What's interesting to me is how big a shift mobile represents to Apple's strategy.
Gruber was first to convince me that Apple didn't care about the business that Dell was in. Dell could have it. No margin.
Apple believed they built computers for the "elite" consumer who had taste or money or both and wanted a premium experience. They played there because that's where the margin is.
This situation (highlighted by iPhone vs. Android) is a stark departure for Apple, and it probably illustrates one of two things:
1. The competition is better, or
2. The switching costs for phones is much lower than for computers, and by costs I mean both money and the hassle of migrating data and applications.
Google is doing an amazing job on both fronts. If the iPhone didn't exist, Android would be the clear leader in this market. And when it comes to switching costs, Google is eradicating them: I use Gmail, Google Calendar, and Picasa. All work on both platforms very well. And I use Google Contacts as my primary rolodex.
I don't use Mobile Me because Google provides the equivalent for free (Google's services are probably better, really). Apple really doesn't have any hooks into me.
If Google can deliver a compelling alternative to iTunes, I could move tomorrow and the only costs I'd incur would be walking away from the $30 in Apps I've purchased.
Compare that to my trying to move from OS X to Windows.
Apple is rightly terrified of Google.
And it probably gets worse when the Chrome OS hits the market.
I love love love my MacBook Pro and my iPhone. But increasingly they are delivery vehicles for Google services. The irreplaceable part of that equation is Google, primarily because I'm not interested in Microsoft's or Yahoo's or Apple's alternatives.
Sorry, but I see this as a very micro-focused example.
And my argument revolves around iTunes. The sheer amount of content that apple has sold through iTunes would surely suggest that moving to another platform would be a major barrier to transferring to another service.
As you said, Google indeed is doing a fantastic job on a lot of fronts. But from what I see, in this "war" Apple is accomplishing a well executed flank attack by controlling both the hardware and software platforms.
Apple will never get into the search business, but there are so many outliers that many companies (Google, MS, Yahoo etc) have that Apple can out-flank and simple dominate in the long term.
In addition, I'm convinced that Apple is sitting on the AppleTV since they don't yet in their eyes have enough control over games, media content and associated distribution. But, they are headed there, and I would expect that the app Store will soon make it's way to the apple TV (and variants) platform.
"The sheer amount of content that apple has sold through iTunes would surely suggest that moving to another platform would be a major barrier to transferring to another service."
That will not continue to be true for long. The future of media consumption (well, at least music consumption) is from streaming services, which don't make you deal with syncing. iTunes may be user friendly, but the whole sync process is still time consuming and frustrating. Also, all music that's been sold on iTunes for over a year is DRM-free, and you can 'upgrade' your older songs for a relatively modest fee if you want to.
There's an argument that video content (which is still laden with DRM) will provide adequate lock-in, but that will probably start streaming too in the next year or two. And I think it's less of a big deal to most people if they can watch a TV show on their phone, anyway.
That will not continue to be true for long. The future of media consumption (well, at least music consumption) is from streaming services, which don't make you deal with syncing.
Fair, but remember that iTunes strength isn't their sync ability to their associated devices, it is the already negotiated agreements with content providers who have agreed to distribute their content electronically.
For people with a strong bias towards "pay as you go", it's not a sad future at all. The headache of managing bought content in terms of backups, syncing to various devices, changing formats, essentially making everyone a expert in storage management is one that could use some creative destruction.
I already got rid of my collection of music videos in favour of youtube playlists, movie collection in favour of a netflix subscription, document store for Google docs and would dearly love to get rid of my mp3 collection in favour of a streaming service. Spotify et al cant get here soon enough for me. Once that happens I wont be in perpetual fear of my laptop breaking down (just replace with another netbook) or losing my various cd/dvd/flash-drive backups.
If one day I'm not able to afford these services or a net connection, I have bigger issues to worry about than being able to enjoy the movies/music.
