Apple's iOS mobile web share calls into question reports touting Android sales supremacy

Posted:
in iPad edited January 2014
An uptick in mobile web usage by iOS devices, matched by an even greater decline in Android web traffic since November, is calling into question figures from IDC that reported an apparent, significant slippage by Apple in global tablet market share.

As noted in a report by Philip Elmer-Dewitt of Fortune, web statistics by Net Applications indicate that iOS users have actually increased their web presence over the winter quarter, alongside the release of the new iPhone 5 and iPad mini.

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In contrast, Android's collective representation on the web has declined significantly by 13 percent since hitting a peak of 28 percent of mobile web traffic in November; for January, the figure is now at 24.5 percent. In contrast, Apple's iOS represents more than 60 percent of mobile web traffic.

The fact that iOS is more than twice as popular on the web as all Android devices combined calls into question market statistics by research firms such as IDC, which recently stated that Apple's share of the tablet market had fallen to 43.6% of worldwide tablet sales. That report was presented by Adrian Covert of CNNMoney to state that "Android is the new king of tablet market share."

Reconciling minority sales with majority usage


Given that web browsing is a primary function of mobile devices, how it is that Android, repeatedly reported by its fans to have an edge in both sales and installed base of users and devices, is showing up with just 40 percent of global mobile web usage of iOS?

One explanation is that IDC isn't really tracking tablet sales. It's compiling estimated shipments of devices into the channel. Outside of Apple, few tablet vendors are reporting their actual sales or even their overall shipments. Neither Amazon nor Samsung, for example, report their quarterly tablet shipments or sales. IDC makes some educated guesses. But the real issue isn't the accuracy of IDC's estimations; it's the legitimacy of conflating shipments with sales.

The real issue isn't the accuracy of IDC's estimations; it's the legitimacy of conflating shipments with sales.For Apple, iPad shipments were the same as its sales in the winter quarter. The company reported that it "began and ended the quarter with about 3.4 million iPads in channel inventory." Those devices in inventory aren't counted as a sale; they are sitting on Apple's retail partners' shelves and warehouses. Constrained supplies of iPads in the quarter mean that if Apple could have produced more, it likely could have sold more, too.

For other companies, however, shipments do not equal sales. If a company ships more inventory than it actually sells, it exits the quarter with a net gain of channel inventory. This does not contribute to product sales or usage. It is, however, counted by IDC in its "shipment" numbers and figures into the firm's calculations of tablet market size and each vendor's market share, even though unsold inventory does not expand the true size of the market.

This winter, Microsoft reportedly shipped 1.25 million Surface RT units into the channel, according to IHS iSuppli. Sales out of the channel "were significantly lower, maybe on the order of 55 to 60 percent of that figure," Rhoda Alexander of IHS told CNET. That comes out to real sales of "roughly 680,000 and 750,000." On top of that, Alexander noted that "return rates were high."

The way IDC reports market share by "shipments," Microsoft would have earned almost twice as much credit for each sale compared to each iPad Apple sells. Additionally, Apple's "share of the market" is also reduced by excessive stock of products that aren't selling and therefore don't represent "the market" at all.

As a side note, IDC actually estimated that Microsoft shipped "just under 900,000" Surface RT tablets in the quarter, or about three quarters as much as iSuppli estimated. If iSuppli's sell through rates are correct, that would mean Microsoft may actually have sold fewer than 500,000 units in the quarter, even before considering return rates. So there's a vast discrepancy between reported shipments and what is actually selling and being used by consumers.

There's a vast discrepancy between reported shipments and what is actually selling and being used by consumersReporting market share by inventory shipments into the channel is wildly misleading, particularly because the only point of reporting "market share" is to determine what company's products are the most popular. Counting market share by shipments is like predicting the results of an election by counting the number of ballots that were printed rather than the number of votes that were cast.

Samsung similarly created a big ripple in tablet market share at the end of 2010 when it dumped millions of Android 2.2 tablets into the channel, very few of which were actually sold (as was later revealed in confidential sales reports in the Apple v. Samsung trial). Despite this, it was reported at the time to have taken significant "market share" from Apple, "gains" that were similarly not reflected in web usage (or app sales) because they were not real.

