107 Comments

Summary:

More Google Android phones were sold during the first quarter of 2010 in the U.S. than iPhones. Customers of Verizon Wireless, the largest U.S. carrier in terms of subscribers, can’t buy an iPhone, but they can choose from a wide range of different Google Android smartphones.

More handsets sold in the U.S. during the first quarter of 2010 were running atop Google’s Android than Apple’s iPhone operating system, according to the latest findings of The NPD Group. Android smartphones accounted for 28 percent of sales; the iPhone, just 21 percent (both still lagged behind Research In Motion’s BlackBerry platform, which was the market leader at 36 percent). So what’s propelling Android past the iPhone?

There’s the obvious explanation: Exclusivity on AT&T’s network limits the potential sales for Apple. As Verizon announced on its most recent quarterly earnings call, it has more than 92.8 million subscribers, none of which can buy an iPhone for use on the network — although a recent poll found that a majority of them want one. Enter Google Android phones, whose user interfaces are similar to the iPhone and have access to a growing software store, now estimated at 50,000 applications. Verizon is helping the Android cause, too — it devoted $100 million in advertising muscle to back the Android-powered Motorola Droid.

An additional factor is the number of handset choices. By providing its Android operating system to any hardware manufacturer that wants it, Google allows for a near limitless number of handset variances for consumers to choose from. iPhone selection, on the other hand, is akin to choosing the paint color of the old Ford Model T’s that only came in black — you can have any iPhone model you like right now, so long as it’s an iPhone 3G or 3GS.

Finally, the many permutations of Android devices offers another advantage — pricing flexibility based on the hardware used and the features offered. The NPD Group cites an average smartphone price of $151 in the first quarter of 2010, roughly half of the $299 price tag for a top-shelf iPhone. Apple offers subsidized models at $99 and $199, but most subsidized Android phone prices top out at $199 and go down from there. The Samsung Behold 2 running Android is currently free with a service plan at T-Mobile, for example. With so many choices, consumers can find Android units for well under $99 these days and can shop around in a greater range of price points.

Related research on GigaOM Pro (sub req’d):

Google’s Mobile Strategy: Understanding the Nexus One

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  1. I hate Apple. But it would also be wise to point out Q1 is right before they announce the newest model of Iphone. So you average Apple Cult Member would have already bought their 3GS last June and aren’t buying in Jan – Mar. Also Q1 doesn’t include a gift holiday. Either way I hope Apple burns in hell.

    1. What are you 12 years old? Seriously, get some professional help.

  2. Constable Odo Monday, May 10, 2010

    Android is doing very well, but only individual manufacturers of Android handsets are making any money. Google isn’t making a dime from Android market share. At least not yet, anyway. It would have to leverage mobile ad clicks to make any revenue but that isn’t going too well yet. Mobile market share doesn’t have much value if there isn’t much money to be made from it. If the iPhone ever gets released on Verizon, the iPhone would be pulling so much revenue it would be almost unbelievable. Let Android market share crush iPhone market share. Apple just has to continue making money as usual and it will do more than fine.

    1. I’m in general agreement on the revenue angle, but it’s worth noting that on their last earnings call Google said they’re making money on the Nexus One sales. But I think you’re right – we’re just getting started with revenues from the mobile ad market.

      1. Hasn’t Verizon stopped selling the Nexus One? It doesn’t look like that phone has a future even though the OS clearly does.

      2. Verizon never sold the Nexus One – no carrier does as it’s sold directly from Google. The Incredible is extremely similar to the Nexus One, so Verizon chose to sell that and not work a wholesale partner deal with Google on the Nexus One.

    2. I don’t see the relevance – Google is unconcerned with making money (directly) off of Android. They just wanted to ensure a competitive landscape existed for mobile internet devices, which they’ve definitely done. The more we search, the more money they make. With Apple waiting 3 years and counting to expand beyond ATT, the move looks smarter by the day. Even if Apple expands to every U.S. network this summer and crushes the Android handsets, Google might consider their investment more than worthwhile for putting seriously net ready phones in people’s hands a year or two before Jobs wanted to.

