Why Android Doesn't Really Have 80% of the Smartphone Market

There's a classic Seinfeld episode in which Jerry buys his dad a $200 Wizard organizer, but his dad can't see the gadget as anything more than an easy way to calculate restaurant tips. If that episode were written today, the Wizard would be an Android smartphone. Morty Seinfeld would see the handset as nothing more than a device to talk and text, and the commentary would be dead-on.

We read plenty about Android's growing dominance in worldwide market share. The free mobile operating system is taking up more of the room every passing quarter, forcing into an increasingly tight corner. Google's platform now owns a whopping 80% of the world's smartphone market, while Apple has seen its worldwide share shrink to just 14%.

Source: Strategy Analytics

What we don't read a lot about is how much all these web-connectors get used as actual smartphones. Those stats tell a much different story. Apple's iOS owns some 55% of smartphone web activity. Android, despite its overwhelming lead in market share, owns just 28%.

Source: Bloomberg Businessweek/NetApplications

So, what story do these numbers tell? Apple users are deliberately buying handheld computers. Android users, on the other hand, are often just upgrading from cell phones and feature phones to smartphones because their carriers are offering a nicer device with more capabilities for no greater charge.

This may help explain why more Android users switch to Apple smartphones than iPhone users make the switch to Android. And that's despite Android devices being available cheaper, and having around the same number of available apps.

Nearly 20% of all iPhone users have switched over to an Apple product from an Android phone in the past year, according to Consumer Intelligence Research Partners. There was not a similar trade being made on the other side. When measured against Samsung -- the world's biggest supplier of Android smartphones -- only 7% of Samsung phone buyers were switching to the brand from Apple devices.

With Samsung and other Android phone makers often seen as outpacing Apple in terms of smartphone innovation, investors need to question why this trend exists.

Apple CEO Tim Cook, who likes to cite usage statistics, addressed the web-use gap with Bloomberg Businessweek recently. Here's what he had to say:

Anybody that's used both (Apple and Android) should not be surprised that that is the natural result. And that's really important to us because we have never been about selling the most. We're about selling the best and having the best experience and having the happiest customers.

In any case, the fact that Apple's been able to maintain such a high web-activity share as competitors flood the market with cheaper alternatives would seem to bode well for the iPhone maker.

On the flip side, these are potentially troubling statistics for Google. Web activity is important to Google. The company has made its Android platform available for free, banking on increasing web use and web search, Google's bread and butter. Chairman Eric Schmidt told CNBC just last week that he still sees search advertising as Google's main growth driver moving forward.

If Google is going to more effectively capitalize on the near-ubiquity of its Android devices in the fast-growing mobile market, it needs its users actually using the phones as handheld computers.

What these numbers also show is that the true smartphone market -- the one where people actually use their phones as computers -- may not be as saturated as device sales indicate. If Apple can continue to add customers looking to upgrade from a low-cost Android, investors could see market-share numbers begin to move in Apple's favor as the market matures.

Investors should keep their eye on web activity statistics. If Apple can hold its ground in this area, seeing relatively minor losses as Android makes significant gains in platform market share, it could be a sign that the iPhone has a stronger position in the fast-evolving smartphone market than many had believed.

Profit from destruction!
Let Motley Fool provide you with relevant insight into Apple. Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.

The article Why Android Doesn't Really Have 80% of the Smartphone Market originally appeared on Fool.com.

John-Erik Koslosky owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.