Record iPhone 4 Preorders Won't Stop Android Invasion

As expected, Apple tried to turn this week's iPhone 4 preorder disaster into a PR win, noting that customers preordered a record 600,000 devices on Tuesday. And although iPhone 4 sales will no doubt beat previous Apple records, there's no escaping a simple truth: Google's competing Android system has already surpassed the iPhone platform in the United States from a market-share perspective and will do so worldwide by the end of 2010. And perhaps as early as 2011, Android will permanently supplant the iPhone from a usage-share perspective as well.

Apple's announcement of the 600,000 preorders came in the wake of a separate AT&T statement noting that iPhone preorders were "ten times higher" than those of any previous iPhone. This suggests that worldwide preorders for the previous device, the iPhone 3GS, were relatively low—in the 60,000 to 100,000 unit range. (AT&T preorders account only for the United States.)

AT&T also noted that its website was visited about 13 million times on Tuesday as customers attempted to check their upgrade eligibility and preorder the iPhone 4. Some customers apparently were erroneously shown other people's account information, though most people of course simply couldn't get through. It's unclear whether the 13 million figure represents "successful" visits or all visits.

Based on these figures, analysts rapidly upgraded their sales forecasts for the iPhone 4, including the infamous Gene Munster, who comically overestimated iPad first-week sales based on similar preorder craziness, only to later be confronted by Apple's much-smaller actual sales. But suffice it to say, the iPhone 4 will be a blockbuster hit for the company, in part because so many AT&T customers are now in the final year of a two-year contract and are thus eligible for lower upgrade pricing.

And that's part of the problem for Apple: Though it will sell millions of these devices in the next few months, most of those sales are going to existing iPhone users. That's good for AT&T—customers will be stuck with the clueless wireless carrier for another two years—but doesn't help Apple beat back Android, its fast-moving rival.

Apple CEO Steve Jobs presented some information at the iPhone 4 announcement a few weeks ago that sought to contradict reports that Android was already surpassing the Apple mobile platform. But the numbers Jobs used were a smokescreen, mixing "market share" (unit sales) with "usage share" (installed base) while suggesting that market share was something one could infer, or read differently, when nothing could be further from the truth. All he really showed was that the iPhone, which had a two-year head start on Android, has a larger installed base of users (and, correspondingly, a much larger ecosystem of apps and other content).

This information is true, but obvious and beside the point. According to recent market share—that is, actual unit sales—data, the Android platform is outselling the iPhone in the United States and will soon be doing so worldwide. The reasons for this are as obvious as they are simple. Android devices are made and sold by a wide variety of hardware makers and delivered to consumers through all major wireless carriers, not just through a single carrier, like the iPhone is with AT&T in the United States.

Android is also updated much more aggressively than the iPhone—a side effect of its relatively late start in the market—and thus new Android-based devices, with new capabilities, appear much more frequently. Since the end of 2009, the Android market has had several unqualified hits (Verizon's Droid, HTC Droid Incredible, and HTC Evo, among others), all of which came with major hardware and software advances. Meanwhile, Apple updates the iPhone only once a year, and last year's upgrade, the 3GS, was a tepid improvement over its predecessor. No Android phones have individually outsold the iPhone for any appreciable amount of time, but none need to: The huge market of available Android devices, together, outperforms Apple's small selection of iPhones, much like the PC market overwhelmed, and now continues to dwarf, the Mac market.

Apple's hope, going forward, is that it can turn the iPhone into a high-end, more desirable device, much like the Mac or a BMW, while extending its underlying software platform, iOS, into more devices and form factors. The iPad is the first major departure along these lines—iOS is also the basis for the iPhone-like iPod touch—but it's not hard to imagine this system later being subsumed into Macs and then ultimately replacing today's Mac OS X software.

This is speculative, and of course such a transition would take years and many refinements. But if Apple has proven itself adept at anything, it's moving forward and aggressive replacing the old with the new. 

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