The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
Hipmob CEO Ayo Omojola explains why Android device owners don’t buy as much as Apple device owners and what retailers should do about it.
By most metrics, Android is killing it. A billion devices activated to date. 48 billion app installs. 17 billion messages pushed each day.
Despite what Apple Inc. fans say, Android is an astronomical hit for owner Google Inc., for Samsung Electronics Co. Ltd (the leading maker of Android devices), and for tons of app developers. A game developer I know, in its first month porting just one app to Android, blew away its iOS revenue on in-app purchases across more than a dozen iOS apps. The game developer's experience shows that there's demand for quality Android experiences, and that—at least in some cases—Android users are willing to pay for them.
The question is: Can this dynamic translate from games, where revenue typically comes from in-app purchases and ads, to mobile commerce, where e-retailers sell a product or service that's not digitally consumed and the dollar amounts are higher?
The answer thus far has some troubling—and interesting—long-term implications. For retailers selling physical products and real-world services to smartphone and tablet users, Android appears to be underperforming iOS, by a lot.
Forrester Research Inc. says that 53% of Android phone owners use their devices to make purchases versus 69% of iPhone owners. The research and consulting firm says Android users are less engaged in general.
Our research shows an even greater disparity. Mark Geller, head of product for mobile at Nordstrom Inc.'s flash-sale unit HauteLook, told me recently that across mobile apps and the web Android accounted for 10% of the brand's usage versus 88% for iOS, despite heavy investment in top-flight experiences for both. This means that for HauteLook, the return on investment for iOS is eight times the return on investment for Android. As a decision maker looking at such data, it's only logical to invest more in iOS than Android.
That phenomenon isn't unique to HauteLook. Cam Fortin, senior director of product development at Wine.com, told me that at Wine.com, all Android devices account for roughly 6% of mobile revenue, versus 29% for the iPhone alone and 65% for the iPad. The disparity here is even greater than it looks. Wine.com's mobile web site is optimized for multiple screen sizes, meaning Wine.com looks as good on an Android smartphone as on an iPhone. Despite this, the return on investment from iOS is about 15 times that of Android. Again, the empirical data make it hard to justify investing in premium Android experiences.
For these e-retailers, iOS customers are simply more engaged and profitable. Usage data across our customer base (which spans mobile retailers, hospitality and software services such as customer relationship management and point-of-sale) speak for itself: Consumers using Apple's iOS consistently account for 80% to 90% of activity. Looking at our customers deploying now and into the holiday season, we still see a heavy iOS skew and no indications that the trend will reverse, despite the absolute flood of Android devices hitting the market.
The vicious cycle
This creates an interesting dynamic for Android in the medium term. Even though 70% of smartphones being activated worldwide today are Android devices versus 21% for Apple's iOS, businesses are seeing more revenue and engagement from iOS users, leading them to invest more time and resources into developing for that platform. This creates a vicious cycle: As revenue generated from consumers on iOS devices continues to outpace revenue from Android devices, retailers will invest and optimize more in iOS, leaving Android farther behind.
We're only just starting to see businesses look at both platforms differently. Gilt Groupe Inc., for example, recently redesigned its Android app, emphasizing larger product images, optimizing the checkout flow, and offering Android-exclusive sales. The images and optimization bring the Android app to parity with its iOS app in terms of quality. And more importantly, in offering Android-only sales, Gilt is recognizing that an Android user's needs and preferences might be distinct from an iOS user. This is merely a first step in that direction.
Soon, more retailers will try to define and meet Android users' specific needs, as far as they are different from those of iOS users.
WHAT THIS MEANS FOR YOU
Acknowledging the differences between iOS and Android users makes sense. To date, "mobile" has been considered a monolithic entity. Early data suggest that to really service Android's massive installed base, we need to treat Android users as distinct, and that means first figuring out their specific needs and then figuring out how to address them.
If your Android sales lag iOS, I'd urge you to consider the following steps as you think through your approach to Android for 2014.
1. Play to your demographics. One familiar trope in the tech press is that iOS users skew wealthier and Android users skew less wealthy. The real question is: Who are your customers? You already have demographic profiles and analytics on these folks; understanding where they fit and how they use mobile will help you create experiences that improve their lives. For a few high-end retailers, this might mean focusing entirely on iOS for the moment. For most, it will mean doing more research to find out what features and functionalities your Android customers prefer.
2. Break out what devices drive mobile traffic. For some retailers, "mobile" sales really come from tablets. If the lion's share of your mobile revenue comes from iPads, you might be observing, like HauteLook, that the iPad is really replacing the desktop for your users. If you see this in your data, your best bet might be to get out of Android entirely and focus on iOS. Why? Because consumers are not replacing their desktop computing with Android tablets—no Android tablet has gained that kind of adoption. Again, this might change in the future, but for now your Android investment is probably going to waste.
The bottom line is if your demographics and device data favor Android, it's time to pay attention. Not doing so will stunt your growth.