Michelle Clancy ©RapidTVNews | 22-07-2011

Apple and its iPhone have pulled ahead of Nokia as the worldwide leader in smartphones, shipping 20.3 million iPhones in the third quarter, vs. Nokia's 16.7 million units. It's a shift that has big implications for mobile video.

That rapid penetration of iPhones into the market is changing the profile of mobile data traffic. Video right now generates 39% of mobile data traffic, according to Bytemobile. And iPhone users are the biggest consumers: 43% of iPhone data traffic is video. Taken as a whole, it's clear that mobile video is getting a pretty big push from Apple's top moneymaker.

It's a sad day for Nokia, which said that it remains the No. 1 handset vendor overall when it reported its Q2 2011 earnings this week. But even that may not be a title that it will keep for long: after years of claiming a 40% share, overall market share slipped to 23.7% this quarter, from 29.1% in Q1. Sales slipped 20%, overall.

There's some hope. Nokia still managed to report an operating profit and beat analyst expectations thanks to royalty gains ($555.1 million, off of a one-off royalty revenue of $430 million). It also said the handset business will be profitable in Q3.

"To summarize, Q2 was a difficult quarter," Chief Executive Stephen Elop said on the earnings call. "But we're starting to see a very positive impact on the health of Nokia."

Nokia is also looking to the imminent release of Windows Phone 7-powered handsets to remedy the market share issue. Nokia announced in February that it would eschew its Symbian and MeeGo operating systems in favor of building mobile Microsoft’s Windows Phone 7. Bing will power Nokia’s search services across all devices and the Microsoft adCenter will provide search advertising services. The first smartphones from the two will be released in the fall--and Microsoft has optimised Windows Phone 7 for video playback, giving even more wings to the growth of the service.