When Market Share is used to Mislead

I've noticed a number of blogs and forum posts that keep citing Android market share as evidence that Android is catching up to the iPhone, or even surpassing it. This is misleading so I'd like to put it in a broader context.

Back in the 1960s, when U.S. manufacturing was thriving, business studies showed that doubling production allowed one to reduce per widget cost by around 10%. If you were able to sell twice as many widgets as your next closest competitor, chances are you could produce them more efficiently and enjoy higher profits. The implication is that in each market, there is only room for a few producers with sufficient volume to be the most efficient and profitable manufacturers.

In the case of Android smartphones however, we are comparing a "free" operating system adopted by many manufacturers and carriers, with a specific product from a single vendor that is actually for sale. Any market share comparison that is not related to scale, efficient production, profitability, or customer satisfaction is largely meaningless.

The iPhone is by far the best selling smartphone, has the highest production volume, has the most efficient supply chain, has the greatest share of industry profits (to fuel ongoing development), and enjoys the highest customer satisfaction and brand loyalty. No other single product comes close.

But it goes deeper than this. Many reviewers don't even realize what the product is. They still believe the iPhone or iPad is mostly a hardware product defined by its specifications. Apple has invested 10 times more R&D resources to create the iOS software and supporting eco system than its hardware. Apple didn't design the hardware to match some feature checklist, they designed it to make their software amaze and delight customers, to create an emotional connection that effects peoples lives. To compare the iPhone or iPad to other products primarily on their hardware specifications is not representative of the quality of experience users are likely to have with the product.

What happens if you lose your phone or tablet or wish to upgrade to a newer model? Will all your applications and data move seamlessly? What if you want to share data with others or between your tablet and phone? Can your tablet be upgraded to the latest OS? Will the software you want be available and work smoothly on your new tablet? What about malware? What if something goes wrong? Is there a store where you can take your tablet to get help? These are important considerations consumers see clearly, but the tech press largely ignores. Is the iPad a next generation mobile computing platform, or just the latest cool gadget you're going to replace in a couple years?

Why is it so hard for the tech press to see the iPhone or iPad objectively, and why do they keep promoting the next most promising rival as serious competition when there isn't any?

First, there's the familiar archetype of rooting for the underdog. Apple has become a giant corporation with little need for sympathy to spread their message. Most people already know of Apple's success, what they are less likely know is where Apple has failed or been challenged. Highlighting Apple's weakness is an interesting angle that draws more attention.

Second, disruptive innovations take years to develop and unfold. Not every Apple product or event can meet the hopes and expectations some users have imagined.

While this might explain some of it, in many tech blogs and forums there's an element of resistance around Apple's success. A belief that Apple's customers are somehow being deceived into choosing Apple products over others that are just as good. Or that Apple's tight control over their software eco-system is a threat to user freedom. Or that Apple's singular success concentrates too much power in too few hands. There's an underlying meme that the market needs a worthy competitor, even if that means propping up weaker alternatives.

It's worth noting that Apple has deliberately chosen to serve the less techno-savvy consumer market. By carefully controlling their software eco-system, Apple has made it easier to find and buy computing solutions with less risk of malware or expensive complications. The IBM PC was originally conceived as a less expensive business computer, and more specifically to stop the Apple II from gaining a foothold in the corporate world. The popularity and rapid evolution of the PC meant that consumers were subsidizing cheap business computing. With the emergence of the Post PC era, that subsidy is ending. Nobody likes having their subsidy taken away, including nerds. IT departments are now being told to support iPhone and iPad regardless of their previous support policies. They are losing control over their employees choice of technology.

But there's a deeper reason. As a developer, I've invested years of my life and livelihood in Apple's vision of computing. I left my day job in 1996 to become a Mac developer back when Apple was doomed. For nearly two decades, Mac users and developers have believed their computers were better, while PC advocates argued successfully that their computers were good enough and offered a better selection of business software. It wasn't until Apple switched to Intel processors capable of running Windows that mainstream business users began to take notice.

If you have 10 years of your life invested in Microsoft technologies, the idea that Apple is 5 years ahead of the industry and could dominate the next wave of personal computing is frightening. To admit that you have been out-thought, out-maneuvered, out-marketed, out-executed, and are no longer able to compete effectively is unthinkable, yet this is the very real possibility that the PC industry faces if it concedes portable music and gaming (iPod Touch), smartphones, tablets, and the ultra notebook category to Apple. It simply can't afford to do this without a fight. You have to believe there is a consortium of vendors that can challenge Apple. Otherwise your business and career are at risk.

These factors combined help explain why the tech press is reluctant to embrace Apple's Post PC era. With Apple doing so many things right, the best defense may be to sow market confusion until a worthy challenger can arise.

There is a way to challenge Apple, but most of the industry still doesn't see it. They think Apple is competing on hardware features and price, but they are wrong. What Apple has done is they have gotten serious about creating a portfolio of great software products that delight customers in ways they haven't seen, and then combined this with elegant mobile hardware. Apple is winning in music, photography, home video, phone, App store, mobile gaming, and video conferencing. The iPhone 4S and iOS 5 will add Cards, text messaging, and Siri voice interaction on top of that. You will not be able to challenge this portfolio with more megahertz, pixels, or bytes. Consumers are smarter than that.

When Tim Cook says "Apple loves music", the subtext is that Apple makes the best music players on the planet. If you love music, you should have an iPod, iPhone, or Mac (and once you've tried one, you won't look back).

Android may be strong in mobile web, GPS navigation, and Google app integration, but none of these have the emotional appeal of music. Amazon is starting to figure it out. If you love books and reading, you should have a Kindle. Microsoft is re-imagining windows for mobile, but it's less clear if they realize they need a portfolio of consumer applications with emotional appeal to challenge Apple's. Focussing on the enterprise won't be enough. The next generation of mobile business software is already starting to be written for iPad.

If you don't agree with Steve Jobs approach of serving consumers first, you are free to design a better alternative and let the market decide. For more background, see Thoughts on the "Post PC" Era.

Enjoy!