Apple's mobile business came under attack in the fourth quarter, with everyone from Business Insider Editor-in-Chief Henry Blodget to app-analytics firm App Annie declaring the beginning of the end of Apple's reign as the preeminent platform in the app economy.
But don't expect Apple's lead to change anytime soon. Despite having fewer users than Android, iOS remains the dominant app platform in terms of revenue, and its users are still the most-valuable, highly sought-after device owners for marketers. In fact, Apple's app revenue has grown year-to-year even though its U.S. market share remains relatively flat, suggesting that per user, Apple's app business is stronger than ever.
According to data Ad Age collected from research firms App Annie, Gartner and eMarketer, Apple makes at least six times as much app revenue per iOS user than Google does from Android users.
To put it simply, if you want to make money off of apps -- especially among U.S. consumers -- you're far better off building for iOS.
"For every dollar a developer makes on iOS, they can expect to make $0.24 on Android for the same title," said Peter Farago, VP-marketing for mobile-analytics firm Flurry. "Just because there are more users on Android, doesn't mean [developers] will make more. They'll make less. … If you and I were making an app tomorrow, I'd say we should build for iOS first."
Mr. Farago's belief that iOS remains the more lucrative app marketplace for developers (and brands) seemingly contradicts research from App Annie, a Beijing-based app research firm that said Google increased revenue earned from apps sold in Google Play by 311% from January to October this year, while Apple App Store revenue grew just 12.9%.
But these numbers only show cumulative sales growth, a metric which skews in favor of Google Play because of its historically low app revenue.
As of January this year, Apple had paid $4 billion to app developers, said Apple spokesman Ted Miller, meaning more than $5.71 billion in transactions were conducted through the Apple App Store. In November, Apple announced it had paid $6.5 billion to app developers, meaning its App Store generated $3.58 billion in revenue in just the first 10 months of 2012. Put another way, more than a third of the revenue Apple has received via apps has come in 10 months.
These gains came in spite of Google widening its gap with Apple in terms of global market share. The number of worldwide devices running on iOS or MacOS (including iPhones, iPads and Apple computers) increased just 61.4%--from 225.7 million devices to 364.3 million -- from 2011 to 2012, according to research firm Gartner. User growth for Android devices, however, was more than double Apple's; from 2011 to 2012, the number of Android devices worldwide jumped from 261.7 million to 608.4 million.
Although Android extended its lead in device market share, the Apple App Store still accounts for 80% of the dollars spent in the app economy compared with Google Play's 20%, according to App Annie's recent report.
Eric Litman, CEO of mobile ad-serving company Medialets, said that Google's recent increase in app revenue is , in part, cultural. As apps become an increasingly important part of everyday life, more smartphone users are comfortable using (and purchasing) apps. These new app customers are likely Android users who are just now becoming accustomed to making purchases on their phones. iPhone users, on the other hand, have been making app purchases for years. Now, they're just spending more.
Apple has been able to maintain its lead because all of its devices are integrated with a more frictionless payment system and it requires all users to sign up for accounts, Mr. Litman added.
"The Apple ecosystem has had much longer to mature its products and build a really great, consistent user experience," he said. "With iTunes, Apple trained 150 million people to put in their credit-card information and pay for content. They've had a running start on Google."
Not all active Android devices are payment enabled -- as opposed to 100% of Apple devices -- so getting those users to monetize via apps is difficult.
In October, Google began allowing Verizon-based Android users -- approximately 40% of its user base -- to charge apps directly to their phone bill. While this has failed to catch in the U.S., it is incredibly popular in Asia, Android spokesman Christopher Katsaros said.
More than a quarter (29%) of Google Play's October app revenue came from Japan, compared with 26% from the U.S., according to App Annie. It was the first month U.S. users have not been the top revenue source for the company.
The U.S. remained the top app-revenue-generating country for Apple, accounting for 33% iOS app revenue in October. Japan accounted for 14%.
Yes, Google has begun to close the gap on Apple in terms of total app revenue, but that should be expected considering Google has the majority of users. Apple still has a more-elegant payment system and a user base that 's wealthier, more tech-savvy and consequently willing to spend more on and via apps.
IOS users are 50% more likely than Android users to make between $200,000 and $250,000 a year, according to mobile ad-targeting company Jumptap. Additionally, iOS users are 64% more likely to work in the tech sector and 9% more likely to own a home.
As app monetization goes, the difference between the iOS and Android user bases is one of quantity vs. value. Apple's relative market share may be shrinking, but its small number of users is a far more valuable market segment in mobile commerce. Android has the numbers, but iOS has the mobile commerce spenders, and they're spending progressively more.
This dichotomy between user bases has not been lost on media buyers. Android's share of mobile ad impressions actually decreased from 53% in 2011 to 37% in 2012, a trend that mobile marketing solutions provider Velti attributes to the popularity of the iPad Mini and iPhone 5. The iPhone 5, released last September, has already caught up to the Samsung Galaxy S3 in terms of ad impressions, the company said.
Apple has the same allure for app developers and retailers. Rovio, the maker of the hit Angry Birds game series and arguably the most-successful app developer in history, makes iOS users pay for its game while offering freemium versions on Google Play. Supercell, the gaming company that makes $500,000 per day off its games Clash of Clans and Hay Day, only offers its games on iOS. Iconic retail store Macy's offers apps on both platforms, but when it rolled out a Black Friday enhancement to its app earlier this year, it only did so for iOS devices.
It's easy to look at Google's gains in the apps economy and say that it marks the end of Apple's stranglehold on a marketplace that the company itself invented. But when you're the leader of an industry, everyone can see a target on your back.