Profit Share vs Market Share

by Da'Von B.

Talking heads are all about market share “Android has 50%+ market share Apple is failing!” that’s the consensus among talking heads because for some unknown reason, market share is what truly matters. But the problem is these same talking heads mutter under their breath “Apple has 60%+ profit share in the smartphone industry…but but but…they MUST come out with a cheaper iPhone to compete”, this makes absolutely no sense, and that’s where sites like Bloomberg, Forbes Tech, and many others seem to disregard everything pertaining to company performance.

Profitability or Profit is a monetary surplus after deducting all expenses (raw materials, wage deductions, etc) used to make the product which generated the substantial income to achieve a healthy profit. A company having a surplus is actually a good thing, this is basic Finance 101, profits allow you to reinvest in your company push out new products hire more, etc etc. So it’s no longer amusing that talking heads skate around this as they seem to not understand when they say Android has 50%+ market share this consists of dozens of companies that make Android handsets and make very little to no profit (See HTC, LG, Sony, Huawei, Motorola for example). The only Android vender making a healthy profit is Samsung and that’s thanks to their business of making cheap handsets of every imaginable size and throwing it to the market to see what sticks.

Another comparison many confuse is that the smartphone market will look like the PC market, problem is in the PC market vendors that made machines that ran Windows had to pay a license, meanwhile Android is open…though many Android vendors have to pay Microsoft to actually use the Android OS (imagine how perplexing that must be for Google). The smartphone market and PC market aren’t the same, they aren’t equal, there’s very little correlation to make. The smartphone industry could flip in a matter of a few years, keep in mind RIM was expected to hold a substantial market share if you would’ve asked IDC who continue to get their numbers wrong on a consistent basis yet the media hangs onto their every word as if it’s all based on fact. Having a substantial amount of market share does not equate to profit.

Logic, common sense, basic understanding of finance 101, these are things that are absent when it comes to the media’s understanding of anything related to tech companies. Headlines on the misfortunes of the most profitable tech company garner a substantial amount of attention, when the body of their text is completely opposing the context of the headline and highlights how misinformed they are. If the media began having a serious discussion about the importance in the difference between profit share versus market share I believe the conversation would go from the company in Cupertino being doomed to Android OEM’s needing a new game-plan. This won’t happen, talking heads operate on Flawgic (a great term by Daniel Eran Dilger for Appleinsider), this “Flawgic” is defined as flexibly adaptive logic, that’s installed directly into the public mindshare as a virus spread by talking heads.