Last week, you asked “Why Is iPad So Much More Dominant Than iPhone?

The uber short version is phones are sold. Tablets are purchased.

The slightly longer version is. The vast majority of people buying a phone just want a phone that does (fill on the blank) like Mary’s or tad’s. They walk into a cell phone store and they leave with whatever phone the phone store wants them to leave with. They do this because their is immense channel pressure to move these phones and since they do not have “organic demand like the iPhone” they pay for sell thru at point of sale. Stores and sales people are incentivized to sell phones.

Demand for Android phones is three overly simplified segments

Geeks that don’t want to live in Apples walled garden (smallish but not insignificant group)

People who cannot or think they cannot afford an iPhone. (the cost of the phone is largely irrelevant relative to the cost of the contract)

And lastly…people who walked into a phone store without knowing exactly what they wanted.

None of the carriers WANT to sell iPhones. The $400+ per unit subsidies added up to over 6 Billion in Q4. The Carriers would much rather sell you a phone they pay 150-200 to subsidize that they are getting spiff money from the manufacturer to sell.

The reality is that the carriers NEED the iPhone ask Sprint how they were doing before the iPhone.

One last bit. I think the iPad has a greater margin of quality lead over its competitive set than the iPhone does. It Is sold at tighter margins that manufacturers have not been able to compete with. And lastly. Google ain’t apple so Android for tablets ain’t iOS.



About the author:

Neither my current job nor my history would help you pigeon hole me too well. I was a late bloomer, partial college musician/bus driver supporter of wife In college I quit driving took an entry level job in a bank and went back to school. I now work at a major Capital shop with over $100 billion in AUM, most of which is fixed income.

Category: Technology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Phones are sold. Tablets are purchased.”

  1. b_thunder says:

    It’s been less than 2 years since the release of the first iPad (April 3, 2010 ) In relations to the iPhone timeline, the tablet era “now” is what iPhone era was right before the release of iPhone 3GS – do you remember the state of iPhone competitors back then? There simply was no competition.
    I think that ipad competition 2 years after its introduction is much stronger than what it was for iphone 2 years after its release. Given time, others will catch up.

    Second thought: why didn’t Apple call new ipad the “ipad 3″? i think it’s for the same reason why Honda doesn’t call it’s cars Civic 1, Civic 2, Civic 3, …. , Civic N. They call it 2012 Civic or 2013 Civic. They make essentially the same car for 6-7 years and very few people buy new Civic every year. I think iPad reached the same plateau: those that already have ipad 2 or the “new ipad” have no reason to upgrade every year or even every other year! And without constant upgrades I just can’t see Apple sales going at the same rate as in the last 2 years.

    And finally, I totally agree with the following statement: “None of the carriers WANT to sell iPhones. The $400+ per unit subsidies added up to over 6 Billion in Q4.” My takeaway is that sooner rather than later Verizon and ATT will tell Apple to either drop the prices or take a hike (ie T And VZ will raise retail iphone prices.) Not to mention they’re peed-off that Siri wastes disproportionally large amount of bandwidth. Buh-bye those “fat” profit margins!

  2. jb.mcmunn says:

    Android phones are sold only to geeks and ignoramuses?

    What uninformed unsubstantiated twaddle.

  3. bolderbob says:

    Dear Guest Author,

    Being a smart person since you are on The Big Picture, please do not end a sentence with “with”. This shows you need to go back and study english. Since you are referring to a company when you use the word “apple” the “A” needs to be in capitalized. Also, please do not end a sentence without a (.). If you want to be a good blogger, please check your work. Why would anyone care about your opinion if you come across as a 6th grader?

    Thanks for being a PRO.

  4. baldheadeddork says:

    “None of the carriers WANT to sell iPhones. The $400+ per unit subsidies added up to over 6 Billion in Q4. The Carriers would much rather sell you a phone they pay 150-200 to subsidize that they are getting spiff money from the manufacturer to sell.

    The reality is that the carriers NEED the iPhone.”

    I think that’s a hugely simplistic look at it. In each case, the iPhone solved one problem for a carrier that couldn’t be fixed otherwise.

    When AT&T took on the iPhone it was because they were in an almost-even race with Sprint/Nextel and Verizon, and those two had large leads in the business/Blackberry market that then dominated smartphone sales. They correctly foresaw that they had to become one of the top two players in the market or they would be fighting to stay alive in five years. If they didn’t make money on the iPhone was irrelevant if it kept them from being an also-ran fighting for 10-15% of market share, and they were right.

    Fast forward to 2011. Verizon and AT&T are the dominant players, but Verizon has a problem. They keep trying to sell themselves on the quality of their network (“Can you hear me now?”) but they’re having a hard time making that stick against AT&T. The consumer market is now the most important segment of smartphones and AT&T can market itself as the only place you can use an iPhone.

    Verizon doesn’t really need the iPhone to get consumer market sales. In the preceding two years they’ve done a great job of building the Android brand and it is now outselling the iPhone, at significantly better terms than AT&T is getting from Apple. But by taking away AT&T’s exclusive on the iPhone they remove their strongest marketing tool. Without the iPhone AT&T has to engage Verizon on network quality, and that’s a fight Verizon wants to have every day of the week. They break even at best on the iPhone like AT&T has, but it doesn’t matter. After heavily promoting the iPhone for a couple of months before the launch it practically disappears from Verizon’s marketing. They would prefer you buy an Android handset, thank you very much. But so would AT&T, who also hardly mentions the iPhone any more.

    Then came Sprint. The motive here was simple – if it works great, if not Apple is just another claimant for the bankruptcy Sprint was heading towards without the iPhone. They have nothing to lose.

