[dquigley]

Clay Christensen in the Innovators Solution lays out an explanation for what is happening here. Apple used vertical integration to make a giant leap forward with their iPhone that you couldn't have made in a non-integrated company. They ended up overshooting the typical consumer's needs though in the following iterations of the iPhone. And the technology that was at first difficult for competitors to reproduce became easier to replicate (thanks in part to Android). Samsung, HTC, and others were able then to provide good enough devices (and in certain ways, better devices) to consumers at a lower price point.

Apple's response has been to move up market towards tablets, and have been able to use their vertical integration to produce devices that no other Android manufacturer could match at first. Microsoft is building their own device to have similar quality, but they are doing it as a vertically integrated company. Amazon showed you could do a partial vertical integration (heavily customized Android and integration into their own media resources) to take away the low end of the tablet market from Apple. And slowly the Android tablet manufacturers are catching up to Apple.

So what this makes me ask is what will be next for Apple? They haven't been good at playing the high-volume, low-profit electronics game, so they'll need another "blockbuster", highly innovative device, and I am excited to see what that will be. It drives the industry forward, and creates exciting new technology we all get to benefit from eventually.

[cloudwalking]

You are absolutely right in what you say regarding integration.

I disagree with your final analysis of where this leaves Apple. I think Apple will continue to hold a significant chunk of the "high-end" luxury market. iOS will maintain high price points and Apple will maintain its polish--and consumers with expendable income will keep their sales strong. I suspect their market share in Europe, USA, Japan, and wealthy Chinese won't drop too much (30% of market? 45%?). Android will claim the entire low-cost market--the rest of China, India, South America.

I think Apple will maintain its profits, but Android will secure the majority of the world market. Apple is trying to maximize percentage of industry profit rather than percentage of industry sales.

[nestlequ1k]

Sure, Apple is trying to maximize profit. But how does that help me?

We're developers right? We need to find the market with the most potential. If I'm developing for a platform where the platform holder is laser focused on maximizing their profit, but not their marketshare... it seems like I've made the wrong choice.

I see a lot of iPhone devs (not you specifically) try to justify Apple's shrinking marketshare by saying it's fine since Apple is still taking the total profit in the industry. Either they've heavily invested their earnings into AAPL, or they're trying to pull any stat they possibly can to justify their platform choice.

[enraged_camel]

Simple: people who have the kind of income to pay a premium for Apple devices will also be more willing and able to pay a premium for good apps. There lies your profit. (Not to mention your costs will be lower since iOS ha no fragmentation.)

[akmiller]

> iOS has no fragmentation

I think the correct statement would be iOS has "less" fragmentation. They still have fragmentation though. Not only through the devices but also the version of iOS running on the device. It can get pretty hairy trying to maintain support for multiple iOS devices with versions of even just 4.3 and up.

[veemjeem]

If you think iOS is hairy supporting 4.3 and up, you probably have no experience supporting Android apps. The fragmentation extends beyond the Android version. The differences between handsets are so big that one pretty much has to ignore the users who own phones that are impossible to test with. You'll get some random complaint from a user running your app on a device from a manufacturer you've never even heard of.

Look at Google's own wallet app -- it only runs on only 6 android devices. If you want to run google wallet on your Nexus S, you'll have to run a 3rd party "hacked" version of Google Wallet.

[magicalist]

Google wallet is a really poor example of fragmentation that a developer would run into since it has nothing to do with varying hardware and drivers, it's the carriers that are blocking it and (AFAIK) there's no reason that a developer would care whether or not the app itself is there. The hardware is accessible; Verizon and AT&T will use it for their own attempt at a payment system. That whole situation isn't really analogous to any other fragmentation you might encounter.

Android development and testing really isn't all that painful, and most of the new APIs you might miss are backported and available for the more prevalent Gingerbread and now ICS.

[myko]

I've certainly had issues supporting iOS 4 vs 5/6. Most of the Android issues I run into have to do with WebViews behaving differently on different OEMs devices. Both forms of fragmentation can be a pain in the ass.

