Rich people buy iPhones. But rich people ultimately don’t tell us much about where the mobile market is going.
That’s one lesson from recent data from mobile data in China, as well as mobile transactions in the US during Cyber Monday/Black Friday. Historically, the fastest path to meaningful income for a developer was to invest in iOS and relatively affluent markets. But, again, new data suggests that this may be a great short-term strategy but also a way to lose the longer term mobile war.
Android dominates use, iOS dominates pay
It has been a truism for years that while Android is popular with users (70% of all new devices of any kind run Android), Apple pays the bills. After all, iOS users are more likely to buy apps and spend 4X more on those apps. Half the users, double the pay. Not bad.
And while Google is narrowing Apple’s lead in terms of mobile payouts to developers, the real story isn’t in app sales, which is just a tiny corner of the overall mobile market.
Rather, the real action is in things like mobile advertising. Given its market share lead, it’s perhaps not surprising that Android dominates mobile ad traffic, as an Opera Mediaworks report details (Figure A):
Android dominates mobile ad traffic.
This, as I’ve written before, is all part of Google’s master plan for Android: “Google’s mission is to get everyone on the planet using the internet. Why? Because the internet is Google’s piggybank.”
With Google earning $6.30 per internet user, per year through advertising, Google can afford to give away the operating system that now gets most of the world online.
But where this gets really interesting is in China.
The poor go mobile
Alibaba’s Alipay mobile payments service — a bit like PayPal with over 300 million registered users — now sees 54% of its transactions on mobile devices, as reported by TechCrunch.
That’s an important shift, and it’s similar, though more pronounced, to what we’re seeing in the US. As the ADI report uncovered, mobile devices drove roughly 26% of total online sales on Cyber Monday, up from 18% in 2013.
But in China, as the TechCrunch report goes on, the data shows an even more important shift:
“Mobile payments were relatively low in affluent cities like Beijing, Shanghai, and Guangzhou (accounting for 29 percent, 24 percent and 27 percent of transactions respectively), but in more remote areas like Tibet, Shaanxi and Ningxia, mobile accounted for 62 percent, 60 percent and 58 percent of transactions respectively.”
One way to read this is that the affluent, in addition to larger bank balances, also have more ways to buy. For the poor, a mobile device is likely their only way to get online and, hence, the only way to buy things online.
Revisiting developer economics
As such, it may be time to rethink developer opportunities in mobile. VisionMobile rightly points out that developers in the US make a lot more than those targeting China (Figure B):
Developers in the US make a lot more money for apps.
It also shows that iOS developers consistently make more money than those primarily focused on Android (Figure C):
iOS developers consistently make more money.
The revenue numbers today may actually not be meaningful. As tempting as it might be to focus on the comparative few that have a lot of money (here’s a nice graph showing global income distribution), a company that can monetize rich and poor alike…? That’s a winning business strategy.
This is why data companies like Google, or hardware companies like China’s Xiaomi, are more likely to win mobile than Apple, when it comes to the long term trajectory. They know how to make big money from small transactions.
Today, as Asymco’s Horace Dediu showcases, far more mobile browsing than mobile buying happens in the affluent West (Figure D):
More mobile browsing happens in the West than mobile buying.
But that’s because we can afford other options. We’re not the market to watch if you want to see the future. China, or other comparatively poor markets, is.
In conclusion, in the rich West, we will continue to buy Apple hardware, but the market ultimately belongs to those that can monetize the masses.