Apple's inventory channel is bigger than any Android tablet competitor

To illustrate how deceptive IDC's shipment-based market share numbers are, consider that Apple's iPad sales are now so vast the the global channel inventory levels Apple must now maintain is larger than the sales of any Android competitor.

Every quarter, the company notes that it seeks to maintain 4-6 weeks of channel inventory for each hardware product it sells. If Apple can't make enough of a particular device to both meet demand and stock the shelves of its channel partners with inventory, channel numbers come in low, as occured in the past quarter for both iPads and Macs.

In the most recent winter quarter, Apple reported selling 22.9 million iPads, amounting to 1.7 million iPads per week, up from 1.1 million per week in last year's winter quarter. Maintaining 4-6 weeks of inventory would mean the iPad maker would liked to have entered 2013 with 6.8 million to 10.2 million iPads shipped, unsold, siting on its retailer's shelves for purchase.

However, iPads sold so quickly that Apple's global inventory was left rather bare. There was plenty of room for another nearly 7 million more iPads in the channel before Apple's relatively conservative inventory maintenance levels would be considered full. (Apple once maintained as much as ten weeks of inventory for its Macs, something that actually contributed to inefficient operational problems).

According to IDC's own numbers, the shelves of Apple's channel partners at the beginning of 2013 had enough room to comfortably accommodate as many tablets as IDC said Samsung shipped in the entire winter quarter. It's an inventory deficit as big as all the tablets shipped by Amazon and Barnes & Noble combined, or more than twice as large as ASUS' record tablet shipments.

The shelves of Apple's channel partners at the beginning of 2013 had enough room to comfortably accommodate as many tablets as IDC said Samsung shipped in the entire winter quarter.If Apple had pumped out 7 million additional iPads, IDC would have counted that unsold inventory as "market share," even if none of it had actually sold, the same way the firm counts every other unsold shipment on the Android side. That alone would have been enough to give Apple majority market share in "shipments," according to IDC methodology, but all that extra inventory wouldn't have made any difference on the number of actual iPads in use.

Conversely, if IDC only counted true sales of tablets to end users in calculating market share, it would have an even bigger change to its reported numbers that would favor Apple even more. It would have resulted in numbers far closer to the actual real world figures evident in web statistics and app sales, which clearly indicate that iOS is being put to work more by its end users.
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Comments

  • Reply 1 of 131


    You'd think this would have come up, I don't know, over a year ago when it first started being reported.


     


    I don't understand why they're allowed to just go on like this without having an actual investigation.

  • Reply 2 of 131
    kr00kr00 Posts: 99member
    It's been a long standing practice of companies like Samescum to report shipment numbers, but fudge the sales figures. There's a warehouse somewhere filled with product, in order to distort the market in an attempt to hijack the competitive edge from its rivals. As they do with high subsidies, just to undermine the opposition product. Someone needs to call them out on this, and sanctions must be applied, as its akin to insider trading. Who in their right mind would support a company that thinks so evil, it'll do anything to crush its opponents. You only have to read this to get an insight into that evil mind.

    http://www.kernelmag.com/features/report/3028/samsung-power-corruption-and-lies/
  • Reply 3 of 131
    nchianchia Posts: 124member
    Perception of greater market share surely sways potential buyers in believing popularity of the device must count for something, or at least be on a shortlist.
  • Reply 4 of 131
    One problem here--- Apple does count and report shipments to channel partners as "sales." That's standard accounting practice as the risk has transferred from the vendor to the reseller. Apple counts those as sales, because they are in fact, sales, to the reseller. Apple gives the change in channel inventory on its calls, so taking the units sales reported and subtracting net change in channel inventory gives the actual units sold to end-users or "sell-through."

