Apple Talk: Death of the iPhone?

Apple iOS overtaken by Android in market share but surely it's not really game over…

...the iPhone is going to get any significant market share. No chance... They may make a lot of money." One out of two isn't bad.

I argued before that Apple, and later Google like it, had no truck with the conventional wisdom of the mobile phone industry and swept away the old hegemonies.

Steve Jobs' targets for iPhone sales

At the iPhone launch in 2007, Steve Jobs announced relatively modest sales goals in retrospect. He set a target of 10 million phones sold between the July 2007 launch and the end of 2008. In its last quarter alone the company sold 18.65 million iPhones.

We're currently still focused on the smartphone market. However, as I've written before, in a few years smartphones won't be called smartphones anymore - just phones.

The segment that Apple and Google are dominating will grow and grow as more and more devices come equipped with high-end features such as touchscreens, GPS, HD cameras and sophisticated operating systems.

In 2007, Ballmer, gazing into his crystal ball again, said of the market share issue: "If you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60 per cent or 70 or 80 per cent of them, than I would to have two or three per cent, which is what Apple might get."

Apple's share of the overall phone market is now at five per cent and increasing, according to market analyst and blogger Horace Dediu on his splendid website Asymco.

Market space for Google and Apple's smartphone expansion

Grandiose predictions that either Google or Apple will be destroyed by the other are myopic. There's plenty of new market space into which both Apple and Google can extend their dominance and diverge from other competitors.

Where Apple and Google truly diverge from each other is in the revenue models they employ.

Apple's strategy is clear. Make great products, charge for them, make a lot of money. And it's working.

According to Strategy Analysts, which reviewed iPhone revenues for the first three months of 2011, Apple's iPhone revenue was $11.9bn in the last quarter.

In comparison, Google's revenue for Android in 2010 was around $1bn, according to reports.

Google and Apple's smartphone strategies

Google's strategy is not to make money from handset sales but to distribute the Android software to handset manufacturers, and make money from mobile search and advertising and app sales. It relies on building market share to reap rewards. Apple relies on doing the same, but maintaining its huge margins is more important for the Cupertino company.

Apple may only represent the minority share of the overall phone market but it utterly dominates the market in terms of operating profits. Again, the Asymco website has an instructive graph.

What Apple and Google are now doing is selling phones entirely on their own terms, having turned the conventional wisdom of the market on its head in an extraordinarily short space of time. Guess what? The PC guys did just walk in.

How wonderful it is to have two genuinely innovative and exciting companies driving the agenda for the mobile device industry. The rest of the mobile industry and competitors relying on conventional wisdom may not share my enthusiasm but that's to be expected.