Smartphone market share myths

Samsung sells more phones than any other company. Reuters reports Samsung accounts for every third smartphone sold around the world in 2013.  Gartner puts Apple’s market share at around 12 per cent.

Conventional thinking says this gives Samsung a dominant market position. The same thinking says this means strong profits. And you might think it would make Samsung a favourite target for app developers.

Yet Samsung lags behind Apple in both departments.

Market share less important, not unimportant

That large market share counts for less than you might think.

Two years ago Horace Dediu showed how despite a smaller market share, Apple took the largest slice of profit from selling phones.

Technology moves fast, but it’s likely Apple still takes a larger slice of profit from the phone business than Samsung. Both companies' recent financial reports suggest this is the case.

You could argue a smaller share of profits from a larger slice of the market means Samsung is buying market share.

Developers, developers, developers

The app developer question is a little more complex. Few write programs specifically for Samsung. Instead Samsung phones use the Android operating system – depending on which set of numbers you believe Android could account for anywhere up to 80 percent of all smartphones.

As Dave Smith writes for readwrite:

Though Android dwarfs iOS in devices and downloads, Apple rakes in an estimated $5.1 million in revenue from the App Store each day, while Google banks just $1.1 million per day.

Smith goes on to report Android accounts for 75 percent of app downloads while Apple’s iOS only has a 18 percent share. Yet the Google Play store – used to distribute Android apps – only took 13 percent of the revenue Apple achieved.

Although Android’s app market is catching up, it’s clear Apple users are not the same as Android users. Each Apple customer is worth far more to the hardware maker and software developers. That’s why most successful developers focus on iOS apps first. Many don’t bother with Android at all.

Samsung’s Galaxy s4 customers are an elite group by Android standards, but they still appear to be considerably less valuable than iPhone customers.

The problem here is that when we look at markets, it’s too easy to be seduced by simple statistics such as market share.  That’s not surprising, in many technology sectors there’s a direct correlation between market share and profits. One day the smartphone market may be the same, but that day has yet to come.