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WebiMax Blog

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Apple's Reliance on iPhone Subsidies Makes Google (Search) a Winner in the EU

Ryan Buddenhagen, February 28, 2012

Since the launch of the iPhone, Apple has enjoyed a large percentage of the US smartphone market continually setting new heights in the sale of the product in this market. Just this past quarter, they sold 37 million iPhones, which is over twice the number a year prior. Like much of Apple's products, the iPhone has garnered a great deal of attention from consumers and media alike and has cultivated a dedicated fan-base.

One downside of the phone is its cost though, and in taking a closer look, there is a deeper story to the cost structure of the device. The iPhone greatly relies on subsidies from wireless providers which are both a blessing and a curse for Apple; a blessing in the US and a curse in Europe, where Google (through Android-powered devices) eagerly fills the void left by slow iPhone adoption.

Due to the contract system in the United States wireless market, subsidies are a big advantage for Apple who receives roughly $400 from carriers for every customer who buys an iPhone with a two-year contract, according to The Wall Street Journal. The carriers pay the subsidies as a way to make the smartphones available to a wider audience, but the iPhone subsidies are considerably higher than those for any other smartphone. The model is to make the iPhone easier (cheaper) to buy and then make the money back on the 24-month service contracts. This puts the phones in the hands of consumers at a much higher rate (and for less consumer cost) thus allowing the iPhone to be feasible for many.

smartphones in Europe

EU Market
In Europe on the other hand, the "prepaid" rather than contract system is more widely used, and as a result, customers have to pay a higher rate for their phones. In Southern Europe, where the economy has taken the biggest hit due to the debt crisis, consumers are opting for the cheaper Android-powered device which is drawing them away from the iPhone. Apple's market share could drop lower if carriers decide to stop underwriting a percentage of the device cost as appears to be potentially on the horizon in countries like Spain and Denmark, according to The Wall Street Journal.

In the end, Apple may need to restructure their model for the EU market further adapting how they deliver their iPhones on a per-country basis. Apple is not a web search player, but their slow growth in Europe due to economic factors and their cost structuring specifically in southern Europe has opened the door for devices running Google software to gain prominence in the market only furthering their applications such as Maps, Gmail, and Chrome, among others. Most importantly, however, all this makes their search engine that much more widely available and used in the growing mobile search market, affirming the relevance for SEO catered towards Google and mobile search. An SEO company situated to deliver such International SEO services will do well as more and more businesses will need to be optimized for SEO and mobile search across international markets going forward.

Need an Expert Contributor?

Ken Wisnefski is a seasoned web entrepreneur and a frequent contributor to news outlets and business publications. Ken’s vast knowledge of how to make online businesses succeed has made him a sought after consultant from businesses wishing to improve their online initiatives. Contact pr@webimax.com to collaborate!


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