This stuff is not rare enough to make it worth me owning a copy (unlike in the 90s or before)
I also think that the Apple TV could become much more than what it is right now. I actually don't have one because I can't yet justify the price to myself, but traditional cable is not the way I would like to enjoy TV and movies. Hulu and Netflix streaming (and a bit of movies from iTunes) is what I use and I wish the Apple TV was delivering that in a smart way (and without hacking).
I am really looking forward to the day Apple will stop calling the Apple TV a "hobby" and do something cool with it. The App Store (or an App Store) might be the way to go…
As for iTunes, as jkincaid said, the catalog is now DRM-free so it's not as much of a lock-in problem. But right now, there isn't much to move your music to. You can replace it with services like Pandora and Last.fm, but your music library would stay where it is. However the acquisition of Lala.com and the rumors around itunes.com (if they become true) have the potential to maintain Apple's control of the music part when it moves towards a completely streamed system. And in that domain, Apple's mindshare is already so huge that it would assure their success if they execute on time.
Apple has an uphill battle on this one. from the start they did not support Divx or Xvid, which are the leading torrent formats.
On the other hand, Xbox360 supports those formats and more, has lastFM, Netflix, Games, and streaming from the computer, at a price that is cheaper then Apple sub par offer, the xbox360 outsells the appleTV dramatically.
>Google is doing an amazing job on both fronts. If the iPhone didn't exist, Android would be the clear leader in this market.
What market? Nor iPhone nor Android are the leaders of any market, either separated or combined. Add the marketshare of iPhone and Android together and you (almost) get RIM's marketshare. Double that and you get Nokia's minus a few percent.
Enthusiasm is generally an alright thing to have, but the enthusiasm of Android fans was always unrealistic and it's becoming off-putting.
"I can’t see Apple building its own search engine, but perhaps they really are building their own maps service — hence their purchase of PlaceBase last July."
I found this paragraph towards the end interesting: I was thinking recently about how it can sometimes be difficult for two guys in a garage to get traction on their ideas/products, because to really leverage them you might need a whole set of products around it. They're good ideas but would be a part of a big system that you can't build unless you're Google, Microsoft, etc. (e.g. if you want to do something where you access the data of emails, you need to piggyback on other companies' email systems)
So, I found this last part interesting because it puts Apple in a similar situation as the two guys in their garage, at a larger scale, where they (might) have to develop their own map service, where they have to get involved more in online services (MobileMe), etc., even though it's not their core competency[1]. The same way I would not use the two guys' product if it doesn't work with my existing email account, some will get an Android phone just because it integrates perfectly with their Gmail and Google Voice account.
That's something Apple will need to focus on more IMO. We're heading towards having everything just online (pictures, documents, backups, music…) and Google definitely has the advantage there.
[1] I'm not saying they don't know how to build online services. iTunes is a proof that they do, but it doesn't (really) have an online front-end.
Google is trying its damnedest to commoditize the smart phone business. It would love for Apple, HTC, and everyone else to go down the same road PC manufacturers went down and cut their own throats competing on price. Only instead of taxing the manufacturers with a fat fee for each copy of Android, they will make their money owning the advertising and search business.
Why does Google necessarily care of Apple drives the price of the iPhone down? As long as Android phones can remain popular with low price points it will be the same as the current desktop/laptop market. Apple prices their products into a 'premium' space targeted at customers with more money while everyone else competes on price. The high price of the iPhone doesn't necessarily prevent a commoditized smart phone market.
I guess the question becomes: Why does Apple think that it needs to 'own' the (smart) phone business to be successful? They've been able to remain popular and profitable while keeping their products as a premium brand. Why does the cellphone market need to be so much different?
Why does the cellphone market need to be so much different?
Because Microsoft is making money selling software and commoditizing hardware, while Google sees both software and hardware as a compliment to their business (and so, gives software away for free (hardware is commoditized enough)). By comparison, Apple is trying to make profit off markup in precisely those areas: hardware + software.
