Why do people buy 16MP phones in order to upload images to FB or Instagram?.
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Since there is only one 16MP phone it's easy to answer that, it's because not only does the Galaxy S5 capture more detail, it also produces more accurate colours, doesn't overexpose images like the M8 and handles night low light shots better, M8 doesnt handle street lights well, you get visual artifacts as well as as the image being overexposed, also shots in good lighting look dull and lifeless.
Sites have done blind tests comparing images from devices and Galaxy S5 won easily while the M8 was second to last, even ignoring the megapixel rating it's still a much better camera.
As you say, it's diminishing returns. At the pixel densities we already have I'll bet that contrast, colour temperature, saturation, brightness, viewing angle all make more difference to the perceived image than differences in ppi, but those are harder to turn into a single number for marketing purposes.
If you had 2 5" displays which matched on those criteria, one 1080p and one 1440p, put them both in the same phone body and gave them to people I'd guess that almost nobody would notice there was a difference unless you asked them and the majority wouldn't be able to tell even if you did. I'm also cynical enough to suspect that if you put two identical 1080p displays in different bodies and told people that one was 1440p a significant subset of people would tell you that it was sharper (especially if they'd paid money for it).
I agree with this, most users won't be able to tell the difference, I'd like to think I could tell the difference but without looking at a website I probably couldn't.
Just once it would be nice to have a significant GPU upgrade without the resolution being increased, we will never catchup to the iPhone's gaming performance with the resolution keeps increasing like this.
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Carry on.