Sure, They’ll Buy an Android Phone, but That’s About It…
Jason is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The August issue of CNN Money reported that Android-based phones held as much as 68% of the consumer market share, while rival iOS phones clung to as little as 17% (nearly four times less). While these statistics may be surprising, you very well may be taken aback to learn that despite this, the profit funneled through Apple phones significantly exceeds that of Google phones. Investors may want to take a look at what this could ultimately mean in terms of stock performance.
Android floods the market
Even with a barrage of cleverly placed advertisements in movies, T.V. and print, Apple’s (NASDAQ: AAPL) iOS phones are handily outmatched in sheer volume when stacked next to Google’s (NASDAQ: GOOG) Android children. While obvious comparability of features can easily take a bow for the upstage, one can easily argue that the lower price model for Android phones allows for an easier decision at the tech store checkout register.
Getting value after the sale
This is where Android is seeing the problem. While the market is flooded with Android users, an online survey from Forrester Research states that only 76% percent of Android software users engage in research for the purchase of online products and of those, only 53% of them actually buy anything. This is in stark contrast to iOS users, of whom 86% perform product research on their phones with a noteworthy 69% actually making a purchase.
While the data in this study points specifically to online product shopping, an easy case can be made to factor in the usage of both Google’s and Apple’s app platforms, Google Play and the Apple App Store. Earlier this year analytics firm App Annie reported that Apple’s App Store had leaped far ahead of Google with a revenue share of 71% to Google Play’s 29%.
Google Play-ing catch-up
Google and Apple both provide consumers with devices that come at a cost to produce, and they both provide similar software platforms which require staffing and upkeep, yet one platform is significantly more profitable than another; not good. Apple’s App Store is more established, has yet to go through a name change (although Google Play is a good name) and according to rumors, pays developers more. Whether or not Google will be able to overshadow Apple’s well established App store and online profits will rely heavily on whether or not it can motivate its consumers to buy anything.
Even though Apple’s been down more than 3% over the last six months, its market viability and profit making potential are without question; being reminded of the fact its consumers purchasing rates are strong after the sale (of hardware devices) may give you reason to give Cupertino a second look.
Even as I write this article Google’s party continues on a $700 dollar march.
When looking at Google’s myriad of profitability it may come as small news to an investor to consider that Google’s dominance in delivering Android models over Apple has not been at all hurt by the fact that Google is not the only manufacture of Android based devices. Yet this is something worth considering when you remember that Google is hardly getting the return on investment (by way of App purchases) from any of its Android devices (Motorola or not) that Apple sees on its own. While this may seem like mere pennies lost for Google now, a wise investor knows that it makes "cents" to stay aware.
The Foolish Bottom Line
Investments in either Google or Apple have been known to show portfolios strong volatility. It is important to take note at what factors may drive that volatility (and ergo profits margins) in and out of your favor.
MindOverMarket has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!