Is the iPhone Winning on Profits?

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  Is the iPhone Winning on Profits?

Over at Macworld, there's a lengthy screed about my post from earlier this week in which I analyzed Google's success in thesmartphone market. It's mostly trash talk, but the one salient point seems to be that despite Apple's smaller market share in the smartphone market, it's making a lot more money from the iPhonethan Google and its partners are making from Android-based phones.

I'm not sure how this is a refutation of what I wrote. I thought this would be obvious from context, but when I said "Google is winning the smartphone wars," I meant in terms of market share.

Now maybe Steve Jobs doesn't care very much about market share. Perhaps he believes that it will be more profitable in the long run to be the BMW of smartphones, selling a premium product to the 20 percent of the population that's willing to pay for it. Apple does appear to be "winning" according to this criteria, at least so far.

But history suggests this state of affairs won't last. Network effects are extremely important for digital platforms. I won't rehash the familiar story of Windows and Mac OS, but I'll just note that around 1990, Apple's "profit share" of the PC business would have been pretty high too. That didn't prevent the Mac from falling steadily behind Windows during the 1990s.