    The difference with Samsung is they stuff the channel then use discounting or buy back unsold units. Apple keeps shipments roughly inline with sell-through.
  • Reply 5 of 131
    ajmasajmas Posts: 575member
    This could simply indicate that iOS users surf the web more than users of other platforms. For example, up to now I doubt Blackberry was a decent device to surf the web.?
  • Reply 6 of 131
    jfc1138jfc1138 Posts: 3,090member
    Might be why Samsung has warned about declining mobile hardware sales for them?
  • Reply 7 of 131
    drblankdrblank Posts: 3,383member
    FYI. Maybe the Android users are buying 3 phones per person. One to use, one to use in case the first one's battery dies, and the 3rd one is the one they keep around because the first two have Sudden Death Syndrome and they to have a working product just as backup. And as far as tablets are concerned, they don't actually USE the Android tablet, they just leave it around so they can say they actually own a tablet and then they can praise how they level their XYZ Android tablet, but they don't actually use it. It's just for show.

    That would be my rationale as to how to explain the reasons why Android sells more, but Apple has higher internet usage.
  • Reply 8 of 131

    Quote:

    Originally Posted by Turley Muller View Post



    One problem here--- Apple does count and report shipments to channel partners as "sales." That's standard accounting practice as the risk has transferred from the vendor to the reseller. Apple counts those as sales, because they are in fact, sales, to the reseller. Apple gives the change in channel inventory on its calls, so taking the units sales reported and subtracting net change in channel inventory gives the actual units sold to end-users or "sell-through."



    The difference with Samsung is they stuff the channel then use discounting or buy back unsold units. Apple keeps shipments roughly inline with sell-through.


     


    Regardless of how Apple and Samsung differ in reporting "units sold/shipped," I believe the article is stating IDC estimates market share based on how many shipments they see leaving assembly factories and component manufacturing facilities. They can use Apple's numbers at face value because those are the actual numbers. They can't use Samsung's or Amazon's or B&N's numbers because those companies don't release the number of tablets or the number of Android smartphones sold/shipped, basically no such numbers exist outside of those companies' financial firewalls except as part of a general revenue number for that line of business.

  • Reply 9 of 131

    Quote:

    Originally Posted by ajmas View Post



    This could simply indicate that iOS users surf the web more than users of other platforms. For example, up to now I doubt Blackberry was a decent device to surf the web.?


    I have a friend who bought his entire family <$100 Android tablets for Christmas.


     


    They were struggling, badly, just to get the app store working as they'd expected (it was the manufacturer's and therefore much more limited) and getting WiFi networking operational.


     


    I tried them.  The touch screen was awful.  Responsiveness was abysmal.  If I had owned one of them I would have tossed it in a drawer and bought an iPad.  But since he bought one for each family member that was an option he could not afford :(.  Since many people think of the tablets as rough equivalents to iPads, I'm sure this spoiled a lot of Christmases for people.


     


    There was probably more of a spike of iPad ownership in Christmas 2012 than 2011 thanks to the entry-level iPad Mini, thus the change in market share numbers whether derived indirectly from web use or not.  I think a lot of crummy Android tablets were sold, and gained respectable market share.  Since the target audience is likely to throw them into a drawer after the initial novelty wears out, I don't think they are any threat to Apple.


     


    D

  • Reply 10 of 131
    jfanningjfanning Posts: 3,398member
    drblank wrote: »
    That would be my rationale as to how to explain the reasons why Android sells more, but Apple has higher internet usage.

    Couldn't another possibility be that the iPhone users are just using the web more? There will be a lot of people that purchase their smartphone and only use it as a normal phone, just like there are lots of people that purchase laptops and never move them off the table they sit on.
  • Reply 11 of 131

    Quote:

    Originally Posted by Tallest Skil View Post


    You'd think this would have come up, I don't know, over a year ago when it first started being reported.


     


    I don't understand why they're allowed to just go on like this without having an actual investigation.



     


    Whatever helps to pressure down Apple's stock price. Does anyone actually think analysts are not in it for themselves?