In short, the numbers are very different. While laptops are now split nicely at $1000 (<1000 - mostly PC's, >1000 - mostly Macs), what we're talking about is devices Apple wants to sell for $700 soon costing less than half of that for similar "Android" manufacturers. I forget the marketing-speak explaining this, but that gap is a big problem.
In summary, Google wants a world where both hardware and software are a commodity. For Apple, this is bad, bad, bad, as that's precisely the market they're trying to make their markup.
From the reviews on the Nexus-one , it seems that there's no big difference between iphone and android. and since switching costs are much lower , this is a totally different market.
It's interesting to see Google is stepping on lots people's toes: Apple (phone), Microsoft (search/apps/mail), Facebook & Twitter (Buzz), Amazon (AppEngine), Yahoo (the fake ad deal). Who else?
what I'm worried the most about is that while the big boys play, MSFT will sit and wait and then when everyone is weak enough the Borg will strike back and Evil Empire will reemerge.
Or instead it could be a case of warring Greek states growing strong enough that they were able to take on Persia. Asimov had a great sci-fi short story based on this premise called "In a good cause"
"Hence the patent suit against HTC. That’s all about Google - about creating a situation where Android is no longer a free operating system for handset makers in the U.S., because the cost of using it is an expensive legal defense against Apple."
I don't think other manufacturers really need to worry about it too much -- if Apple sues another Android adopter, they'll basically force Google into suing to protect Android.
"But the situation has gotten past the usual level of competitive vigor"
Really, how? And so what? I wouldn't want a mutual advisor or board member either if I was Jobs/Schmidt.
Haven't there been rivals (even bitter rivals) since the dawn of capitalism? As long as everyone fights legally/fairly, what's the problem?
When I did IT at a UPS call center, managers would take shots at FedEx at least once a week in morning meetings (higher-ups were so pissed that FedEx was in "Cast Away", it was hilarious). People switch sides and take better jobs in any industry. Again, as long as there's no NDAs being violated, what's the problem?
Is Apple out of line with the patent issue? Other than maybe that, I don't see what's abnormal.
>"But the situation has gotten past the usual level of competitive vigor"
>Really, how? And so what?
He gives specific examples in the article.
"I.e. it’s not particularly interesting that Apple hired Pittman, or that Google lost him, but it is interesting that Apple poached a director from Google, period. That didn’t use to happen."
"Mr. Campbell was forced to choose, and according to a person with knowledge of the situation, he dropped his formal responsibilities at Google, although he is still informally mentoring executives there."
This is new, they have never asked advisors to take sides.
In addition its not mentioned here but Jobs use to advise Sergey Brin. They were friends and helped eachother. This is no longer true. This is new...
"[Sergey] Brin was also known to take long walks with Mr. Jobs near his house in Palo Alto, and in the nearby foothills of the Santa Cruz Mountains. According to colleagues, they discussed the future of technology and planned some joint ventures that never came to fruition – like a collaborative effort to develop a version of Apple’s Safari browser for Windows."
- http://www.nytimes.com/2010/03/14/technology/14brawl.html?pa...
I was just about to suggest that if Google wanted to shaft Apple then one good way would be to introduce a royalty-free video format for HTML5 <video> that Apple doesn't support in its OS, its browser or its iPods and iPhones. Suddenly 130 million dollars for On2 doesn't seem that bad an investment.
(Obviously Apple could adopt a royalty free format, but would they unless forced to?)
How would Apple be shafted in this scenario? Sure, there are no On2 hardware decoding chips in the iPhone, so battery life would suffer a bit, but... is there anything more than that?
Consider Flash vs Apple. There's nothing stopping Apple implementing Flash, they just don't want to.
If Flash becomes indispensable for the mobile web Apple will be forced, eventually, to support it. But up until that point (which may never come) that it becomes inevitable, and probably for a long time after that point is reached and Apple actually caves, all that Flash content will not be accessible to users of iPhones or iPads, which reduces their value to consumers compared with Android equivalents that do support Flash.
