The Network Effect of Apple’s Dominance over Android
The network effect is one of the strongest models to determining the success or failure of software and software development. It is essential for software to drive value creation and continuous participation and profitability to withhold a marginal network effect. In this area of business, the software platform with the richest offerings and services becomes dominant. Developers must make sure that there is a positive revenue stream from the software and services provided to supply and increasing quantity and quality of updates to keep new and existing customers intrigued. New users will select the front-running software and operating system, so ensuring one system is the best of the best is essential for business development in the network.
A substantial and well-known network effect in software is the ever-constant business battle between the iOS and Android, the two leading smartphone operating systems globally. The two companies own 99% of the global market share, with Android leading with 73% and Apple merely at 26%. However, Apple generates almost double what Android does, with $72.3 billion generated in 2020 compared to $38.6 billion made by the Google Play Store. This is due to the regions where the iPhone is popular, like the United States and Japan, where users are more likely to spend more on phone applications. Android’s lack of a self-sustaining network effect comes from these statistics, where developers are not encouraged to make services and software for devices where utilization and profit margins are nowhere near Apple’s. Android customers normally have reputations for looking for free deals and have little interest in making ongoing purchases. On the contrary, Apple appeals to consumers who enjoy buying software on their phones, and Apple puts a high value on these customers knowing how much they mean to the company. They excel in customer experience and keep constant warranting on their app store to make sure the integrity of their excellent platform is maintained.
This article sheds light on how two separate strategies in software development in the mobile phone industry can drive success in the network effect. Android chooses power in numbers and focuses on outsourcing their operating system to as many OEM devices and keep prices low to establish the majority of the market. However, Apple selects their customers knowing that they may want to spend more money to have an improved experience with their device and creates an appropriate environment for this. Therefore, in the network effect, Android will have a higher value low end and high-end critical point on the graph compared to Apple, as they must push a lot more people to use their devices rather than Apple. However, Apple must make sure the right type of consumers are using their phones or else their network effect will begin to decrease.
Sources: https://seekingalpha.com/article/1105381-the-network-effect-why-apples-ios-will-win-the-platform-war-over-googles-android | https://www.businessofapps.com/data/app-revenues/