Why Eric Schmidt's prediction about Android vs. iOS development is dead wrong

Google Chariman Eric Schmidt recently addressed an Android user lamenting the fact that that mobile apps are often released on Apple’s iOS platform well before they finally reach Android. Schmidt cooly and curiously explained that this dynamic will change in just 6 months. Here's why he's wrong

Google Chariman Eric Schmidt recently addressed an Android user lamenting the fact that that mobile apps are often released on Apple’s iOS platform well before they finally reach Android. Schmidt cooly and curiously explained that this dynamic will change in just 6 months.

From Schmidt’s perspective, it’s nothing more than a numbers game. More Android users = more potential customers = more attractive platform for developers. That, however, is an overly simplistic view of mobile development resting on the erroneous assumption that all mobile users, across all platforms, are one and the same.

The reality is much more nuanced and can be boiled down to a simple precept – not all smartphone users are created equal.

Developers distinguish between certain kinds of users

An analogous and illustrative example can be found in TV advertising where Television shows with desirable demographics (18-34 year olds) can demand higher prices for 30-second ad spots than shows that may very well have many millions of more viewers. It’s why a show like Family Guy commands higher advertising rates than Two and a Half Men even though the latter consistently draws many more viewers every single year. And though American Idol and Dancing With The Stars have more or less the same level of viewership, Idol is able to charge a few hundred thousand dollars more for a 30-second spot because while both shows have many female viewers, the demographics for American Idol skew much younger.

Similarly, developers don’t always focus their efforts on the platform with the most users. Rather, they’re interested in the platform that can yield them the highest return on their investment. So much like advertisers covet particular demographics with respect to TV viewers, developers seem to place a premium on iOS users as opposed Android because they spend significantly more money on mobile apps.

Google last week touted that the Android Marketplace had reached  the 10 billion download milestone. That’s an impressive figure, to be sure, but notice how Google did not, and in fact never has, divulged a far more telling metric – the amount of money they’ve shared with developers thus far. Apple, in contrast, periodically boasts about the money it’s doled out to iOS developers, with the most recent official figure checking in at over $3.5 billion as of October 2011.

So while total usage numbers are important, how those numbers actually translate into dollars and cents is what truly matters.

And when it comes to making money, iOS blows Android out of the water.

Follow the money trail

According to a recent report from Piper Jaffray analyst Gene Munster, 85-90% of all the money spent on mobile apps are for iOS apps. His research also found that only 1.3 of Android downloads are for paid apps whereas 13.5% of iOS downloads are for paid apps. All told, Munster estimates that Apple has paid out $3.46 billion to developers while Google has only paid out $240 million to developers. And a mobile app study from Distmo this past May found that "80% of paid apps on Android have been downloaded less than 100 times."

More recent data from FlurryMob confirms that developers are more keen on iOS development than Android development, and again, it all boils down to money.

Flurry’s data is particularly interesting because they’re an analytics company. Consequently, developers often set up analytics accounts with them weeks before a product is actually released. They therefore have “a glimpse into the bets developers are making ahead of the market.”

Encompassing 50,000 new apps, Flurry’s study found that the bulk of new development projects are for iOS, outnumbering new Android ventures by a factor of three to 1.

If anything, Flurry's data indicates that developer interest in Android relative to Apple's iOS is declining, down from just over 1/3 of new project starts early in 2011 to just a tinge over 1/4 in the current quarter.

Anecdotally, developers consistently tell us that they make more money on iOS, about three to four times as much.  To be sure, we pulled a sample of in-app purchase data from a set of top apps with versions on both iOS and Android, comprising of several million daily active users (DAUs). Running the numbers, we find that, on average, for every $1.00 generated on iOS, the same app will generate $0.24 on Android.

At the end of the day, it’s the money that talks, not overall users.