Probably games developers have it harder on Android, but for the average app it seems just about the same to me as a developer.

[clarky07]

it does have some fragmentation with the new screen size, but supporting iOS versions is a dream compared to android. 85% of my users are on iOS 6 already and 98.5% are on 5 or greater. You can easily drop support for 4.xx and below, and it wouldn't hurt too badly to drop support for 5. Try doing that on android.

[taligent]

Actually I think the correct statement is that iOS has such little fragmentation (in comparison to Android) that it is effectively zero.

Every developer can safely target iOS 5. With Android it is still 2.3.

[akmiller]

Well that hasn't been our experience. We've dealt with many issues and we've had customers from 4.3 up to 6.0. Not to mention devices from 3GS and the original iPad up to the latest. I haven't done any Android applications yet but I can imagine it would be worse if you wanted to target a large base of users (I will be gaining that experience rather soon).

[bookwormAT]

> iOS has no fragmentation

iOS is fragmentation. Android exists because 10 years ago, every mobile vendor was making his own incompatible operating system. So a developer had to make 300 different versions of his app to reach his audience. That was impossible, so there was no market for mobile apps.

Today, there are still 300 different devices, and maybe a 100 different operating systems. But because ~95 of these are based on Android, you can write a single cross-platform software that runs on all these systems. Android was build to defragment the market, and it was a huge success.

It might not work perfectly, but adapting your App to some strange behavior in some fancy Android device is still a lot less work than making a whole new app from scratch!

The only interesting OSes that you have to write everything from scratch for today are iOS and Windows Phone. These two systems are, unlike all the others, not compatible with each other and require a significant amount of extra work. And that is called fragmentation.

[kemiller]

I think it's more nuanced than that. If Apple customers are more affluent than average, and/or more willing to spend money on apps, then it continues to be a great market even if the sheer volume is lower.

If you're making something that you give away for free and make money on the volume of participants somehow, then Android is probably a better bet at that point, but if that's your strategy you probably want to target everything.

[bane]

I agree, potentially less money in the consumer's pocket is less money they can spend on my product.

I wonder how the mix of average money spent on iphone vs android apps per consumer has changed?

Or at the very least, total dollars spent on apps on each platform?

[briandear]

But the cost-conscious consumer is typically less inclined to buy apps. This thread is relevant: http://news.ycombinator.com/item?id=2929612

[cloudwalking]

> We're developers right? We need to find the market with the most potential.

Are you optimizing for making money, or for making impact? There's no right or wrong platform (iOS or Android), it just depends on what your goals are.

[ajross]

It's worth pointing out that very similar things were said about Apple computer c. 1990, as comparatively primitive[1] windows 3.0 boxes were being increasingly sold into the PC market at volumes dwarfing what Apple was seeing with their more polished and higher-margin macintosh line.

That didn't work out so well.

[1] And it really was. Comparing System 6 to Windows 3.0 was night and day to any observer, even people with very little market knowledge. Android is, relatively, much, much closer to iOS in polish (even granting that iOS is the "better" choice, which lots of smart people don't).

[clarky07]

It's also worth pointing out, that Apple has kept huge market share and profits in the iPod market. Sales have only gone down recently because everyone already has 1(or 2 or 3).

I'd like to think Apple has learned a few things since 90, and I also think these markets are a bit different. The compatibility problem isn't as bad this time, as most devs are making apps for both platforms, Apple still has a (slight) advantage here in terms of quality, and a fairly big advantage in terms of profitability. As long as they stay on par for profitability for devs they will keep a decent market share (20-40).

[ajross]

Sure, but those aren't independent variables. Their advantage in profitability derives almost entirely from their perceived advantage in quality (both because consumers will pay more for the devices in sticker price and because they can command better deals with carrier partners who know that they'll sell more boxes). Over the long term, no one is going to pay more for iOS devices that don't have a clear quality advantage.

