Apple Claim Chowder: Business Models

257 thoughts on “Apple Claim Chowder: Business Models”

1. What, to me, is most damning is not that people once thought these things. What is most damning is that people still think these things against all the _overwhelming_ evidence otherwise.

   It’s kind of like watching a TV show or movie where the lead character is constantly dismissed by his peers or bosses even though he is constantly right. I guess that’s it. There is no entertainment if everyone accepts the efficacy of one’s actions and right off the bat agrees with their conclusions.

   Joe

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   1. It’s called page views.

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   2. Stopped clocks … waiting for 2 to come around.

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2. No one – and I mean no one – puts more boundless research into his articles than John Kirk. He must have discovered a 25-hour day.

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   1. High praise indeed, humbly received. I’ll respond with a quote from Mark Twain:

      I can live for two months on one good compliment. ~ Mark Twain

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3. “Apple seems to be doing swimmingly without our advice. Perhaps we should stop spending our time telling them what they’re doing wrong and start learning what they’re doing right.”
   if they, the critics, did learn about what apple is doing right, what kind of article would they, could they sell? And what would they, could they do with that information? Start a gnu apple? Critics can never see the goal, only the defense of the score. Apple Long!
   Great set of articles, Thanks

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   1. Thank you for your compliment krabbie. It was hard work, but your appreciation of that effort makes it all worth the while.

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4. John, kudos to you for such an entertaining, informative and evocative set of articles. Always love the use of quotes to anchor your thoughts and points to another/broader perspective.

   Regards
   Mark

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   1. Thank you, Mark. Since you like my quotations, I’ll throw one more at you:

      “An apt quotation is like a lamp which flings its light over the whole sentence.” ~ L. E. Landon

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5. Wonderfully informative and entertaining series of articles! Bravo!

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   1. Thank you so much.

      “The pen is mightier than the sword, and considerably easier to write with.” ~ Marty Feldman

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6. Apple’s business model is so revolutionary, ingenious and subtle that it has been totally overlooked by all these naysayers and their analyst’s yammer of open v close, market share dynamics, and other such fancy biz school catchwords: Apple just builds products that people really like then sell it at a price that they are willing to pay.

   For all the fancy-shmancy analysis that insists that Apple has been on a 10-year-long Wile E. Coyote moment, none of them have ever seemed to grasp that no one else builds devices that people like as much as they like Apple’s devices. Not even close. But you can’t really measure consumer desire, you can’t really measure product quality, so if you restrict your analysis only to measurables like market share, prices, profit margins, and hard product specs then you are missing the biggest thing that explains Apple’s apparent ability to walk on air. But they aren’t, they just build the far-and-away best damn product out there and people are willing to pay for it.

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   1. …Wile E. Coyote moment… – aardman

      I love that metaphor. 🙂

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7. John,

   Whatever they are paying you to write your articles is simply not enough.

   And you should ask to be paid in Apple shares.

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   1. “Give a man an article and he will starve for a day — but teach a man to write and he will starve for a lifetime.” – Anonymous

      Thank you for your kind words, isitjustme. My pay is enormously supplemented by your compliments.

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8. “Apple’s vision is to make the best, not the most.” No. That’s Apple’s PR. Apple’s vision has been spelled out in the internal memo revealed in one of their suits. It’s: lock-in. Not one word about “best” in it.

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   1. In early August I began to collect material on an article. It started out as a discussion on how culture affects companies and then it evolved and separated into three chapters:

      1) APPLE: University: Codifying and Creating Culture On Purpose
      2) APPLE: Keeping The Company Focused On Its Mission And Not On Itself
      3) APPLE: Keeping The Company Young And Flexible

      I was unable to finish the article before my vacation and with the Apple Event fast approaching I switched my focus to writing about it instead. Your completely wrong-headed suggestion that Apple is all about lock-in has reignited my interest in completing my article. It may be delayed because coverage of the Apple event will take precedence, but I look forward to explaining to you and those who think like you that you are not only wrong, but you are profoundly wrong about what motivates Apple…

      …and that motivates Apple; what drives Apple, has made all the difference.

