The problem facing Android: Users don't want to spend money

Android has one billion active monthly users, and over the past year it has paid out $5 billion to developers. Sounds good until you realize that iOS users spend four times as much on apps.

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Data released at Google's annual I/O developer conference offered up two key business numbers that had previously been unknown — the number of monthly active Android users and the cash paid out to app developers.

Android has one billion active monthly users (excluding China and Kindle users), and over the past year it has paid out $5 billion to developers. Andreessen Horowitz’ Benedict Evans took this data and crunched some numbers.

Apple told us that it paid out $7bn in calendar year 2013 — given the growth trend, it probably paid $10bn in the last 12m. On a trailing 24m basis, there were 470m iOS users in March 2014.

So, Google Android users in total are spending around half as much on apps on more than twice the user base, and hence app ARPU [average revenue per user] on Android is roughly a quarter of iOS.

Horowitz offers up a number of suggestions as to why this disparity might exist.

  • Android is dominant in low-income countries.
  • Users don't have credit cards and Google has been slow to adopt carrier billing.
  • Android handsets are cheaper than iPhones, and so people who are willing spend more choose iPhone.
  • Apple is offering something that users want and as a result are willing to spend more.
  • Developers are attracted to iOS because of increased revenue, and this means there's less for Android users to spend money on.

The bottom line is that Android users aren't as loose with the dollars as Apple users are. And this is a problem for Android as it tries to expand into new areas such as wearables and home automation.

Not only is it going to be difficult selling high-end devices to Android users — premium devices such as the Galaxy S5 are in the minority — but it's going to be hard to encourage developers to create compelling apps for a new generation of devices that are going to have limited appeal.

Android positioned itself as a lower-cost alternative to iOS, and it seems that this is something that users have picked up and run with, and it's going to be a problem for the platform as it tries to expand into new — and more expensive — areas.