Clearly 22 years ago isn't a perfect comparison, and I don't claim to know the future either. I'm just cautioning against putting your faith in "polish" and "margins". Historically those have been poor indicators of success in the consumer market.

[clarky07]

I think you misunderstood. I'm talking about the apps on the platforms. The devs are making slightly better apps, and they are making significantly more on iOS. As long as those continue to be true, it will compete with users as a phone and will compete with devs as a platform.

[bitcartel]

I don't think Apple are really in the "high-end" luxury market otherwise you'd see an iPhone as often as you see someone driving a Rolls-Royce Phantom or wearing an Audemars Piguet watch.

I think it would be fair to compare Apple products to consumer level fashion items from luxury brands. Whether it's Armani jeans, Calvin Klein boxers or Gucci handbags, people are willing to spend a little more because of perceived value or identity with the brand, even though they can get the same product for less at Banana Republic or GAP.

However unlike Apple, the likes of Louis Vuitton and Gucci do sell high-end luxury items at ridiculous prices, often unique bespoke pieces, which ordinary consumers would never be able to afford. Were Apple to be comparable, they would be selling boutique devices at $10k-$20k like a gold-plated iPhone with 5" screen, 8-core 64 bit ARM processor, 32GB ram, 512GB storage.

[eta_carinae]

> iOS will maintain high price points

What high price points? iOS devices (phones and tablets) are pretty much at the same price as the competition.

[pook1e]

In the past, I'd agree with you. However, comparing Google's latest lineup with Apple's latest lineup tells a much different story (all 16GB):

Nexus 4: $349; iPhone 5: $699

Nexus 7: $199; iPad Mini: $329

Nexus 10: $399; iPad: $499

Of course, Apple and Google aren't in the same business, but they are very much competitors.

[w1ntermute]

> Apple and Google aren't in the same business

And this makes a world of difference. Google is selling products at cost to drive their ad business. There's no way you can compare that to Apple's business model. The idea that Apple sells expensive products is a belief born out of the PC market, and if you want to compare apples to apples, you should be looking at the iPhone 5 vs the Samsung Galaxy S3.

[eertami]

> you should be looking at the iPhone 5 vs the Samsung Galaxy S3.

But the S3 is so far ahead of the iPhone that it also is not a fair comparison.

[Steko]

What's this rubbish?

iPhone 5: thinner, lighter, higher quality construction, better battery life, better cpu, better gpu, superior display quality (full sRGB, IPS, higher ppi), better ecosystem, better apps, will be regularly updated for years, better customer service, etc.

GS 3: bigger screen diagonal, more RAM, NFC, better front camera

Go back to Engadget kid.

[mardix]

You also have to see in USA, people will get the phone at subsidized amount. Like most phone on a two year plan cost between $99 to $199.

Macbook maybe luxury in the computer world, but iPhone, not really

[hiddenstage]

So isn't that telling then that Android is outpacing the iPhone in sales?

[sbuk]

Not when the market is flooded with cheap commodity handsets, no.

[scottm01]

The iPhone 5 is $649 unsubsidized, not $699. Other features aside (some of which it lacks compared to Nexus), it does have an LTE radio and works on, say, Verizon.

Source: Someone who just paid full boat for a 5 after my Droid Charge was destroyed. At least I still have my unlimited data and subsidy coming up next year.

[taligent]

Of course just comparing on price ignores some big differences.

Nexus 4 has no LTE. Nexus 7 has terrible build quality. Nexus 10 has nearly half the battery life.

[Tyrannosaurs]

You're the first person I've ever heard say that the Nexus 7 has terrible build quality and the AnandTech figures show that the 10 has around 90% of the iPad battery life rather than "nearly half".

[czhiddy]

Build quality issues were rampant when the device was introduced. I had to swap out my Nexus 7 twice because of loose-screen / screen-flicker issues. I did order it the day it was released, so maybe there were some unresolved factory quality control issues at the time.