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      1. Fantastic! Can’t wait to read it / them.

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   2. Well, you can choose to take an internal document out of context OR you can choose to accept observable reality where hundreds of millions of Apple customers really are happy with Apple’s products and services because those products and services are quite good and deliver a lot of value.

      Maybe the underlying issue here is you truly don’t understand why Apple is succeeding, so you’ve decided to make up a reason, ‘Apple customers are foolish’. There. Nice and tidy. There’s no innovation happening, the products aren’t very good or capable, in fact they are two or three times the price and have waaaaay less features. Apple certainly isn’t trying to make anything good, they’re just out to screw customers and milk them for more money. It’s mostly marketing anyway, people are just being fooled by slick ads, plus Apple is trendy and fashionable and that certainly won’t last. Any day now Apple will come crashing down and the whole world will see that Apple’s success wasn’t real at all. That about sum it up obart?

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      1. That’s what beautiful about that memo: there’s no context to it. That’s what Apple spontaneously discuss amongst themselves, when there’s no events, no mics nor cameras around. i-nalysts are studiously refusing to acknowledge that private memo because it mightily contradicts the public narrative.
         To me, the “observable reality” is that, though I know there are some cases where Apple products are better (music creation, localized edutainment), none of the Apple customers around me use any of that, and technically, they’d be just as well served by a much cheaper smartphone.
         As for the mechanisms that make people buy luxury items and then stockholm up technical reasons for doing so, indeed, that’s way over my head. Then again, I used to have a friend adamant that Prada shoes were more comfortable, and Vuitton bags more practical. Recent hires at Apple do emphasize they want to keep the luxury thing going, whiwh is fine, but let’s acknowledge it’s a subsidies-related success, I’d probably get a BMW too if my gas station was paying for my car. Actually no, I wouldn’t either, but I understand why others would.

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         1. This is exactly why it’s so fascinating to engage you from time to time. You truly believe Apple has succeeded by tricking foolish customers into buying expensive gewgaws. The reality of Apple’s success upsets you so much that you’ve created an alternate narrative to deal with it. You’ve gone as far as invoking Stockholm syndrome as part of your explanation of Apple’s success. You are indeed a living, breathing case study.

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            1. While there’s somewhat better quality in some of the apps/os , a lot of the appeal in the iphone for some is as a status symbol and apple uses it .

            2. Apple customers buy because they’re getting a lot of value within the user experience Apple provides, and that goes far beyond “somewhat better quality in some of the apps/os”. The failure to acknowledge this differentiation is a key factor in poor analysis of Apple.

               Of course Apple is known for quality, and there is always an aspect of the aspirational brand. Stratechery had a good recent article about Apple and Veblen goods. But we must be careful not to fall into the trap that Obarthelmy has, to argue that Apple has succeeded by tricking foolish customers into buying expensive gewgaws. He (or she) actually seems to believe this. From this foundation all analysis of Apple will fail miserably (as we see with much of the nonsense obart spews).

            3. > to argue that Apple has succeeded by tricking foolish customers into buying expensive gewgaws.

               In a sense, the differing market shares in places where there’s carrier subsidy and where there’s no such subsidy , tells us that this is largely a story of tricking customers.

            4. Interesting to follow up on this now that we’ve had a year of subsidies decreasing or going away, and the reality has been an increase in both iPhone sales and share, and that happened globally. The industry seems to be moving to monthly payments (I predicted this BTW), the same way humans buy lots of other things we can’t afford in one lump sum, such as leasing a BMW, buying a house, using credit cards, and so on.

            5. Ah yes, and you think status, especially status that endures, can be manufactured out of thin air? People aren’t as stupid as you need them to be for your assertion to be true. A company might be able to sell a few widgets by projecting its brand as a prestigious status symbol, but they better deliver the quality and performance befitting their claim of status or they’ll soon find themselves devoid of customers and the object of public ridicule and contempt.