      1. +1, Egg Zag Tlee ,
        Giving people net ready phones a year or two before iPhone is the key , it will create loyalty (read fans) and slowly increase revenue in mobile advertising space. By the time iPhone is available on Verizon/Sprint/TMobile folks already have comparable Android phone (not to belittle the options Android gives; the keyboard, touchscreen, expandable memory and removable battery to name few) It will be a tough sell for Apple to convert these folks. Apple surely will miss couple of millions of sales on each carrier ( which totals into ‘millions’ if you count HTC + Samsung + Sony + LG + Moto on Verizon + Sprint + T Mo ) as a result.

        Ask if any of the 2 million Droid users to buy an iPhone, then you know what I mean.

      2. ROFLOL – “[google] just wanted to ensure a competitive landscape existed for mobile internet devices…” are you that naive or just plain stupid?

    3. Google is not a traditional software company like Microsoft who look to make money out of licensing, Google wants to own the platform and encourage more handset vendors and more buyers to come on to their platform willingly. For such a broad vision, spending around 100 million dollars per year on android is a pittance. Google roughly generates 2.5 billion dollars positive cash flow every quarter. Google thinks owning the best platform is the key to the future revenues, not selling licenses.

  3. Apple’s crazy if they stay exclusive to AT&T for another day – the money they’d give up in exclusivity sweetness is nothing in light of all the marketshare they’re sacrificing.

    1. Brian S Hall EJ Monday, May 10, 2010

      Apple has never cared about market share.

    2. Brian McConnell EJ Monday, May 10, 2010

      I would have bought an iPhone a long time ago, if I did not have to use AT&T. I didn’t want to deal with jailbreaking the phone, and risk it turning into a doorstop. They should have done their deal with T-Mobile to begin with.

  4. Gokul Selvaraj Monday, May 10, 2010

    yea whatever!! or it could be the case that consumers are actually finding Android better than a frigging iphone.. what with multi-tasking/folders and no steve jobs controlling your lives… you may actually at least want to cite the most plausible reason for android outselling the iphone in your article as a probable explanation!! un-frigging-beleievable

    1. Actually, the most ‘plausible reason’ for Android ‘outselling’ the iPhone is that huge numbers of them aren’t even sold–they’re given away as BOGO…which is a nice way to get market share, not so nice if you are in business to make money.

      1. Someone is paying the $70/month for 24 months to Verizon for each of those handsets. And Verizon is buying the handsets. So what.

    2. Sorry Gokul,
      You’d be hard pressed to find 1 out of 10 customers who care one bit about multitasking/folders, Steve Jobs controlling their lives and whatever other Engadget/Gizmodo (hey whats the processor speed!) Uber geek specs.

      1. Haha, i thought the same before this report was released. I too thought there were just too many people who didnt care about being ripped off and willing submitted to Jobs’ whims. But apparently not so, 28% who do care vs 21% who do not according to the NPD report(not 1 out of 10 zippyd)

      2. Are you serious? You must be seriously out of touch with 99% of people that use these phones. No one cares about multi-tasking? Ha!

  5. Not being an Apple fan, this is great news! The 92.9 million Verison subscribers are obviously happy with their carrier!

    1. I m with Verizon, just waiting for the contract to expire so I can switch to AT&T just to get an Iphone.

      1. Me, too…..which is sad because I love Verizon, and really don’t want to go with AT&T. Hopefully the reports of a Verizon iPhone coming out this summer are true.

    2. If you switch to ATT you will be sorry. I have sprint and I switched and ATT was so bad I switched back, I tried it again a year later thinking they might have fixed there bad service, I dropped so many calls I had to switch back again. I will wait till sprnt comes out with an iphone or I will get the android that will be out in June or July. It is supossed to be as good or better then the iphone.

  6. The biggest hit to the Iphone is yet to come. A few guys have been able to dual boot android on an Iphone.
    Once people start doing that and use the android they will start shifting to it a lot more.

    1. The average consumer is not going to jailbreak their iPhone no matter how easy.

    2. I’m not sure if there is oxygen on your planet, based on that comment. I have both; I’ve used both. I find Android to be a geeked version of iPhone OS 2, that is, a lot of cool features slapped together with little consistency. Consistency often means limiting choice. But if I had an iPhone that could boot Android, I would still use the iPhone. It’s just simply more polished.