My current unit has a speck of dirt trapped under the screen, but I don't really care that much anymore given that the thing was $199. You'd be a lot less annoyed about a rattle in the dashboard on a new Corolla than you would if you bought a BMW.

Battery life during use is generally good, but the battery in mine dies completely after ~4 days of non-use. Stock install, nothing but my Google account signed in. I'm not sure if it's a hardware issue, but reinstalling the OS hasn't fixed it.

[taligent]

Maybe you should Google it because it is pretty common knowledge that Nexus 7 is very hit/miss in terms of build quality.

And I stupidly compared battery life against iPad Mini. So it is not half and not 90%. It's about 65% of the iPad according to Engadget.

Nexus 10: 7.26 hours, iPad 4: 11.08 hours

[pook1e]

Ah, yes. The old game of taking a perceived flaw of a product that is competitive to a product you like, and blowing it way out of proportion. I'll play a round.

- The camera on the iPhone 5 has the 'purple haze' issue.

- The iPad mini has an embarrassingly low resolution display for (almost) 2013, despite also having a larger display than the Nexus 7.

- The iPad 4 doesn't run as hot as the iPad 3, and no longer makes me scrambled eggs for breakfast while I play Infinity Blade.

Seriously. All products have flaws, and therefore there is no perfect product. Pointing out flaws to prove that your favorite company is better than their competitors is counter-productive. I really wish people would stop this childish debate and just agree that both Google (with their hardware partners) and Apple make fantastic, competing products.

[drivebyacct2]

It's really just painful to watch you comment in these thread. It really just hurts.

[technotony]

There's a slide in here which shows apple has ten times the app download revenues that android has: http://www.businessinsider.com/state-of-internet-slides-2012...

[j-v]

This. From an app developer's perspective, there's no contest currently.

And mobile web usage isn't looking much better for Android: http://www.businessinsider.com/apple-android-mobile-web-usag...

No doubt more and more phones in pockets will be running Android. But how many will really be used like smart phones?

[jarek]

> From an app developer's perspective, there's no contest currently.

To be more exact, this is the perspective of a developer looking to monetize their application by selling directly to users.

[myko]

Of course on Android it is easy to say 'show me the desktop version' of a site which uses a different UA which would show up as a desktop browser and not an Android phone.

[jusben1369]

One nitpick is the tablet isn't "up market" but rather a new market. A device that sits between an PC and a mobile phone.

[rogerbinns]

Asymco (highly recommended analysis site for the mobile industry) has an excellent article on this "over serving" issue http://www.asymco.com/2012/09/18/is-the-iphone-good-enough/

One thing he notes is that Apple sell the current (new) generation device at the same time as they sell the previous generation for less. By looking at sales they can tell if they are over serving - people will buy the previous generation because the new generation doesn't add sufficient value to their needs.

[mtgx]

And yet, even with that strategy being implemented for the past few years, the iPhone is losing in global market share, and Android is 5x bigger now. So it's not very effective in this context.

[rogerbinns]

What "market share" are you measuring? If it is number of devices sold then so what. Maybe narrowing down to number smartphones sold? A little more interesting.

How about instead we look at market share of revenues? Even better what about share of profits since that makes more business sense. Asymco has a post for that: http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile...

I prefer Android myself, but claims of Apple "losing" need to be substantiated. It is certainly the case they are losing the least profitable customers but that is a very hard business to be in.

[r00fus]

Apple has never been interested in marketshare alone, unlike Google or Microsoft.

For Apple, it's all about profit, profit-share and units sold. All else matters little to them if they don't have those three.

[bane]

I'd bet that Apple is taking Glass very seriously. Or at least the wearable, always on, always connected computer.

[Steko]

The first NYT article on Glass reported that Apple was also doing a lot of research on wearables. Predictably when they come out with whatever they do everyone will say they are "reacting to Google" but I'm sure many companies have been hard at work on this for years. If I had to bet I would bet on a startup that just takes bluetooth accessories to the next level and leverages the phone in your pocket for the connection/cpu/gpu. Bluetooth headset with a camera and custom voice control app. It's not near what Project Glass promises but you could build it today and sell millions for $99/$149.