               To be able to sell a product solely on a claim of its lofty prestige, you need some pretty nifty marketing. Apple has pretty nifty marketing, in fact a lot of its detractors say that’s the only thing they’re really good at. But marketing, at best, only gets you a first sale to a customer. For that customer to not return that first sale and then come back to buy from you again, that’s not due to marketing anymore, that’s from delivering the quality and value that you promised.

               I’m so tired of hearing people say Apple’s only appeal is snob appeal and its success is based solely on marketing. As if there is some kind of marketing that is so mesmerizing that it convinces unsatisfied customers to keep buying the disappointing product.

            6. “As if there is some kind of marketing that is so mesmerizing that it convinces unsatisfied customers to keep buying the disappointing product.”

               Oh but haven’t you heard? That’s due to “lock-in”!

            7. > Ah yes, and you think status, especially status that endures, can be manufactured out of thin air?

               I look at beats an i’m inclined to answer yes. Such marketing is pretty common today.

               On the other hand , altought there are some differences between apple and android today , they aren’t that big(for some evidence – there are plenty of people who shifted from iphone to android usage). Also , since most people only use few apps, the quality is good enough for those( and i don’t buy the claims that “good enough” don’t applies to user experience – heck they even apply to healthcare sometimes).

               To test this , let’s start with a place who doesn’t offer carrier subsidy(another way of tricking customers). Let’s take something like the moto-G(good $179 android) with a special app store(that is somehow equivalent to the iphone app store.Why apps – because you mostly spend 95% of you screen time there) and try to sell it , only with basic marketing comparing app quality for $450/$650 . How large a marketshare do you think such phone will get?

               I think you won’t get many customers for this because :

               1. We know that most customers only download and use a few apps.And the major apps are probably quiet polished for both platforms.

               2. We know that even on the iphone ,users don’t value apps for that much and are’nt willing to pay for them.

               My guess is that this phone won’t be very popular.Do you think otherwise ? The rest of the difference between iphone/android is mostly marketing and lock-up-effects(for example due to data) , and not true differentiation.

            8. “The rest of the difference between iphone/android is mostly marketing and lock-up-effects(for example due to data) , and not true differentiation.”

               This was exactly my earlier point, let me quote myself “The failure to acknowledge this differentiation is a key factor in poor analysis of Apple.”

               The common thread among those who do not understand Apple’s success does seem to be this failure to acknowledge the differentiation *and value* within Apple’s user experience. If you refuse to admit it exists, then your arguments do seem rational.

            9. I did acknowledge apple’s true differentiation. It’s mostly really good apps, by the best ecosystem. No doubt. I even offered to go to the effort of recreating it because of it’s possible importance.

               But do you think that if we did my little experiment , many people would have paid +$300 more just for a better app store ?

            10. “do you think that if we did my little experiment , many people would have paid +$300 more just for a better app store ?”

                I doubt it.

                “I did acknowledge apple’s true differentiation. It’s mostly really good apps, by the best ecosystem. No doubt.”

                No you did not. You’ve misunderstood what it is, as shown by your thought experiment. Apple’s differentiation comes from the value created within the user experience, and this is so much more than apps, it is the entire stack, from apps to content to ease of use to build quality to industrial design to support, and more. It took Apple decades to create this. You are making the common mistake of boiling it down to ‘better apps’. Other pundits might boil it down to something else, but usually it’s a single thing that they view as easily copied. So of course as soon as Company X starts doing Easily Copied Thing Y, Apple is doomed.

                What you still fail to understand is Apple’s differentiation may be impossible to copy. In fact, no other company even seems interested in attempting to follow Apple’s path. Most of the tech industry views Apple as ‘doing it wrong’. I suppose that’s easier than admitting how difficult it is to do what Apple is doing. “Yeah, I could totally do that, but it’s stupid so I’m not going to.” That seems to be the attitude of a big chunk of the tech industry.