    3. And of course you are talking about the techtards, you know, the ones that love to dig into the tech and jailbreak etc. But the overwhelming majority, let me repeat, the overwhelming majority of people want to be insulated from the technology. They want incredibley easy to use, functional devices that are state of the art and deliver tremendous added value. Only Apple does this. Look what Apple has accomplished virtually overnight in this industry. Before your user manual was 10x the size of your phone and it was virtually impossible to figure out how to use all its features and functions. Apple will continue to be a dominant player, no matter what the techtards think.

  7. I was trying to decide between the iPhone and the Motorola Droid. When I saw that I could get the droid for $20 bucks on a new contract with Verizon thru Amazon.com I was sold. There are very few apps I need that are not available on Android Market (Netflix and Pizza Hut come to mind) but for the most part, the apps I need are there. And I have insurance on the phone which I would NOT be able to have with the iPhone.

    I am happy with my Droid and I can certainly see why it is doing so well.

    1. Didn’t I see you driving a Vega?

  8. Android is a race to the bottom fellas. This is mirroring the PC industry. PC’s outsell Macs by a huge margin. Eventually, Androids will outsell iPhone by a huge margin. Does not Apple care? Sure, but not as much as they care about profits. In the PC industry, despite being outsold every year, Apple makes more profit than many of them combined. Same goes for the smart phone market, combine all the Android handset makers and compare their profits to Apple, they would trade places with Apple any day. Bottom line, all these handset makers are accountable to share holders, and this is where Apple is so far ahead, they are laughing at these numbers. Like I said, Android = race to the bottom.

    1. Kevin C. Tofel rabidcb Monday, May 10, 2010

      One difference in the PC market and the mobile market as it pertains to Google: PC makers don’t make money from users clicking ads on their PCs while that business model is core to Google’s revenue stream.

      1. Yes, true, Google is the only one concerned that Android runs on as many mobile devices as is possible. HTC and Motorola could care less, they simply want to sell handsets no matter what OS runs on it. It is the handset makers that have to differentiate themselves from the pack. Look at the Incredible, correct me if I am wrong, the Incredible runs a proprietary UI. You see, eventually, they will all need to build walled gardens around their ecosystem to provide a user experience the consumer wants to return to.

      2. Agree – Android is not monolithic and fragmentation will only become more distinct. Will not matter that the underlying system is open, everything on top will be closed.
        I can hear the open-source fanboys crying already :-)

      3. Fragmentation is going to continue to be a growing problem for Google. Look at the Android Marketplace for example. Yes they claim to have 50,000-60,000 apps,however, if I bought an Incredible I can only purchase a subset of those apps since all won’t run on my version of Android.

        It’s also a problem for developers as they will need to support multiple versions of android for their apps.

        On the iPhone developers don’t have that problem since they know the upgrade cycle is annual and apple phases out older versions. Apple has also made it easy for developers to create and manage iPad versions of their apps.

        Unfortunately for Google, their fragmentation problem is just beginning as more manufacturers start using Android and as they further customize it to differentiate their products from their competitors who are also running Android.

      4. “Fragmentation is going to continue to be a growing problem for Google.”

        Valid point that we’ve covered quite a bit, most recently here: http://gigaom.com/2010/04/27/googles-android-fragmentation-problem-persists-admob/

        However, my gut says that Google is aware of the fragmentation issue and is looking to address it. Let’s see what comes from the Google I/O developer conference next week.

      5. Will be interesting to see what they “try” to come up with. Can’t see the individual mfgs going along with Google though – To be successful, they can’t be a Gateway or Dell controlled by Microsoft.

      6. Isn’t fragmentation going to be a problem with iPhone OS also now? We have upcoming OS 4.0 which runs on 3GS, partially on 3G and does not support 2G. There are quite a few 2Gs out there and large developers will need to factor them in.

        If fragmentation can happen with a single vendor, single hardware family, closed systems then Google can definitely not be singled out.