[jonmrodriguez]

Shameless but very relevant plug :)

My startup is doing what you describe: http://vergencelabs.com/

[sputknick]

Sounds a lot like the PC market circa 1986. Except with Google playing the "good enough device" role.

[mongol]

I think it could be a better TV experience ("smart tvs"), or something related to wearable computing, such as watches.

[sinnerswing]

Nothing impressive with this. I know of a few companies that sold crappy devices with crappy OS's. RIM, Nokia, etc. and they dominated the market.

Android has become the new Nokia.

Big Market Share. Worthless user-base.

[eta_carinae]

> Big Market Share. Worthless user-base.

You sound exactly like these people standing in line for iPhones in the Samsung commercial.

[Retric]

If you look at sales the ratio of Android devices in poor countries is significantly higher than the US. But, for the vast majority of US developers it's pointless to count those people.

If you look at actual US sales, both iOS and Android are on the rise mostly by eating BlackBerry's lunch. Android is still almost 2x the size of iOS but again there far more popular on the cheap handset market and are harder to target due to the fragmented market.

http://www.asymco.com/2012/03/07/the-unrelenting-trends-in-t...

[MaysonL]

And of course, looking toward the market saturation point, every survey I've seen shows that the Android-> iOS switch rate is significantly higher than the iOS -> Android switch rate. If that changes, Apple should watch out.

Another interesting statistic, from Opera, was their report that iPad produced more ad revenue than all of Android.

[myko]

Maybe because a far superior mobile browser, Chrome, is available on Android devices?

[Retric]

I use Chrome on my iPad.

[clarky07]

that commercial is a terrible piece of advertising. I would have gotten a samsung for testing because its the best android phone (as far as i can tell as an iphone user) but i won't anymore. Telling your potential customers that they are idiots isn't a good strategy. I'll buy a nexus, htc, or motorola instead.

[hiddenstage]

Apple was accused of calling their own customers idiots with their 'Genius' ads (which they quickly discontinued). I'm assuming you will also be boycotting Apple?

[jlgreco]

Funny, that is exactly why I don't use Apple products.

[eta_carinae]

> Telling your potential customers that they are idiots

Their potential customers are not people standing in line for hours to buy an iPhone, so the ad is spot on.

[sinnerswing]

you're right. I will never buy copycat devices from Samsung.

[RivieraKid]

I agree that most of Android phones are crappy. Mostly because of Android customizations, old versions of Android and boring-looking hardware. But Nexus 4 is on par with iPhone 5 (while being 2 times cheaper).

[shinratdr]

> But Nexus 4 is on par with iPhone 5 (while being 2 times cheaper).

Assuming you consider no LTE and a plastic body to be "on par".

[RivieraKid]

I meant on par in overall user experience, not that they are equivalent in every feature. iPhone has shitty maps, no NFC, worse CPU/GPU (I think), no expandable notifications, etc.

[shinratdr]

I don't know how two devices, one of which can connect to a data network 5-10x faster than the other, can be considered "on par in overall user experience".

And as Taligent noted, as always the PowerVR GPU in the iPhone absolutely without question smokes every crappy Mali GPU in every Android phone ever.

[RivieraKid]

Because on average, LTE does not improve UX that much. For example for me, the UX improvement would be zero (I don't have LTE coverage). It also uses more battery. And for me, 3G is fast enough (about 2Mbit/s where I live).

I don't think that 2x faster GPU improves UX a lot for the average user. Accurate maps are more important IMHO.

[taligent]

iPhone has much, much better CPU/GPU than Nexus 4. Nearly twice as fast in most cases.

http://www.anandtech.com/show/6426/ipad-4-gpu-performance-an...

[RivieraKid]

It's about twice better in OpenGL tests but I would be very surprised if it had faster CPU. N4 has quad-core CPU with higher frequency.