            11. >> “so much more than apps, it is the entire stack, from apps to content to
                ease of use to build quality to industrial design to support, and more.”

                a. ease of use – depending on one’s needs , one could customize android to be much easier to use than ios, for example , this launcher[1] , which is specifically designed for old people , offering for example bigger text and icons and other stuff for people with poor eye sight. There are other launchers for other needs of course, and i think there were also some phones by manufacturers targeted at that. In a sense , with that customizability , for some people android could be considered even easier to use than the iphone.

                I grant that the first config does take some time/complexity , but usually people who find that difficult have help from family and friends.

                b. build quality – there are many different android phone with varying levels of build quality , surely some of them could be considered “good enough” . same goes for industrial design .

                c. support – again varying phones with varying levels of support , but for example buyers of the “moto x” describe it’s customer support as great.

                d. content – i’m from outside the u.s – so i’m not sure about that.

                Those are the reason why i believe apps are most of the differentiation.

                [1]https://play.google.com/store/apps/details?id=com.wiser.home&hl=en

            12. You are so far away from understanding the true value and differentiation of Apple’s offerings. In fact you’re doing exactly what I warned against, ticking off individual things you think can be easily copied, “Oh, Android already does X, and it can do Y, and this other phone does Z” and so on.

                You’re missing the cumulative value that comes from vertical integration and the *whole* user experience. Indeed, many folks in the tech industry deny that this value even exists. I suppose they have to deny its existence, since only Apple is doing it.

            13. The customer gets to decide whether there is a difference between iOS and Android, not you, Restfullbull. Most people who don’t understand Apple’s success don’t understand the value of their ecosystem. Some customers appreciate it and are willing to pay for it and other do not and will not. This is as it should be and presuming that you know better than those who spend their money is the first step towards poor analysis.

            14. It occurs to me that Android and iOS need each other, in a way. Apple cannot scale its model to serve the entire market, and most of the market doesn’t value Apple’s differentiation anyway. Android is good enough for most of the market, but the horizontal nature of it means there can be no vertically integrated user experience like Apple’s. Hmm, I wonder, what does the market look like without an Apple delivering a vertical experience? Are there other industries with examples? I haven’t thought this through at all, obviously.

         2. obarthelemy, please email the article you are referencing to mr.johnkirk@gmail.com or provide a link so that I may be certain to address it in an upcoming article. Thanks!

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            1. http://www.globalnerdy.com/2014/04/07/dirty-laundry-aired-in-the-applesamsung-patent-infringement-suit-part-one-the-apple-documents/ (full source)
               http://bits.blogs.nytimes.com/2014/04/07/email-from-steve-jobs-hints-at-how-apple-ticks/ (highlights)

               Nuggets:
               “- tie all of our products together, so we further lock customers into our ecosystem”
               “- make Apple ecosystem even more sticky”
               “- Google and Microsoft are further along on the technology, ”
               “- Strategy: catch up to Google cloud services”
               “- Strategy: catch up to Android where we are behind (notifications, tethering, speech, …)”
               Also, intriguing how competitors’ ads, but not products, are studied (see text). to me it’s revealing of where Apple’s focus is.
               Even Apple acknowledge that kind of things, yet a lot of i-nalysts and commentators don’t.

            2. Okay, never mind that the document you’re pointing to doesn’t prove what you think it does, not even close. There’s a single line about ‘lock in’ and most of the document is about improving Apple’s offerings. That seems to be the opposite of the narrative you are attempting to create.

               Looks to me like you intentionally clipped some quotes to better support your story. Here’s some of your quotes, in full, instead of your edited versions:

               “Google and Microsoft are further along on the technology, but haven’t quite figured it out yet”

               “Strategy: catch up to Google cloud services and leapfrog them (Photo Stream, cloud storage)”

               “Strategy: catch up to Android where we are behind (notifications, tethering, speech, …) and leapfrog them”

               Subtle but important differences. Truth matters obart.