So the same as that, but with Google codecs and web content in them in place of Flash, but worse because in this scenario Apple probably wouldn't support them on the desktop either.
Anyone else here remember the scenes from Pirates of Silicon Valley where Steve Jobs is shouting at Bill Gates about ripping off the Mac? A few years from now I bet this will all make for a good sequel.
I'm sure the whole tech scene hopes so, but there are some important differences this time around. I only know enough about law to realize it's extremely complex.
I haven't seen any evidence that Apple is poaching Google's employees. It's quite possible that the employee in question approached Apple, not the other way around.
In this context it does. The rumored agreement was that Apple and Google couldn't recruit each other's employees but their employees could apply at the other company if they wished.
Well, I'm sure therms of employment preclude discussing such things publicly. But it might explain why a fellow on the train was giving me dirty looks the other evening while I was playing with a Nexus one. When he turned to get off I noticed an Apple ID badge hanging from his belt.
Having said that, I saw probably 10 iPhone users in the same carriage, and as yet they have no truly compelling reasons to switch.
I'm going to guess that Apple is in the weaker (or at least more vulnerable) position, given that it was the first to resort to lawsuits. I'm not sure they really have an effective counter to Google entering the smartphone market.
Obviously Apple needs to do that, or they're dead. But they do not appear to be able to threaten Google's core business the way that Google is able to threaten Apple's.
>We did not enter the search business, Jobs said. They entered the phone business. Make no mistake they want to kill the iPhone. We won’t let them, he says.
Except that Jobs wasn't at Apple between 1988-1994, when the lawsuit was in progress. But maybe he still had some emotional investment in the matter? :)
Apple seems to be fighting a losing battle here. Google has a larger war chest - that is more products which people find great value in, than Apple and they are fighting on the side of openness which is more in the interests of users. At the same time, I do appreciate the fact that Apple has instilled a sense of aesthetics into the industry.
While I can't disagree with your idea of aesthetics, I would argue that Apple's entire product line is not about an aesthetic sense as much as a design imperative. In promotional interviews for products (iPad, recent iMacs) you'll find Ives repeatedly mentioning how many unnecessary elements he and his team have _removed_ from products. This seems to be the ideal from which their industrial design team works. Cf. Steve Jobs quote:
“Most people make the mistake of thinking design is what it looks like. People think it’s this veneer — that the designers are handed this box and told, ‘Make it look good!’ That’s not what we think design is. It’s not just what it looks like and feels like. Design is how it works.”
Gruber was first to convince me that Apple didn't care about the business that Dell was in. Dell could have it. No margin.
Apple believed they built computers for the "elite" consumer who had taste or money or both and wanted a premium experience. They played there because that's where the margin is.
This situation (highlighted by iPhone vs. Android) is a stark departure for Apple, and it probably illustrates one of two things:
1. The competition is better, or 2. The switching costs for phones is much lower than for computers, and by costs I mean both money and the hassle of migrating data and applications.
Google is doing an amazing job on both fronts. If the iPhone didn't exist, Android would be the clear leader in this market. And when it comes to switching costs, Google is eradicating them: I use Gmail, Google Calendar, and Picasa. All work on both platforms very well. And I use Google Contacts as my primary rolodex.
I don't use Mobile Me because Google provides the equivalent for free (Google's services are probably better, really). Apple really doesn't have any hooks into me.
If Google can deliver a compelling alternative to iTunes, I could move tomorrow and the only costs I'd incur would be walking away from the $30 in Apps I've purchased.
Compare that to my trying to move from OS X to Windows.
Apple is rightly terrified of Google.
And it probably gets worse when the Chrome OS hits the market.
I love love love my MacBook Pro and my iPhone. But increasingly they are delivery vehicles for Google services. The irreplaceable part of that equation is Google, primarily because I'm not interested in Microsoft's or Yahoo's or Apple's alternatives.