About all those Android Users

The cumulative number of Android devices sold may be impressive, but it doesn’t paint an accurate picture for developers as to the size of the platform's customer base. The Android ecosystem is terribly fragmented and not every app is capable of running on each and every handset. Even standard apps like Netflix and Angry Birds can’t run on every Android device you might find in a store today. And if that wasn't already frustrating enough, even devices technically capable of running a particular app may lack the requisite processing power to deliver a smooth user experience. You might remember that Rovio a few months ago issued a public apology for the poor performance of Angry Birds across a multitude of Android handsets

Exacerbating the problem is that most Android handsets used today are running older versions of Android. Indeed, even new Android handsets bought today are likely running antiquated software that may or may never be updated. A few weeks ago, Michael Degusta of the Understatement released a telling, if not damning, chart illustrating just how widespread the problem is. Looking at all 18 Android phones that shipped in the US by mid-June, Degusta found the following:

  • 7 of the 18 Android phones never ran a current version of the OS.
  • 12 of 18 only ran a current version of the OS for a matter of weeks or less.
  • 10 of 18 were at least two major versions behind well within their two year contract period.
  • 11 of 18 stopped getting any support updates less than a year after release.
  • 13 of 18 stopped getting any support updates before they even stopped selling the device or very shortly thereafter.
  • 15 of 18 don’t run Gingerbread, which shipped in December 2010.
  • At least 16 of 18 will almost certainly never get Ice Cream Sandwich.

And as for more Android smartphones released more recently, well they won't be getting Ice Cream Sandwich for at least a couple of months, save of course for the Galaxy Nexus.

The takeaway here is that Android is not a monolith, and the installed base of Android users Google likes to trot out encompass a wide range of phones with varying screen sizes, processing capabilities, and features. In Google’s zeal to increase Android’s reach and make it all the more appealing for developers, they are actually achieving the opposite.

The Groupon effect

Now there’s no denying that Android provides consumers with more choice than Apple, but a significant reason for Google's impressive Android activation numbers is that there are a slew of lower-end devices running Android that consumers can often pick up for free or at extremely low prices. To this end, Android developers face the same problem that plagues merchants who use Groupon to drum up business – the user base is largely comprised of cost-conscious consumers. As such, one can reasonably assume that Android users, on average, are less likely to pay for apps than consumers who purchase high-end devices like the iPhone and premium Android handsets like the Samsung Galaxy S II. Indeed, the data referenced above confirms this.

But wait, there's more - Malware, ease of payment, and app selection

Unfortunately for Google, this is just the tip of the iceberg with respect to the uphill battle they face in the fight for developers. Clunkier development tools for Android have been on ongoing problem, and let's not forget about the vast number of scamware, crapware and malware apps that permeate through the Android Marketplace. The lack of an approval process for apps on Android certainly has its benefits, but let’s not forget there’s also a downside to being open.

Just yesterday, Google removed 22 malware infected apps masquerading as popular apps such as Angry Birds. Meanwhile, a study from this past November found that malware on the Android Marketplace was up an astounding 472% since July. Going back a little bit further, to March of 2011, Google removed over 51 malware infested applications that by some estimates might been downloaded up to 200,000 times.

Compounding matters is that the payment mechanism for Android isn't nearly as seamless as it is for iOS users. Whereas Apple has hundreds of millions of credit cards on file and can easily integrate app purchases with iTunes, Android users have to rely on Google Checkout which, suffice it to say, hasn't exactly been a runaway hit.

Taking this all together, is it any surprise why developers often release apps for iOS over Android, and sometimes don’t even bother with an Android app at all?

Another issue worth mentioning is app selection.

While most of the biggest apps will always be cross-platform, a number of big mobile apps never make the transition to Android. Instagram is a huge hit for the iPhone with no Android counterpart. Ocarina and I Am T-Pain are two huge iPhone hits from Smule, a development company with no intention on developing Android apps anytime soon. And how about the top grossing iOS app at the moment, the award winning Infinity Blade II? Sorry folks, but it too is an iOS-only endeavor.

So what's the conclusion

Now Android is a growing platform and it’s not as if money can’t be made there at all, but the real moolah lies with iOS. For Schmidt to suggest that developers will be eyeing Android over Apple’s iOS in just 6 months demonstrates Schmidt's blatant disregard, or perhaps willful ignorance, of what really drives developers – the ability to write code and earn a living.

Google is famously a numbers/data driven company, but the leap Schmidt makes between the total number of Android users and developer interest is misguided and shortsighted. Schmidt's perspective ignores many of the non-data factors that influence mobile purchases and the allocation of development resources. What's more, hidden underneath Google's impressive Android activation numbers are wide ranging hurdles such as device fragmentation and ease of payment.

There's absolutely no reason to assume that Schmidt's prediction will even come close to taking shape in 6 months.

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