            3. That’s twice about lock-in, and yep, “catch up and leap frog” instead of “catch up” changes everyting.

            4. The word ‘lock’ appears once. As I said, truth matters. And the truth is most of that document is positive, talks about the state of the industry and improving Apple’s offerings. You’ve latched onto a single line as if that somehow proves Apple is just as bad and evil as you wish it was.

               Funny that you didn’t quote any lines like this one: “Strategy: stay in the living room game and make a great “must have” accessory for iOS devices”

               Well, you could interpret ‘must have’ to also somehow mean lock in I’m sure. That’s *three* times now Apple talked about lock in!

               But wait, what about this quote: “Free MobileMe for iPhone 4, iPad and new iPod touch” Surely that means lock in as well! Four times! There must be more examples, I just have to open my mind!

            5. Introducing a new concept (it seems): synonyms. Such as: sticky, and lock-in.

            6. Nope, they are not the same. The differences may be subtle, but are important. Although I could argue the way Apple means lock in isn’t what you think it is. Of course you have to argue now that sticky and lock in mean the same thing, and you also have to argue that your edited quotes don’t matter. You have no choice, you painted yourself into a corner.

               You’re still ignoring the truth that most of that document you’re clinging to doesn’t prove what you want it to. If your narrative re: Apple is correct you should have no need to edit quotes and conflate terms, and you should have *far* more documentation/evidence. Obart, you simply have to do better.

            7. Well, have fun getting stuck in, but not locked in.

            8. Thank you, obarthelemy. I won’t promise when, but I promise I will read it with care.

         3. There is hardly anything in the world that some man can’t make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey. ~ John Ruskin

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            1. I’d argue in that case, it’s “make a good bit worse, and a lot more expensive”.

               Also http://www.goodreads.com/quotes/tag/quotations, among which:
               “He wrapped himself in quotations – as a beggar would enfold himself in the purple of Emperors.” ― Rudyard Kipling, Many Inventions
               “[A] quotation is a handy thing to have about, saving one the trouble of thinking for oneself, always a laborious business.” ― A.A. Milne, If I May

            2. Brilliant in it’s irony. 😉

            3. I quote others only in order the better to express myself. ~ Michel de Montaigne

               I love quotations because it is a joy to find thoughts one might have, beautifully expressed with much authority by someone recognized wiser than oneself. ~ Marlene Dietrich

            4. So to quote is to “slavishly copy” a thought!
               And that’s not a bad thing, as long as it’s cited, which you do.

            5. “Quotes are to thoughts what brands are to objects.” -obarthelemy.

            6. Hence the difference between a good quote and a bumper sticker. 🙂

9. Much has been written about market share of Apple products, or the relative lack thereof.

   You’ve written much about the “vertically integrated” business model. Vertically integrated has always meant something more along the lines of “specific purpose” to me. Though I find the terminology highly misleading, I see it al lot around here, so let’s go with it.

   Apple has successfully integrated hardware, software, and retail within it’s ecosystem. It totally controls the whole thing. If I may add, it does so in an anti-competitive fashion. Fine, you may say it’s not a monopoly after all. Great! It’s vertically integrated.

   Microsoft tried to do the same thing, to a far lesser degree in the ’90’s, and was justly slammed. The difference, of course, was dominant PC market share.

   Questions:
   a) Should Apple’s market share rise to monopolistic levels, is their vertically integrated model still legally viable?
   b) Wouldn’t that have been applicable to MS as well?
   c) Is lack of monopoly position sufficient justification for “exclusively” vertically integrated systems? (Admittedly a very loaded question).

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   1. Vertically integrated means a firm performs all the production steps from the raw material stage to distribution of the finished product. There are really no fully vertically integrated firms -the modern economy is too complex for that, but back in the 1950’s Ford came closest when they owned their own iron and steel mills to produce the sheet metal and cast iron used for making their cars. I don’t see how “specific purpose” has anything to do with vertical integration. Except maybe that a product with a very a narrow use and market (i.e. specific purpose?) is easier to vertically integrate.

