Apple And The Marketshare Fallacy

One of the common statutes of technology journalism is this. Marketshare trumps everything. Whenever you read headlines about Apple’s moribund marketshare– Mac, iPhone, iPad, Watch, or whatever– ignore it, but mark the writer as someone to avoid in the future.

Every technology business that competes with Apple’s product line generates similar specific statistics, but not all are important or carry the same weight. For example, each company knows about their own unit sales, revenue, profits, total customer base, but few announce those numbers and instead rely upon guesses from various research groups. Except Apple.

Sharing The Market

Technology gadget makers do not share many such numbers with their competitors, technology writers, industry research groups, or stock market analysts, so even a total marketshare number is fraught with opportunities for huge mistakes.

Here’s a good example. Google says the Android platform has about 1.6-billion connected devices, while Apple says the company has over 1-billion iOS device users. The math is inescapable. Google’s Android owns about 65-percent of the smartphone and tablet marketshare, while Apple owns most of the rest.

That means Apple is doomed. Yet, those numbers do not agree with numbers from research groups which put Apple’s iPhone marketshare at 15-percent and Android’s smartphone marketshare at 85-percent. Why the disparity? Chalk it up to lies, damned lies, and statistics. Apple’s devices last longer in the marketplace than Android devices.

The Doomed Meme

Headline after headline in recent years point out Apple’s marketshare problem in the face of inexpensive and high quality smartphone knockoffs from China. It’s the so-called Apple is doomed meme. The common consideration is this. “How can Apple compete with similar hardware is available for half the price of a new iPhone?”

That’s a good question, yet there is plenty of precedence for exactly that. First, look at the Mac. Apple’s once flagship product line continues to grow the customer base and brings in billions in profits– yet every model is copied incessantly by competitors who sell similar hardware for less; often far less.

How does the Mac prosper?

Analysts will point out that unit sales, revenue, profits, total customer base are important elements in a product’s success, but marketshare remains as the public face of success touted by Wall Street and technology writers, despite obviously being less important than profits. The importance of marketshare is misstated, seldom accurate, subject to guesses and estimates, and not a true indicator of product success.

For example, Samsung’s smartphone marketshare is estimated to be double Apple’s iPhone. Yet, Apple’s smartphone profits are much, much higher. In fact, most researchers and analysts think only Apple and Samsung make profits in the smartphone segment. No matter what a company’s marketshare, if it cannot make a profit, the future looks gloomy. Losing 10-dollars on every unit sold cannot be made up with more volume. A loss is a loss.

Differentiation Much?

This has been bounced around before but is worth a repeat. Differentiation is a key component of product marketing. Apple commands premium revenue, premium gross margins, and the result is premium profits because iPhone, iPad, and Mac are easily differentiated from other premium brands thanks to iOS, OS X, and the Apple ecosystem molded into higher quality hardware. Apple is the only manufacturer in that position.

That may help explain why Samsung makes far less revenue and profit than Apple from each smartphone sold. What separates a Galaxy-whatever from an iPhone vs. what separates a Galaxy-whatever from a much cheaper Android smartphone from Xiaomi, OPPO, Huawei, Lenovo, or many others. They all run Android. Apple’s devices do not. That’s a key differentiator, but one among many.

Marketshare is an indicator of a company’s sales vs. competitors but it’s both an inaccurate number based upon guesstimates and not a leading indicator for success.

What’s more important? Profits. After that, other elements take their position on the stage of success. Total unit sales, average selling price and gross margins, total customer base, services, accessories, customer satisfaction levels, and many others. The value of marketshare as an important indicator of success is a fallacy.