Will Android Smash the iPhone?

Android's dramatic rise threatens to topple iPhone supremacy. At the AppNation conference yesterday, much of the buzz was not about Apple.

"Android is exploding on the app scene," says Jonathan Carson, CEO of the telecom practice at Nielsen Company, adding, "like a rocket ship over the last year." Carson was speaking to a few hundred mobile app developers who gathered at the first AppNation conference in San Francisco's Moscone Center earlier this week.

Nielsen's latest mobile study released this week highlights the rise of Android. Last quarter, Android devices outsold iPhone devices for the first time. Carson credits Android's success in part to Apple's iPhone exclusivity contract with AT&T.

With the iPhone tied up in an exclusivity contract, combined with AT&T's well-documented shoddy service, giant wireless carriers and device makers like HTC saw an opportunity to bring to market a smartphone-like iPhone and thus "bet their business on Android," Carson says. By throwing their advertising and distribution weight behind the mobile platform, "Android's rise was inevitable," he says.

Nielsen's study echoes similar findings from Piper Jaffray, which predicts Android will overtake the iPhone in smartphpone market share in only a couple of years. Piper Jaffray expects Android to grow its market share from around 15 percent this year to 23 percent in 2012. iPhone's market share is currently at 16 percent today and will grow to 17.6 percent in 2012, Piper Jaffray says.

"Ultimately, we believe Android is likely to control over half of the smartphone market in the next five years," Piper Jaffray said in a report. "Apple's essentially two phone focus (low price 3GS and higher price 4) will likely limit how much of the market Apple can control and we believe ultimately Apple's smartphone market share tops out between 20 to 30 percent."

Market researcher IDC predicts that Android will surpass iOS in market share this year. Android will post 16.3 percent market share worldwide this year and grow to 24.6 percent in 2014, IDC says. Meanwhile, iOS's market share will be 14.7 percent this year and, amazingly, drop to 10.9 percent in 2014, according to IDC.

Does this spell doom for Apple and the iPhone? Hardly, says analyst Rob Enderle. He points out that Apple could open up the iPhone to multiple carriers-the latest rumor has a Verizon iPhone coming early next year-and introduce a wider range of designs. "They likely could quickly overcome this lead, and the numbers would then better represent Google's perennial number two status," Enderle says.

While market researcher Gartner has Android OS passing iOS in the next couple of years, analyst Van Baker agrees that a release of a Verizon iPhone could stem the Android tide. "It is important to note, however, that the Android market share is spread across multiple vendors and that none of these individual handset makers is likely to surpass Apple in the foreseeable future," he says.

Enderle also suggests that iPhone owners use their phones in more intensive ways, buy more apps than their Android counterparts, and generally appear to be happier with the iPhone. The Nielsen study backs at least one of Enderle's claims: The average iPhone owner has 40 apps, whereas the average Android owner has 27 apps.

"This suggests that Google is simply slipstreaming Apple with an inferior product that benefits more from the choices people have than the merits of the device itself," Enderle says. "The data use and application profitability data [of the iPhone] tell a different story" than the market share numbers.

Regardless, Nielsen's Carson says there are just too many factors in play to pick a winner between the iPhone and Android. Even if market share turns in favor of the Android, he says, "Apple has proven you don't need to have 99 percent market share to have a successful business."

Tom Kaneshige covers Apple and Networking for CIO.com. Follow Tom on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline. Email Tom at tkaneshige@cio.com.

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This story, "Will Android Smash the iPhone?" was originally published by CIO.

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