Assume you have a great idea for a smartphone application. Now you need to decide what platform to develop it for to have the best chances of funding and eventual success.

Let’s take a look at the options.

The Big Five

Looking at the latest available unit shipment data gives us a good overview of the market:

• Symbian – 19 million units shipped in Q3/2009
• RIM – 8.5 M units
• Apple – 7.4 M units
• Microsoft – 3.6 M units
• Android – 1.5 M units

Choosing three out of five alternatives is easy: the market share numbers are clear. Choosing a fourth candidate is tougher, though. While WinMo shipments were still more than double of Android’s numbers, the dynamics of the two platforms are quite the opposite. WinMo shipments shrunk over 33 % from the same quarter in 2008 while Android is growing fast. The Android numbers do not include Droid and Nexus One which did not ship in Q3. While WinMo 7 may give new legs to Windows, the safer choice seems to be Android — it has the momentum and the backing of Google.

The Final Four

To pick from the four remaining candidates, let us look at the chart below:

Market Share vs. Market Cap

As you might have guessed, the four mystery blobs are the four remaining candidates. The x axis represents the revenue (LTM) and the y axis the market cap of the companies, while the size of the blobs corresponds with the market share of the company’s phone platform. (The comparison is admittedly apples-to-oranges as Google and Apple are not exclusively phone manufacturers.)

The two largish blobs that are fairly low on the y axis are Nokia (the red blob) and RIM (the purple blob), while the two other are Google (the green blob) and Apple (the blue blob). It clearly seems the markets are bullish on Apple and Google, while Nokia and RIM are not so hot.

One interpretation would be that Apple and Google are overvalued and Nokia and RIM undervalued. A case could be made for RIM (with a trailing P/E of 15) but not for Nokia, which has by far the highest P/E ratio of the bunch (a whopping 75).

So it seems one would have to remove either Nokia or RIM from the running if the markets are to be believed. The call might be different were we looking exclusively at the US market, but a 46 % global marketshare is hard to overlook. So we ditch RIM.

Three’s the Charm

OK, maybe this would be the time to go talk to your neighborhood VC. Which platform would they prefer?

If your neighborhood is the US and you are talking to US-based VCs, you may as well drop Nokia right here and now. They are a non-factor in the US market. If you want to present three options, and especially if you are targeting corporate users, take RIM as the third option.

But let’s assume you are targeting a global audience and your first call would be Nexit Ventures, what would we say?

That would depend on many things, of course, but not the least on the kind of app you are planning. Let’s look at three scenarios:

1. You are developing something simple and inexpensive suitable for emerging markets. In this case, strongly consider Symbian. They may not be sexy, the platform maybe creaky, but Nokia is the only game in town in Africa, India, and most Asian markets (apart from Japan), even China. A slight question mark is the distribution mechanism: Nokia has the Ovi Store with a lot of registered users (80 million and counting), but not really much evidence of how well the apps sell. The revenue share deal on Ovi is pretty standard: you get 70 %, Nokia takes 30 %.
2. You are developing some really cool consumer stuff. In this respect we love Apple. The iPhone is a fantastic platform for cool apps and there is a well-functioning marketplace. It is crowded, though. There are over 100.000 apps available from the App Store and the vast majority do not really get much traffic. So you better be sure you have something that creates visibility (and something Apple approves). And remember Apple also takes 30 % of the revenue.
3. You are developing corporate stuff and/or something that strongly leverages the web. Here you may want to go Android. The market share is growing fast, Google is by far the most web-driven of the companies here plus there is no single-source problem with an increasing number of different handsets available for different applications. The Android Market distribution channel is developing nicely, and the revenue share deal is pretty sweet: you get to keep all the dough.

[Upon reviewing this entry, we feel we did not stress enough the importance of how well the application marketplace for the particular platform actually works. Currently, Apple's App Store is probably the only channel that can be called really mainstream. Android Market is growing nicely but still quite marginal sales wise and Nokia's Ovi is still very much an unknown. But we will expand on this theme in a separate entry soon.]

The Long-Term View

In our office betting pool (for purely recreational purposes, of course) our analysts and principals have taken a very bullish view on Android. In fact, we would not be surprised if Android took the market share leadership in 2013 from Symbian (although we do believe Nokia will keep the lead with the combination of Symbian and Maemo). We also believe that Apple will overtake RIM but remain a fairly distant #3 in the market.

In light of this view, our recommendations remain the same: Symbian for the low-cost markets, Apple for hipsters, and Android for the rest of us. But, obviously, your geographic market, exact target customers, and many other variables will affect that choice.