Most iPhone users stick with Apple, for the apps

By Jonny Evans

When it ships in September, the iPhone 5 will hit a hungry market. Apple [AAPL] has a huge advantage in contrast to other platforms, the apps. It's these which mean 54 percent of iPhone owners will stick with Apple: and with the company reportedly planning to offer a free iPhone 3GS, this app advantage will grow.

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Free iPhone 3GS gives you an app addiction

"As its entry-level iPhone strategy, Apple is expected to cut iPhone 3GS to $0 (on contract, $399 unsubsidized) in conjunction with iPhone 5 launch," said RBC Capital analyst Mike Abramsky. "This approach is intended to target mid-market smartphone buyers and counter Android's mid-market expansion." This will double Apple's global market opportunity, he said.

Apple has already begun selling unlocked iPhone 3GS units in India. Introducing lower-cost iPhones could be a far-sighted move as on a global basis:

"Roughly 1.5 billion [phone users] are post-paid and 3.7 billion are pre-paid. That means that nearly 70% of the world is not being addressed by the iPhone as it currently stands. Put another way, a shift in positioning might result in a 250% increase in addressable market," wrote Asymco's Horace Dediu yesterday.

Of course, once a consumer has an iPhone, they'll begin to explore the apps, and that's where Apple's advantage lies. You get an iPhone and get addicted to apps.

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54% iPhone users stick with Apple for apps

New data from Futuresource confirms the app advantage -- an advantage rendered all the more massive on strength of previous surveys which confirm iPhone users are much more likely to pay for their apps.

One in three iPhone users are already happy to make 'in App' purchases, while just one in ten Blackberry and Android users do this.

"Apps between operating systems is driving brand loyalty and defined what this may mean for content providers and App developers alike. Brand loyalty was shown to be particularly relevant to iPhone owners, with 54% intending to commit to the Apple brand in order to keep the Apps they have come to depend upon," Futuresource says in a statement.

In other words, over half of all iPhone users are likely to stick with Apple-branded smartphones because they want to keep their apps.

That's partly because iPhone users pay for their apps, while the majority of downloads on other platforms are free apps, which are available in many cases on multiple platforms.

75% of US people will own smartphone by 2014

Apple's move to unleash a price war in its attempt to dent Android's growth will unleash new records in iPhone sales. In theory, once a user has an iPhone they'll download an app, and once they've done this they'll be hooked on Apple.

The smartphone business is growing extremely fast. "A quarter of people in the UK and a third in the US now own a smartphone and this growth is set to continue, with Futuresource research showing that three in four people across the UK and US will own a smartphone by 2014," said Casey.

Needham & Company analyst Charlie Wolf believes Apple will ship 9 million iPads in the third quarter and 30 million iPads in 2011. However, iPhone sales are declining as the market prepares for the next iteration, the analyst said, though he expects shipments total 66 million units. All this iFrenzy is impacting on Mac sales, with the analyst predicting these will climb to 17 million for the year.

"Apps for smartphones and tablets continue to offer significant opportunities for promoting and monetizing games, books, movie and TV content," said Futuresource analyst, Alison Casey. Facebook, Google and YouTube (iPlayer in the UK) are the three most-used apps, the research shows.

"With over 25% of smartphone owners surveyed in the UK and US downloading Apps to their phones, this market will continue to thrive," said Casey. "Gaming is the main driver for App downloads, across all four territories and 65% of smartphone owners regularly playing games on their phones. This is closely followed by social networking and music, with more than 40% downloading social networking Apps across all territories."

The conclusions are based on consumer research carried out in the US, UK, France and Germany, across a sample of 2,500 respondents.

Apple's app advantage

But the conclusion remains.

Apple's iPhone 5 will jump onto several months of pent-up demand as shoppers await the new device. Many will opt for an iPhone 4, which will presumably fit the slot now held by the iPhone 3GS. Should the latter device then be made available for free, then the company will likely generate new record iPhone sales, with the smartphone occupying space under many a Christmas tree.

Then you can anticipate all those new iPhone users acquiring an app or two, after which they are far more likely to stick with Apple's products.

Some will see this as a lock-in, with Apple using its proprietary formats to maintain hold on consumers. Others may note the high degree of satisfaction most iPhone users have with their devices, arguing that if it is a cage, it's a plushly-appointed one.

Over to you: Are you an iPhone user? Would your apps keep you on Apple's platform? Or perhaps you're on another platform, Android, for example: are you loyal to your apps? Let me know in comments below, otherwise, please follow me on Twitter so I can let you know when new reports get published here first on Computerworld.  

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