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Android sales pass iPhone–but for how long?

With dozens of smartphones spanning multiple manufacturers and all four major U.S. operator networks, it was inevitable that Android sales would surpass the iPhone sooner or later, and that time is now. Android represented 28 percent of first quarter smartphone unit sales in the U.S.–behind only Research In Motion’s BlackBerry (36 percent) and seven percentage points ahead of iPhone–according to new data issued by market research firm NPD Group, which credits carrier distribution and promotion as catalysts behind the Google operating system’s growth. “In order to compete with the iPhone, Verizon Wireless has expanded its buy-one-get-one offer beyond RIM devices to now include all of their smartphones,” said NPD executive director of industry analysis Ross Rubin in a prepared statement.

Android’s sales surge caps off an impressive quarter for the OS–in mid-April, Google said application inventory in its Android Market storefront increased 70 percent quarter-over-quarter, and according to tracking service AndroLib, there are now more than 50,000 Android applications in all, up from about 40,000 roughly a month ago. Of course, Android Market still lags far behind Apple’s App Store, which boasts more than 200,000 applications for the iPhone and iPod touch according to Apple’s latest count.

But Google is reportedly stepping up its efforts to court iPhone developers to write for Android, reaching out directly to programmers to convince them to expand their creative horizons. Last month, The New York Times’ David Pogue received a message from iPhone app developer Texts From Last Night, which was recently contacted by a Google representative claiming to write on behalf of the digital services giant’s Android Advocacy Group. “He basically said that he wanted to open a line of communication with me in case I chose to port the app to Android, and he offered to ship me a free Nexus One to play around with… Contrast with Apple’s approach: it took us about three months of resubmitting our app to Apple before they stopped rejecting it for inappropriate content. And even now (after we peaked at the No. 7 paid app), we still have no relationship with anyone there. Huge difference in approaches between the two companies.”

And yet for all the developers who’ve run afoul of Apple’s draconian App Store approval policies, defections from the iPhone platform remain relatively few and far between. Chalk it up to the bottom line: Bernstein Research analyst Toni Sacconaghi estimates that iPhone developers presently generate $1 billion to $1.8 billion in annual App Store sales. That number stands to get a whole lot bigger: Sacconaghi forecasts Apple’s forthcoming iAd mobile advertising initiative could yield developer revenues reaching $825 million this year, an annual increase between 40 percent and 80 percent. (TechCrunch reports the iAd effort will incorporate the new ViP [Verification of iTunes Purchases] Program for App Downloads, a real-time conversion tracking system that will tie the ad directly into purchasing data from iTunes–according to an email pitch sent to select developers by mobile advertising network Quattro Wireless, acquired by Apple earlier this year, iAd will boast features that “cannot be duplicated by any of [Apple’s] competitors.”)

Sacconaghi’s estimates are even more astounding given that estimates for total U.S. spending on mobile advertising in 2009 range from $184 million to $416 million. But iAd is not like past mobile advertising programs–The Wall Street Journal reports Apple is planning to charge marketers as much as $10 million for inclusion in the first wave of iAd promotions when the service goes live on iPhone and iPod touch devices in June. By comparison, ad execs say they typically pay between $100,000 and $200,000 for similar mobile deals. Sacconaghi anticipates Apple will collect about $815 million from iAd this year–$550 million from apps and $265 million from media providers like publishers and television networks–which the analyst contends would afford the company the latitude to subsidize the iPhone moving forward. If that’s true, then all bets are off. Android sales may have edged past iPhone for now, but iAd–and the new opportunities it portends for Apple and developers alike–could shift the balance of power once again. –Jason

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