  • Reply 12 of 131
    jfanningjfanning Posts: 3,398member
    There was probably more of a spike of iPad ownership in Christmas 2012 than 2011 thanks to the entry-level iPad Mini, thus the change in market share numbers whether derived indirectly from web use or not.  I think a lot of crummy Android tablets were sold, and gained respectable market share.  Since the target audience is likely to throw them into a drawer after the initial novelty wears out, I don't think they are any threat to Apple.

    If they are cheap crap without Google Play, then they aren't counted as an Android activation.
  • Reply 13 of 131
    "It's been a long standing practice of companies like Samescum to report shipment numbers,.."

    Samsung doesn't even report that. They have PR firms like IDC push numbers.
  • Reply 14 of 131

    Quote:

    Originally Posted by jfanning View Post





    Couldn't another possibility be that the iPhone users are just using the web more? There will be a lot of people that purchase their smartphone and only use it as a normal phone, just like there are lots of people that purchase laptops and never move them off the table they sit on.




    This is confirmed by my experience. Latest exemple: A friend just told me her Mom loves her GS3.


     


    I have a GS3 and an iPhone. GS3 *sucks*. However, it seems her mom uses the GS3 to phone, SMS, check FB... and sometimes mail. End of usage.


     


    iPhone users are spoilt in that it works so well, you do more with it.

  • Reply 15 of 131

    Quote:


    I have a friend who bought his entire family <$100 Android tablets for Christmas....



     


    Girlfriend's father bought a pile of Galaxy Tabs for the family for Christmas. Some of the grandkids had Samsung phones already and kept them. GF gave it an honest try for a week, then picked up an iPad mini and said in three minutes, "This is so much better." Hands on experience was no comparison. The Galaxy got returned for a mini. I'd bet she wasn't alone this winter.

  • Reply 16 of 131
    solipsismxsolipsismx Posts: 19,566member

    This is confirmed by my experience. Latest exemple: A friend just told me her Mom loves her GS3.

    I have a GS3 and an iPhone. GS3 *sucks*. However, it seems her mom uses the GS3 to phone, SMS, check FB... and sometimes mail. End of usage.

    iPhone users are spoilt in that it works so well, you do more with it.

    This is a variation of the excuse I heard from Windows users before the they switched to Mac. Except for the Win PC gamers that now seem to be a dying breed the main excuse against buying a Mac was that they don't do that much with a PC so the initial upfront cost of Mac wasn't warranted.

    The funny this is once you get a machine that can do a lot more you tend to use it more. With a Mac over a $500 WinPC it's not so much about the performance but the ease-of-use that that allows so much more than what you get with Windows pre-installed on a cheap PC.

    Even more funny is the common rebuttal by the anti-Apple crowd that the crapware can be uninstalled to speed up the system and you can find free apps that sorta do what Apple includes on their systems, etc. They don't realize how all of that is the reason why the WinPC is just a chore for the average user. You shouldn't have to do all that and at least with a Mac you don't have to.
  • Reply 17 of 131
    cash907cash907 Posts: 893member


    Or it's just that iOS users surf the web from their devices more than Android users?


     


    Pretty weak angle, AI.

  • Reply 18 of 131
    mjtomlinmjtomlin Posts: 2,428member

    Quote:

    Originally Posted by broadbean View Post



    Perception of greater market share surely sways potential buyers in believing popularity of the device must count for something, or at least be on a shortlist.


     


    As far as how people choose their device, in the order of biggest impact...


     


    Sales representatives pushing a particular product.


    Seeing the device used in the real world.


    Consumer research.

  • Reply 19 of 131
    ajmas wrote: »
    This could simply indicate that iOS users surf the web more than users of other platforms. For example, up to now I doubt Blackberry was a decent device to surf the web.?

    Why would that be the case?
  • Reply 20 of 131
    dasanman69dasanman69 Posts: 13,001member
    jfanning wrote: »
    Couldn't another possibility be that the iPhone users are just using the web more? There will be a lot of people that purchase their smartphone and only use it as a normal phone, just like there are lots of people that purchase laptops and never move them off the table they sit on.

    Or maybe they're out living life, having fun, and knocking up broads, who the hell knows?
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