Mobile Phone Wars: iPhone vs. Android

In the media's ever-present search for horse races -- the often meaningless comparison of numbers that signify little -- we have the comparisons between Google's Android-powered mobile phones versus Apple's iPhone. As usual, they tend towards trying to paint the burgeoning competition in the smart phone space as a winner-take-all war. This is nonsense, but that doesn't stop the headlines or the (deliberate?) misunderstanding by journalists. The latest figures published by Flurry make a good example.

The figure shown here is from the referenced Flurry publication that compares early sales of iPhone, Motorola's Android-powered Droid and Google own Nexus One (manufactured by HTC). In the largely superficial treatment given to Flurry's figures in the media you might think that Android is an iPhone killer. But again, that's only if you believe there can only be one survivor. Besides, the numbers must not be taken at face value; as we will see, a bald comparison of the numbers do not properly describe what happened, even if one does accept that there is a war going on.

First, we need to note (and here we are exclusively looking at the US case) that iPhone is exclusively offered via AT&T while Droid is exclusively offered via Verizon. Google sells Nexus One direct-to-consumer, although it so far only works on T-Mobile's network. These carriers are not equivalent in the size of their businesses and in their business practices, and Apple, Motorola and Google also differ in their market strategies.

Consider subscriber counts: the Q4 2009 figures for AT&T and Verizon are 85.1 and 91.2 million, respectively. These numbers are close so you might figure that the sales figures should be comparable (1 million iPhones and 1.05 million Droids in the 74 days following launch) since they have similar addressable markets (each carrier has about the same number of possible customers for these devices). However, this is a poor comparison because the iPhone launched in 2007. At that time AT&T had 63.7 million subscribers, which is a far lower number. While much of the media overlooked this important data, Flurry's own analysis (from which the above figure was taken) is both balanced and accurate.

2. Relative Subscriber Bases: Droid launched on Verizon, a larger network with more subscribers than AT&T, especially when considering AT&T's 2007 size (63.7 million at the time of iPhone launch) versus Verizon's 2009 size (89 million at the end of Q3). Additionally, there was pent up demand among the Verizon subscriber base for an iPhone killer, which is exactly how Verizon positioned the Droid. Finally, Verizon backed the launch with advertising support of at least $100 million.

To put the sales figures in their proper light, we need to compare penetration into their respective addressable markets. Done this way, we see something quite different:

• AT&T and iPhone: 1.57% (1 million phones for a subscriber base of 63.7M)
• Verizon and Droid: 1.18% (1.05 million phones for a subscriber base of 89M)

Now we see a significant difference, where the iPhone can be said to have outsold Droid during their respective launches. Of course even this calculation has its drawbacks since we have to consider the impact of marketing by Apple/AT&T and Motorola/Verizon before and after launch, and that the iPhone was something quite novel in 2007 while the Droid was heavily marketed as an iPhone killer to a new smart phone-aware population.

Look at the numbers however you like if your objective is to pick a winner, but in too many respects we are comparing apples and oranges. Better, I believe, to recognize that both products (really, iPhone versus the whole line-up of Android-powered phones) are both successful products.

This brings us to Google's own branded phone the Nexus One. Despite some of the hype -- although it generally isn't coming from the traditionally marketing-averse Google -- it is little more than the newest generation of Android software and mobile device hardware. The software will soon be available on all Android phones and the chips are beginning to show up on devices running other platforms. Nexus One is not that special since it will soon be matched and surpassed by other devices, as is typical in the game of technology leap-frog with which we are all familiar.

Whether the Nexus One is a flop or not (135,000 phones in the comparable period) really depends on how one chooses to interpret Google's (non-)marketing strategy, but a strong case can be made that it was not their intention to try to compete in the mass market against those other devices.

Now that Nexus One is available in Canada, we can all do our own comparisons. I have a Nexus One on the way and I am looking forward to get some hands-on experience with this latest salvo in the mobile phone wars. If nothing else, I'll have something novel to pull out of my pocket when colleagues trot out their iPhones and Blackberrys at meetings. It'll be interesting to see their reactions.