Complacency is a sin in business in general and a deadly one in technology; now that devices with the Android operating system have surpassed Apple's iOS in web-browsing share, the iPhone maker is guilty of hubris. The day is coming when Apple will either need more aggressive pricing, or a qualitative jump echoing the one that first made it a leader in mobile.
Few remember now that in 2009, the year Samsung introduced its first Galaxy smartphone running Google's Android OS, the South Korean company had a 3 percent share of all smartphone shipments. Apple was the undisputed market leader with 15 percent. Two years later, Samsung overtook Apple, using a varied model range with lots of different form factors and prices:
Apple, however, had a defense: It still had a bigger market share in value terms, and its fans pointed out that the Cupertino company was skimming the cream as Android phone makers fought over the non-fat milk. Then, in 2012, Samsung caught up on that measure as well, and by 2013 the excuse was gone:
In 2013, Apple's share of new smartphones shipped -- 17.6 percent in the final quarter of that year -- was dwarfed by the combined heft of all the Android makers with 78.1 percent.
Tablet sales followed a similar dynamic. In 2010, Apple owned the market with a more than 90 percent share. In the fourth quarter of 2012, Android devices made up 60 percent of shipments to Apple's 36%.
It was time for a new defense, and Apple chief executive Tim Cook found one: Higher user engagement with Apple devices as demonstrated by Web traffic statistics. Asked to explain a plunge in iPad sales on an earnings call a year ago, Cook cited numbers from online ad network Chitika showing 84 percent of all tablet-generated traffic on the Internet came from iPads. "If there are lots of other tablets selling, I don't know what they're being used for because that's a pretty basic function, web browsing," Cook said.
At the time, Apple was the leader in Web traffic from all mobile devices combined. In August, 2013, it had a 55 percent share to Android's 28 percent, according to Netmarketshare. By last month, Android had 44.6 percent to Apple's 44.2 percent. It's not a big lead, but the trend is clear: Apple's build, interface and app ecosystem advantages are melting.
I use both iOS and Android, and it's getting hard to say which provides the better experience. A recent study by analytics firm Localytics said nearly half of all downloaded Android apps are opened 11 or more times, compared with only a third of iOS apps. That's just in case Cook starts using app download numbers as his new alibi: "300 million people visit the App Store every week," he boasted at Apple's most recent developers' conference. "And these people aren't just browsing, they are downloading. They've now downloaded over 75 billion apps. These are mind-blowing numbers."
There are several other exonerations Cook could reach for, some of which he's employed already. So what if Android now generates more web traffic -- it's just all those cheap phones. The iPad is still dominant among tablets on this front, and iOS devices have a disproportionate portion of traffic given their shipment share. Fortune 500 companies adding tablets to their computer systems are overwhelmingly using iPads, not Android-based products. The education market is Apple-friendly, too.
The problem with excuses, however, is that they get trumped by reality. Those iOS devices aren't special any more, though they still demand premium prices.
It's understandable that Cook wants to cling to the remaining bits of Apple's first-mover advantage: It always feels premature to give it up and admit you're selling a commodity product. Even Samsung is now being undermined by cheaper smartphone and tablet makers, and its experience shows that as Asian markets approach saturation, financial performance can turn nasty. Apple's finances still look great, and its loss of market share is not catastrophic, but the reckoning will come abruptly unless the company does something to shore up its position -- maybe Cook can finally make good on his promise to pulls something revolutionary out of the product pipeline he claims to be building.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Leonid Bershidsky at firstname.lastname@example.org