      As the computer industry goes then, Apple, though far from being fully integrated, is one of the most vertically integrated companies given that they make both hardware and the software that goes into it, they design a lot of their own key components, and they even do retail. Samsung is also relatively vertically integrated but since they outsource the OS, perhaps the most critical component of any computing device (at least from the customer’s point of view), then I would say Samsung is less vertically integrated than Apple

      Be that as it may, trying to address your questions in turn:

      a) There is no law against being vertically integrated, regardless of whether you have monopoly power or not. So your question a) is moot. In fact I haven’t heard of any antitrust law against any particular market structure, all the laws are about behavior. It’s not what you are, it’s what you do.

      b) Following from a) above, your question b) is moot as well. In fact I don’t think I understand what your question means because Microsoft, especially before they acquired Nokia’s hardware business, is not even close to Apple’s level of vertical integration.

      C) Thus your question c) is moot as well. In truth, I don’t understand what you mean by “exclusively vertically integrated system.

      Maybe we are talking past each other because we mean different things when we say ‘vertical integration’. Oh well, tried my best.

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      1. Then wasn’t it an attempt at vertical integration, in software at least, when MS provided the OS, and leveraged that to win in Office Suites, and made attempts at controlling programming languages and internet access? The methods they used were contemptible, but they did not directly, by fiat, forbid competition. There were no rules over “what runs”. They DID control by coercion. Fiat is a higher form of coercion.

         So if they claimed they were a “vertically integrated software company”, this all becomes okay? Or was it market share combined with these things that made them a monopoly?

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         1. You should really do some research on the terms used. “Vertical integration” does not equal “monopoly”. And “monopoly” does not equal “anti-trust violation”.

            Joe

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            1. That’s not what I said. I associated extreme market share, in conjunction with anti-competitive behavior, as monopoly. A hypothetical situation.

            2. You are trying to layout some sort of correlation to the MS business model practices that resulted in the anti-trust trial (which had nothing to do with vertical integration, no matter your reductionist key word) and the Apple model in order to justify (at least personally) anti-competitive charges against Apple when vertical integration has nothing to do with market share/monopoly or anti-trust.

               You’ve already admitted a misunderstanding of a vertically integrated business model definition. Before you go much further down your rabbit hole do some more research on “vertical integration”. There are several good business model oriented websites out there to find out more what it means. You won’t even need to resort to Wikipedia. You might even be better able to put together a more coherent argument based on something other than specious analogies.

               Joe

            3. Some facts:
               MS was accused and convicted in using their monopolistic position to enforce “bundling” of IE with Windows as a mandatory situation. Bundling is integrating.
               Everything Apple includes is “bundled”.
               Apple has as a stated policy the need for their approval of all software to run on iOS. This is not my opinion of anti-competitiveness, it is fact. In fact, many programs that “duplicated functionality”, or substituted functionality were forbidden. Contrast this with MS’s “bundling” of IE. You could still install Netscape, or Opera at the time.
               I submit to you that the term “vertical integration”, as applied here, is nothing more than “bundling”.
               If market share grows to monopolistic levels, thus squeezing out the competition (which is the premise I made originally), aided by anti-competitive policies, is iOS legally viable in that scenario?

            4. You’ve either misrepresented or just plain gotten so much wrong in your list of “facts” I really don’t see the need to continue. You’ve made up your mind, regardless of the facts, such as the meaning of “vertical integration”. If you would at least make the effort to understand what vertical integration really is and what it isn’t, this might be a worthwhile conversation. Otherwise, I’m out.

               Joe

         2. “Then wasn’t it an attempt at vertical integration, in software at least, when MS provided the OS, and leveraged that to win in Office Suites, and made attempts at controlling programming languages and internet access?”

