The Top Smartphone
Apple’s iPhone has held the position as top smartphone for about as long as it has been around. In fact, the position has been held straight for two years by Apple. However, this quarter the iPhone has been beaten out by the Samsung Galaxy S III. And the way Samsung managed to reach this position is through combined technological innovations and network effects. For one, the Galaxy S III has some of the most impressive hardware among smartphones. With its quad-core processor, large HD screen and top-of-the-line Android version, it was one of the most anticipated smartphones among techies. Through my own experience though, I have learned that good looking specs aren’t everything. About a year ago I was eligible to upgrade my phone, so I went to the Verizon store and found a phone that looked amazing, the HTC Rezound. It had the first HD screen, a fast dual-core processor and enhanced audio digital signal processing. This phone had, by far, the best technical specs of any phone in the store. However, this phone never really became popular.
It appears to me that the difference in the success of these two phones can be explained using a simple network effect model. Both phones were top-of-the-line when they were released, so we can assume that they had approximately the same appeal to consumers looking to upgrade their phone in absence of any network effects. Conveniently, both devices had the same initial retail price, so we can model consumer’s reservation prices for both phones with two very similar curves that are the product of direct benefit value and the added value of a larger portion of the network using the device (ie. the more people using it, the more a buyer values the phone). My phone was sold on only one carrier and therefore the small number of people who bought the phone did not offset the price of the phone enough for lots of people to want to start buying the Rezound. In fact, just as this model predicts, many people posted to online smartphone blogs that they wished that they bought a different phone purely because there are more users of some of the other more popular devices out there.
The Galaxy S III had a big advantage over the Rezound in obtaining this network effect benefit that launched the device’s sales upward. Samsung’s phone is sold through more carriers than HTC’s device. This small advantage, which is now also shared with the iPhone, is what most likely allowed the device to get past that first unstable equilibrium in which consumers don’t want to buy the device because not enough people are using it to make it as valuable as the retail price. Now with over 30 million units in total sales, the network effect is so great that Samsung was able to surpass apples sales of the iPhone 4s as the top seller of 2012. Some analysts believe that the iPhone 5 will surpass the Galaxy S III in the fourth quarter of this year and this is most likely due to the fact that Apple still has a large share of the smartphone market considering that the phones are fairly comparable technically speaking.
-Alaskinwonder
Source:
http://thecitizen.co.tz/business/-/27119-galaxy-s3-is-now-top-smartphone-in-terms-of-sales