    I think it’s wrong to say all of the carriers NEED the iPhone, they needED it because of a situation that doesn’t apply any more. AT&T got big enough to survive the consolidation, and Verizon now has everyone on the same page with hardware so it’s all about network, which is still their strength.

    But what competitive advantage does the iPhone offer a US carrier now? As long as they can’t make money on an iPhone contract, I don’t see one.

    When the Apple contract with AT&T and Verizon ends, I can’t see how they sign up for another round under the same terms. They’d love to have the iPhone, but only if they can make as much money on it as they do on other platforms. Which means Apple either lowers their wholesale price or allows the carriers to charge a premium for the iPhone at retail. Either way, Apple loses.

  5. Bigkev says:

    Samsung tab is as good as Ipad.
    Legal issues interfered with Samsung’s launch.
    Watch out for its exhaust as it streaks ahead over the next year or two

  6. johnhaskell says:

    There. Are a lot uv peepl who thinks that not using grammer & puncutation. Mkae their wiritngs looks like they were really fastly writen & interesting. Tehy is wrong.

  7. decius says:

    Does wanting a keyboard on my phone make me a geek who doesn’t want to live in Apple’s walled garden? When I think of walled gardens I usually think of software DRM, but there was the whole issue of the two button mouse…

  8. Bill Wilson says:

    In my opinion, the iPad has established itself as a brand name similar to Kleenex, Xerox, Jello-O, and Coke. When I think of a tablet computer, I think of the iPad. I imagine that gives Apple an advantage that they’ve certainly earned, as they invented the market.

    As far as the iPhone goes, the guest author seems like an Apple snob. There are some very nice Android devices on the market.

  9. Juke Jones says:

    And then there would be the group like me who read up on the choices and did not go with an iPhone because I just thought the Android phone I purchased was better:

    (1)It is flash-capable.
    (2)I can replace/swap my battery at will without paying Apple.
    (3)I can swap memory cards to larger sizes at will without paying for a new phone.
    (4)User interface features like adding numbers by holding the keypad vs having to always click back and forth with the number button (which can also be done on Android if you are typing a bunch of numbers)
    (5)No need to give credit card/address information in order to download free applications
    (6)Functions as a GPS device with voice-directions included with phone
    (7)Voice activated features like “Show me all nearby hamburger restaurants” ala Siri was part of Android 2 years ago

    I am not in the “I am an Apple rebel” camp. I have a Macbook because I did my research and found that to be the best laptop for my needs. What Apple does incredibly well with is the marketing – and making everyone think that there is no need to do research. Thus, people have been trained to think just as this article infers – Apple products are the default superior choice. As a result, the spiffy marketing has harmed the consumer because people have been trained that what they are holding is gold, and thus there should be no demands for Apple to give customer-friendly features such as swappable batteries, memory cards, etc. Meanwhile, Google and a bunch of these other companies are so pathetic at marketing, that when they have a “show me all nearby hamburger restaurants” feature ala Siri two years ago, people have no idea.

    Overall, what you end up with is this notion of two walled encampments trying to slay the other. Yet in the end, only the consumer gets slayed.

  10. mappo says:

    One of the biggest factors of the success of Android phones at the expense of the iPhone is the Android Market revenue model. When an iPhone app is sold, 70% of the price is paid to the developer and 30% goes to Apple. When an Andriod app is sold, 70% of the price goes to the developer and 30% goes to the CARRIER. This is a huge incentive for the carriers to promote Android phones (as Google intended) and I believe a large reason for Android’s success in the smart phone market.

  11. Joe Friday says:

    Here’s the thing.

    If this were just about iPads versus Android tablets, it could very well go the way it did with the VHS versus Betamax VCRs. The Betamax machines were clearly superior technology, but the VHS manufacturers banded together with a marketing campaign and initially operated on thin margins to be more competitively priced.

    The Betamax manufacturers were like, what the hell happened ?

    So even though the Android tablets clearly have superior technology, right now the iPads have the marketplace. But as I posted some months ago, when instead of what they would currently buy, consumers were surveyed as to which tablet they would want to own or like to purchase, something close to half said a Windows tablet, with the rest pretty much divided between iPads and Android tablets.

    So if Windows 8 actually works, Microsoft gets their shit together (and we’ve all seen them screw the pooch in the past), and the demand is anywhere close to what’s been surveyed, Apple could be LUCKY if their tablet sales are a distant second (or even third given the superiority of Android tablets).

    This may explain the phenomena of every time Apple introduces a new iPad model or feature, while the Apple fans are OOHING and AAHING, everyone else is scratching their head and saying Android had that last year or even two years ago. Apple plans to just make hay while the sun is shining until they see which way the Microsoft shoe drops.

  12. gordo365 says:

    I refuse to buy electronics from company with $100b in the bank.

    I just bought a refurbished $225 dollar Acer 10″ mini laptop (dual core Atom, 2gig memory, 250G HD) Scrubbed windows, loaded Linux and a bunch of free opensource apps. Love it. Typing on a 93% keyboard is way faster than typing on the screen I’m reading.

    Pad = Fad

    Full disclosure – I don’t play games or watch movies while out and about – so I may be odd man out. I like video on big screen, and I like plane time to relax and reflect.

  13. burtwalsh says:

    Juke Jones thank you for your post. I just bought a razor for me and a Samsung for my wife. Front and back camera; big screen; better battery; lighter; better screen; tons of apps; great os……. why did I want an IPhone again?

    The IPad is amazing tough it is clearly the leader.

  14. bear_in_mind says:

    Survey: iPads the choice of 84% of companies buying tablets

  15. bear_in_mind says:

    GE utilizing iPads to customize MRI scanning experience