            The simple answer is no. You actually answered your own question with your comment about coercion. Microsoft did not vertically integrate, I suppose you could say they horizontally coerced. But as jfrutal says, you really need to back up and learn more about the terms and concepts here, you’re mixing up a lot of ideas.

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            1. It can’t be integration when Apple does it and not when other’s do. Granted MS wanted to control the PC ecosystem through “vertically integrated software”, and basically stayed out of hardware. Do you mean to say that if MS had their own PC in the 90’s (thus fully matching what Apple is doing today) it would have been all right?

            2. “It can’t be integration when Apple does it and not when other’s do.”

               Perhaps you’ve missed that companies can act horizontally (Microsoft) or vertically (Apple). They are not the same. Apple’s vertical model was (and still is) mocked in the tech industry, it isn’t supposed to work. We’re only recently seeing companies like Microsoft and Google begin to copy it to some degree (in light of Apple’s massive success). Microsoft was not vertical in the time period you speak of. If they had been it would have been impossible for Microsoft to do what they did. The only way to do what Microsoft did was by going horizontal.

               You can relax, Apple isn’t going to take over your world. In fact they have little interest in your world.

            3. My world is far more inclusive than yours, so YOU can relax and stop taking things so personally. If Apple takes over THE world is the premise of the conversation.

               Answer me this…Is the App Store vertically or horizontally integrated? Apple didn’t write those billion Apps, and they do sell developer licenses to write Apps for iOS. Under the most stringent and anti-competitive terms no less. To write to the unlicensed operating system, you need a license. Sound familiar?

            4. “My world is far more inclusive than yours”

               I doubt that very much.

               “Is the App Store vertically or horizontally integrated?”

               The App Store is part of Apple’s vertical stack. Did you have a point to make?

               Look, jfrutal has already said this, you’ve made up your mind that Apple is bad, and you’ve really gone off the rails here, your arguments make no sense at all, you’ve officially arrived at the point where you’re just making things up to suit your opinion. Vertical integration is bundling? What the heck…

            5. The question was, is the App Store, as an entity, vertically or horizontally integrated? It has thousand of dependent developers who purchased a license to code for iOS. In that regard, it’s a licensing model. Rather than license the OS they license (for a fee) the right to program for it. These developers are partners. Is that a horizontal or vertical scenario?

               MS licensed Windows and applications run on it. There are no license restrictions for coding on the OS. The license fee was for the OS, not the right to code. Yet that’s considered a horizontal scenario. If that is, why isn’t the iOS Developer’s License.

               The concept of Vertical Integration, as discussed here, is not only “bundling”, it’s an extreme form of bundling. How can it not be?

            6. “The question was, is the App Store, as an entity, vertically or horizontally integrated?”

               Your question has no merit. The App Store is part of the vertical stack. I could also argue the horizontal nature of individual aspects of many parts of any system, but it doesn’t make any sense to do so.

               Any kind of integration could be viewed bundling I suppose. Obviously you want to do that because it helps your ‘mad-at-Apple’ point of view.

      2. “I don’t see how “specific purpose” has anything to do with vertical integration.”

         I agree, it has nothing to do with vertical integration (save your point that a narrow use case does make integration easier). I’m fairly sure klahanas means it as an insult, as in Apple products are less capable, the typical closed vs open nonsense.

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         1. In no way did I mean it as an insult, oh wise simian from space. In other contexts vertical applications are often industry or application optimized, and specific.

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   2. You have a real lack of understanding of “monopoly”. Marketshare does not equal “monopolistic level”. You can have 100% marketshare if you have the best product and people happen to prefer it. Unlikely, but true.

      “Monopoly” usually refers to excluding others from a market in which you have become the sole supplier.

      MS supplied the OS to all hardware makers except Apple and the ones it drove out of the hardware business (MS even drove IBM out of the PC hardware business due to the deception around OS/2).

      Apple supplies no-one (it is not horizontal!). Apple does not have a monopoly over mobile OS’s, for instance — that would be Google.

      So, let’s revisit your questions, a, b, c, and substitute Google for Apple. