By Ewan MacLeod in android — Jan 14, 2015

Who will win the smartphone OS war?

Here at Mobile Industry Review, we like to keep on top of the latest facts and figures in terms of smartphone and mobile operating system adoption. The industry today is dominated by two major platforms: Google’s Android, and Apple’s iOS. But will there ever be a clear winner, or is is the story more complicated and uncertain?

The state of the smartphone market

As everyone knows, most people buying a smartphone are likely to fall into one of two camps: on the one hand are those that prefer Android due to its ability to be customised extensively and a huge selection of devices at various price ranges from different manufacturers, and on the other Apple with its more closed system that runs on small number of premium devices being mainly iPhones and iPads.

The success of handset manufacturers like Samsung, LG, HTC, Motorola and a dozen others is closely tied to Android, so we’ll focus on the operating systems in this post rather than individual hardware vendors. If Android succeeds, you might think the companies that promote Android will also succeed, but do they have anything to fall back on?

Every week new statistics are published from market watchers and industry analysts which claim that one “side” or another is winning, marching onwards towards the eventual inevitability of total market dominance. And most of these statistics proclaim Android or iOS is on the rise or falling into irrelevance.

Granted, it’s usually Apple which succumbs to the most criticism in terms of market share, because units sold is all that matters, right? In that sense, perhaps Android has already won and decimated the competition for good.

If you examine the most recent statistics for mobile operating system adoption below, it’s clear that Android has risen from a decent 25% share in January 2012 to have a huge lead of more than 59.15% in December 2014. iOS comes in second place with 23.51%, and Series 40 (Nokia) is a surprising third with 5.76%, mainly accounted for by its feature phones which still sell well in developing markets.

And here is the December 2014 breakdown which corresponds to the chart above:

Android: 59.15%
iOS: 23.51%
Series 40 (Nokia): 5.76%
Symbian OS: 1.79%
Samsung: 1.75%
BlackBerry OS: 1.33%
Windows Phone: 2.25%
Unknown / Other: 4.49%

Android’s insurmountable lead?

Android has a seemingly insurmountable lead which appears that it could never be toppled. The interesting thing about such statistics is that while the unit and market share figures cannot be disputed, they don’t necessarily reflect the whole story as there’s more to success than just units sold.

Take the yearly revelations by IBM that iOS users spend more online at Christmas. It seems that this Christmas, of all the online browsing over the holidays, 57.1% was on a mobile device (a rise of 18.6% compared with 2013) and that iOS users spent more time online, bought more items and paid more for each item than Android users. iOS traffic was in fact 39.1 percent of total online traffic on Christmas Day, more than double the 17.7 percent attributed to Android.

So as far as retailers are concerned, despite Android having a larger slice of the mobile OS market, iOS users are more important in terms of sales.

And last year, it seems that developer revenue still favours iOS rather than Android. Apple still has an advantage over Google despite Android dwarfing iOS in market share, simply because iPhone users are more likely to pay for apps than Android users.

“Google Android users in total are spending around half as much on apps on more than twice the user base, and hence app ARPU on Android is roughly a quarter of iOS” – Ben Evans.com

Why is this? iOS users tend to have more money to spend while a huge proportion of Android’s market share is from users in emerging markets who aren’t wealthy.

According to Ben Evans.com:

Android’s market share is strongest in lower income countries
Many people in those countries lack credit cards and Google has been slow to offer carrier billing
Android phones average $250-$300 where iPhone average $600 – people who choose to spend the extra money are sending a signal about their intents
Apple offers a distinctly different proposition to Android: perhaps the people who are attracted to that proposition are just more likely to spend money
This can become circular: if developers believe that Android users do not pay, then their behavior will be affected – they may offer a free ad-supported app instead of a paid app, or have a lower price. And if they decide not to support Android or support it second, then their users will gravitate to iPhone first, which becomes self-fulfilling

Apple sells an experience, not hardware

Of course, Apple sells hardware but actually market the whole experience, in terms of simplifying things so that users can use different devices and buy content more easily. Apple is seeking to create an environment where you’ll buy the Apple Watch, go shopping and pay with Apple Pay, buy a pair of Beats headphones and use CarPlay via your iPhone. All of these things are linked together in interesting ways based on iOS, which makes it harder to buy anything from a manufacturer other than Apple.

Apple has also had a huge hit with the new iPhone 6 and 6 Plus, managing to sell an estimated 60 million in the run up to Christmas last year. They appear to have even made a dent in Android’s market share (at least in the U.S.) due to the larger screen devices which have tempted customers away from competitors’ smartphones.

Despite all this, Apple hasn’t achieved as much success in tempting existing owners to buy more devices. For example, just 29% of iPhone owners use an Apple Mac and fewer than half own an iPad – sales have also dropped by around 4% last year but CEO Tim Cook has said he’s still confident in where they can take the iPad over time.

Google: hard at work shaping the future

Google has a strong tendency to focus on future technologies. Think automated cars, Google Glass wearables and smart home gadgets like the Nest. Despite all this, most of Google’s $64 billion annual revenue still comes from advertising, of which Android is a key piece of the puzzle.

But Google has always been good at anticipating the future – for example, the shift away from traditional desktop browsers to smartphones and mobile technology, which could have meant that Google would be sidelined on the new devices. Android obviously has helped to defend against such a scenario – they don’t make much from Android itself, but it does encourage people to use Google’s search engine and other services.

To further adoption of Android into new products (such as wearables and smart watches), Google might in fact be reliant on Apple to help spark interest and demand. As an example, Android already powers a small number of smart watches, but the arrival of the Apple Watch this year might make wearables a mass market proposition at last.

The same goes for Google Wallet, the electronic payment system that took three years to achieve as much as Apple Pay did in the first few months. So Google stands to benefit from Apple helping to kick start the mobile payments revolution.

One of the threats to Android is that because it’s open source, the smartphone manufacturers can customise it to the hearts’ content. Just as Amazon did with the unsuccessful Fire Phone in 2014, they can remove all the Google services like Gmail and the Google Play store. That means that while those users technically do use Android and are counted in all the market share statistics, it means nothing to the success of the platform on the whole.

Furthermore, Android’s market share figures look great, but the majority of those users are on older versions of the OS. That means that new features in Android (i.e. Google Wallet) can’t be used by the millions of people stuck on old versions. Likewise, manufacturers can use any version of Android they wish, so new features that would encourage use of Google’s services are often not available.

Google also faces several looming threats from other companies. Alibaba, the Chinese e-commerce company has also created a Linux-based smartphone OS called YunOS, which might start to displace Android on millions of Chinese devices. Likewise, Korean giant Samsung also has a backup plan with its Tizen OS – so far there are only a handful of devices which use it (such as smart watches, televisions and the Z1 budget smartphone which was released in India today for $90), but the company is seeking to reduce its reliance on Google on the long run.

Windows Phone and BlackBerry

In the race to win the smartphone OS battle, it’s hard to see Windows Phone or BlackBerry make any inroads into Android and iOS’ market share anytime soon. Microsoft is now hard at work on Windows 10, which will be a unified OS that runs on everything from PC’s to tablets and phones. Microsoft’s problem isn’t the technology or software, but rather the issue of winning the hearts and minds of consumers.

BlackBerry (formerly RIM) on the other hand, fell from grace much like Nokia did since 2008, but the company is attempting to turn things around with a slew of new devices (such as the BlackBerry Classic). The outlook for BlackBerry is also not all that rosy either, there have been improvements at the company and a renewed focus on its core customers.