[taligent]

It's pretty clearly from reviews so far that Nexus 4 is just another mid range Android phone.

No LTE, poor build quality, slow CPU/GPU, average camera.

[bryanlarsen]

What reviews are you reading? Every review I've read has been praising the build quality, the CPU/GPU performance and the camera.

[taligent]

Engadget and Anandtech.

Engadget complained that the glass back easily cracked and that the camera was average. And we know from Anandtech benchmarks that the CPU/GPU is about half that of the iPhone 5.

[bryanlarsen]

So you'll agree that the iPhone 4 & 4S are also poorly built? Lots of people cracked the back screen on those phones.

Nice cherry-picking on the benchmarks. So the second fastest phone in the world is "slow". Gotcha.

[drivebyacct2]

>Engadget complained that the glass back easily cracked and that the camera was average

Did they actually crack one or were they inferior based on the iPhone and ignoring all of the work they did to make it more damage resistant?

[RivieraKid]

Mid-range phone? Quite the opposite. At least according to most of the reviews. E.g. Gizmodo:

"As of right now, it is officially my favorite phone by a healthy margin. It’s just so fast, so smooth, and the software is great."

NFC, 2 times bigger RAM, gerat build quality, quad-core processor.

Even if you think that iP5 is superior, you have to admit that N4's value / price is way higher.

[jusben1369]

Why are you being so defensive and dismissive to the point of making a number of really inaccurate generalizations?

[drivebyacct2]

Yep, 75% of the market loves to buy crappy devices with crappy OSs. The fact that high end Android devices are popular and sell well (SGSIII? Samsung's profits being damn impressive next to Apple's?) is just a weird inconvenient fact.

[rimantas]

Can you make your mind what you are talking about? Unless 75% of the market is taken by those high-end devices (which are two models really: SGSIII and Nexus). If you want inconvenient facts: many of those Android phones are really just dumb phones (or used as such) with Android. Some with very old versions of Android.

[blinkingled]

Why should they be high end devices? Do you define what devices people should use, what qualifies as high end and how people should use them?

Sorry, but I just don't get the argument - if people want a smart phone, any Android phone is a smart phone. If they didn't they would be still buying Nokia true dumb phones. If people want a lower cost smartphone - like those in 3rd world - why would you have a problem with that? Also why aren't people buying cheap RIM phones or cheap Windows Phones if cheap is all they are into?

Older versions? Why would that have anything to do with SmartPhone sales numbers? It is just asinine to look at this from a negative or Apple Salesman attitude.

Fact is simple - people are continuing to buy Androids for many reasons - choice, preference, cost whatever. If Android is enabling the poorer sect of the world to get connected/enabled/smart at a cost they can afford - that's a good thing.

[sbuk]

"Yep, 75% of the market loves to buy crappy devices with crappy OSs"

No, 70% of the market doesn't care and merely what the blingest device for the lowest cost with the highest amount of minutes and texts, data is barely an afterthought. Samsung offering sales commissions doesn't hurt either, or is that 'just a weird inconvenient fact'?

[clarky07]

no, but 40-50% are buying crappy devices with crappy OSs. The high end devices running 4+ are not 75% of the market. they are <30% of the market. only 28.5% of android is on 4+ [1]

[1] http://developer.android.com/about/dashboards/index.html

[sinnerswing]

75% of the market also like Britney Spears. people are idiots.

[drivebyacct2]

If we accept the framework that all people are idiots, which I certainly often find myself thinking, then it's probably great to be Android in that world. You know? Whether or not people are dumb (which is obviously a gross exaggeration of people's perception of Android... but let's be serious, you know that) does not change the numbers.

[sinnerswing]

I'll take 25% of the smart, willing-to-pay-and-buy userbase, than 75% of the dumb, not-willing-to-pay-for-anything android users.

[drivebyacct2]

Why are you being so stubborn? Just, why? What do you stand to gain from this?