I'm pondering Apple's (NASDAQ:AAPL) results, sitting in a cafe in-between meetings. It's been apparent for years that Apple was camped out at the high end of both tablets and phones, and that Android would take almost all of the rest. But it's worth working out on the back of a (rather large) envelope exactly how that would play out, assuming that Apple's pricing strategy doesn't change and of course that nothing else changes (which of course are rather unsafe assumptions). Hence:
- Right now, on the basis of a 24m replacement cycle, there are perhaps 290m iPhones in use on earth. Depending on the second hand market, this might be larger.
- Apple has sold 195m iPads - perhaps 180m are still in use.
- There are also a fairly small number of iPod Touches in use - perhaps 20m
That adds up to a rough estimate of 490m live devices. For comparison, around 900m Google (NASDAQ:GOOG) Android phones were sold in the last 24m, and probably another 110-120m Google Android tablets ('Google Android' = 'not China').
Where might this go? Apple now has about 10% of global mobile phone sales, rising steadily. It's important to note that Apple is not losing share of phone sales to Android - it's just not taking as much share as Android. There are between 3.5bn and 4bn people with mobile phones on earth (there are far more connections but many people with multiple connections). This number is also rising slowly, but all the growth is from the very low end.
Over the next few years the great majority of that 3.5-4bn will convert to smart (and indeed the more important variable is affordable data plan penetration rather than smart penetration). If Apple continues the current strategy and share growth, it will end up with (say) 15% unit share. 15% of 3.5bn is 525m. (I told you this was a BOTE calculation.)
The great majority of the rest will go to Android (though quite what "Android" will mean is an open question). That means perhaps 2.5-3bn Android phones in use. There might be some Windows Phone as well (assuming it doesn't become an Android fork) but we can ignore it for these purposes.
No one has much idea what the total addressable market for tablets really is, let alone premium ones such as the iPad, and the recent sales trajectory is somewhat lumpy. If we assume a four year lifespan for iPads as the tech stabilises and look at the recent run-rate, that suggests a stable base of, say, 300-350m. This gives us a base of perhaps 850m iOS devices, with a lot of ownership overlap.
There will also be an ungodly number of Android tablets, of course, but we neither know how quite how many nor what they'll be being used for (right now, mostly TV, it seems).
What does this mean? What does it mean for Apple to have a platform with a minority of users, indefinitely, in mobile? A minority ecosystem with only 850m devices? Or even 490m?
Certainly, this isn't 'Windows versus Mac all over again'. There are now 490m iOS devices in use, but PCs only hit that number in around 2000, long after Apple lost the last ecosystem battle. Apple sold 51m iPhones last quarter - total PC sales in 1995 were 59.5m. That is, the iOS ecosystem now is much bigger than the winning ecosystem back then. Even beyond that, all the other dynamics are different - the smartphone market is not driven by corporate buyers who demand commodity product based on bullet points and don't care about design or user interfaces, for example. The relative market share of an ecosystem is relevant, but it's not the only thing that's relevant. We need also to think about value share, engagement share, and all the other dynamics that drive the viability of an ecosystem. The assertion that an ecosystem with close to 500m users now and over 800m in a few years will not be viable because there's another that's bigger seems pretty simplistic.
More importantly, though, these questions will probably have become irrelevant by the time we find out the answer. That happens quite often in tech. To me, the platform wars are now much less interesting than what happens on top of the platform. On the desktop Internet, we had close to 15 years of stability with almost all online activity going through the web browser, but on mobile it is far more complex already and also far less stable. Nothing is settled on mobile. I have no idea what it will mean in 5 years time to say that I "installed" an "app" on an "Android" "smartphone". All of those terms could change completely, and with it what it means to say "ecosystem" or "market share".
Note: for supporting charts, see this post.