By Philip Elmer-DeWitt
March 17, 2010

Measured by revenue, the Apple’s first million units easily swamped the “iPhone killers”

Flurry Analytics’ report comparing the initial sales of three leading smartphones generated more than three dozen stories Tuesday. (See here.)

Most highlighted Flurry’s discovery that in the 74 days post-launch that it took Apple (AAPL) to sell its first 1 million iPhones, Motorola (MOT) sold 1.05 million Droids and Google (GOOG) sold only 135,000 units of HTC’s Nexus One.

“The comparison is interesting because the iPhone and Nexus One each represent Apple and Google’s first fully branded handsets, respectively,” wrote Flurry’s Peter Farago, who said Flurry threw in the Droid because it’s the fastest selling Android phone. He was surprised to find that it in its first 74 days, the Droid actually outsold the iPhone by 50,000 units.

Farago offers three reasons for this (which we quote below the fold, along with his chart). But he left out the factor that strikes us as perhaps the most important: price.

In the first 74 days, 68 of them before September 2007 price cut, the iPhone’s ASP (average selling price) was about $575. When the Droid launched 2.5 years later, its ASP was almost half that — $286. The Nexus One, because it is primarily sold on Google’s website without a carrier subsidy, has an ASP closer to that of the June 2007 iPhone.

The chart above, comparing the three phones’ revenue from consumers over their first 74 days, looks very different from the one Flurry ran:

Peter Farago’s analysis of why the Droid’s launch moved more units than the iPhone’s follows:

  1. Consumer Perception & Demand: Motorola Droid launched over 2.5 years after the iPhone 1G. (Nov 2009 vs. July 2007). When the iPhone launched, consumers’ concept of a mobile computing device as we now understand it, was very different. Since then, Apple has spent millions training and educating consumers about capabilities of such a device, which was no small feat especially after its first foray into the handset business (Motorola ROKR E1 in 2005).    Until iPhone had been introduced, most consumers, especially in the U.S. had thought of their phones as, well, just phones.
  2. Relative Subscriber Bases: Droid launched on Verizon, a larger network with more subscribers than AT&T, especially when considering AT&T’s 2007 size (63.7 million at the time of iPhone launch) versus Verizon’s 2009 size (89 million at the end of Q3). Additionally, there was pent up demand among the Verizon subscriber base for an iPhone killer, which is exactly how Verizon positioned the Droid. Finally, Verizon backed the launch with advertising support of at least $100 million.
  3. Holiday Season Sales: Droid benefited from launching on Nov 5 and having its first 74 days lifted by the holiday season, which is the highest selling period of the year for handsets. Neither iPhone 1G nor Nexus One’s first 74 days spanned a holiday period.

As for the Nexus One’s dismal showing, Farago ends with this parting thought:

“As Google and Apple continue to battle for the mobile marketplace, Google Nexus One may go down as a grand, failed experiment or one that ultimately helped Google learn something that will prove important in years to come.”

UPDATE: Several readers have pointed out that for 21 of the iPhone’s first 74 days it was out of stock at most Apple Stores.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

You May Like