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Smartphone wars: Android "has half of the UK smartphone market"

Kantar Worldpanel ComTech -- a prominent market research firm and a powerful figure on the Scrabble board -- today released its latest "smartphone OS barometer" report, and it has some noteworthy conclusions in it about the British market. Specifically, the report claims that in the 12 weeks ending 2nd October 2011, iOS market share in the UK was 18.5% whereas Android was more than two-and-a-half times that -- 49.9% of all new smartphone sales. Apple's share at this time last year was 32.9%, compared to 28.8% for Android. In the US, Kantar's numbers show an even stronger tilt in Android's favour: 66.4% Android, 21.5% iOS.

Beyond the head-line grabbing Apple-vs-Android story, there is other interesting data in the report. In the UK, 69.1% of all phone sales in the last 12 weeks were smartphone sales -- and 43.8% of the population now own a smartphone. It also has the interesting tidbit that HTC does rather better out of Android sales than Samsung (44.8% of all Android phones are by the former, and 37.9% are the latter). Internationally, Samsung is a long way ahead of HTC.

I need to address one common criticism of many market share comparisons. It goes like this: while Apple quotes its volumes in terms of units sold to end-users, many Android OEMs quote units shipped to distributors and resellers instead. This skews figures against Apple because it means unsold handsets languishing in stock rooms around the world count as "sold" stock.

Kantar Worldpanel's methodology doesn't work that way. Rather, it gathers material from interviews with volunteers who have agreed to be tracked. It "conducts over 1 million interviews per year in Europe alone," which is certainly some substantial data gathering.

A second issue people often bring up when discussing market shares is carrier availability. In the US, the iPhone was (of course) only available on a single carrier until relatively recently. This factor doesn't affect the UK market. All six of our mainstream carriers have been selling subsidized iPhones since the release of the iPhone 3GS, and all six also offer Android handsets as part of their ranges. It's a level playing field.

I spoke with Dominic Sunnebo, the author of the report, and asked him for more information on Kantar Worldpanel's testing methods. He told me:

In order to generate the insights you have seen published we have a longitudinal panel of demographically (age, gender, region & ethnicity) representative individuals in each country: for example we track 15,000 people in the UK, 20,000 in the US, and 26,000 in Brazil. We interview the same individuals every 4 weeks, to see if they have had any change in their mobile ownership e.g. new phone, new tariff, new network, etc. The day/date of these changes are recorded, and these figures are then collated into time periods e.g. "12 weeks ending 03rd October 2011" (as in our latest report). As it is the same individuals we interview each time, this also allows us to accurately track switching between brands, OSs, networks, etc.

Now, there is an important mitigating factor to Apple's seemingly poor numbers, specifically the iPhone 4S launch timing. We know that Apple phone sales dipped throughout the last few months as people waited for an updated iPhone, followed by explosive sales of the iPhone 4S. It seems sensible to expect Apple to regain some of those market share points in future reports from Kantar Worldpanel. Given the size of the gap between Android and iOS, though, it's difficult to imagine it closing completely.

The report also mentions that consumers in the UK are particularly price-sensitive to smartphones, preferring to choose a lower-end handset on a free-with-monthly-plan pricing to higher end phones where a purchase price is charged. This, of course, was a market Apple was not addressing at all until the iPhone 4S launch just a few weeks ago, at which time the iPhone 3GS became "free." If Kantar's analysis of consumer preferences is correct this should also give Apple a boost in the future.

It's also debatable just how much market share matters. As Charles Arthur says in the Guardian, Apple's relatively low market share in the computer market hasn't stopped it from making a mind-boggling amount of money. If you could be the CEO of a company that makes all the widgets or a company that makes all the money, which would you choose?

The opposite point of view, proposed by Henry Blodget of Business Insider, is sometimes referred to as "the Highlander Principle" after that film's famous line "there can be only one!" Technology platforms always converge onto one dominant platform, goes the reasoning, as developers concentrate support on the OS with the greatest numbers of users and users flock to the platform they are most familiar with and has the widest range of apps available. Certainly, this happened in desktop OSs, with Windows maintaining its two decade stranglehold to this day. Therefore, Blodget surmises, iOS is doomed and Apple "FANS" (his article was sub-edited by cAPTAIN cAPS lOCK) are clinging to a dying platform.

Blodget ignores significant areas in consumer technology, however, where the Highlander Principle hasn't happened at all -- such as mobile phone OSs at any point in history up until now, or games consoles, or even social networks (which should be more vulnerable to network effects than most -- and yet Google+ and Twitter and Facebook all co-exist). Blodget even concedes that as so many modern apps are cloud-based, the strength of the "platform" in a modern smartphone OS is somewhat diluted. Yelp is still Yelp, whether you use its iPhone app or its Android one.

Meanwhile, to muddy the waters further, Android users are far more thrifty than iOS ones. Even if Android outsells iOS forever, this factor means devs could easily make more money on Apple's platform.

It remains far from clear what the future holds. To my mind, the question isn't whether Apple is losing ground to Android; that seems pretty certain, at least in the narrow terms of the numbers of handsets sold. Rather, it's: what sort of handsets are they?

Some amount -- perhaps most -- of the sales that Android is picking up comes from thrifty consumers buying low-end phones and not spending a lot of money on apps. It seems a deliberate part of Apple's strategy to leave that part of the market unaddressed -- consider that the cheapest pre-pay iPhone in Britain is an astronomical £320 ($510) for an 8 GB 3GS. That may or may not be the right strategy in the long run.

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