    2. Nikhlesh… there’s fragmentation which affects even newly shipping phones and then hardware obsolescence which only affects older, out of date models. Not the same at all in my mind. Fragmentation divides the current market and makes it difficult for devs to program for. Obsolescence is just expected. So, no, I don’t think you can compare the two.
      Some fragmentation from a devs perspective might be considered between the iPod, iPhone and iPad though I would think.

  9. By now the entire world knows the new iPhone releases in June and also for the first time it’s specs. It’s really stupid to buy a phone which will be 100 dollars cheaper in June AND it will be outdated

    Hence this data point was half expected.

    But that said yoohoooo android. And @palm here’s more salt on your sprint exclusive wound.

    1. “Hence this data point was half expected.”

      Spin harder.

      Apple has been losing marketshare to Google for two straight quarters.

      Google kicking Apple ass has nothing to do with ‘teh new iPhone’. Apple fanboys better pray that joke of a prototype everyone has now seen isn’t the real thing. It sure as hell is no Android killer.

      1. You are looking at the competition from a user point of view. That view doesn’t matter to Apple or any other handset maker. When you say Google is kicking Apple’s ass, you better not be talking about profits, cause then you would be way off base and profits are the only thing that matters to ALL handset makers. You need to keep in mind that Apple has a well defined and robust ecosystem, gives them a huge advantage over any handset maker, they are built for the long haul. This is why Steve said Apple was years ahead of everyone, because for any handset maker to build the kind of ecosystem that will keep customers returnin, will take years. Look at the Motorola Droid, when this thing came out, it was marketed well and succeeded for a short period, now it has take a back seat to an HTC handset and cant maintain its status. Since Verizon ownes the Droid trademark, they are all slaves to Verizon. Only Google cares that they have market share because they get advert $$, hopefully from your pocket.

      2. @rabidcb

        And what happens when the iPhone is no longer the handset to have – you know, as happened with the Motorola RAZR and the Nokia N95 – and no-one wants one any more?

        That’s kind of where fragmentation comes in handy and it’s also where a lot of tech commenters demonstrate why they don’t understand the phone market (hint: it’s not apps that sell phones).

      3. Sure, we can do the what if this and what if that, but only time will tell. I don’t think Google or Apple will be losing money anytime soon. I can’t say that for the all the Android handset makers, its a race to the bottom for them. They’ll get cheaper and cheaper in hopes customers use thier devices. But they are chasing each other trying to vie for the Android market. I think HP did the right thing purhcasing Palm, they understand the formula to maintain revenues for the long haul.

      4. I bought an Android to replace an iPhone 3G. So did my father, and he doesn’t know what multitasking is on windows let alone on a phone.

        Like Blackberry which has slashed prices, Apple is soon going to be in a race to the bottom to maintain share or be forced to simply sell to the less than a million members of the Cult Of Jobs.

      5. “Apple has been losing marketshare to Google for two straight quarters.”

        Funny how the article Kevin linked to, below, states: “Handset makers Apple and Motorola exhibited the largest growth in terms of smartphones sold and both gained in market share,…”

  10. The prices you are quoting are subsidized. Comon. Consumers in the US are trickered at paying $2000 to $3000 for an iphone because they have to sign a 2-year contract.

    Why do you always think it’s a given that everyone has to get screwed in the US?

    Android brings new business models to the industry. Which means soon enough people can buy a 3.5″ nice Android phone for $199 and be on a Virgin Mobile or MetroCPS pre-paid account, with Android there is no need to sign any 2-year contracts anymore. That is going to be a HUGE difference. Most of the worlds mobile phone users are on pre-paid and not on contracts.

    1. That sounds good on paper Charbax but its not happening today and you seriously underestimate the political weight of the phone companies to hold onto their markets. My question is 4g really the standard its supposed to be in the future? If it is then I could see it happen. That’s why the market is different in the US vs. the rest of the world (they’ve settled on a standard we haven’t delivered one yet).

    2. iPhone users are no more tricked into a contract for a subsidized phone than any other phone user on any other carrier, this includes Android phones. They are pretty much all subsidized which allows users to purchase smartphones that would otherwise be more expensive and less impulse buys and makes money for the carrier. That’s how it rolls in the US.

      Apple allowed the purchase of unsubsidized phones (but still locked to AT&T), but the cost is considerably more. This isn’t any better or worse than Android.

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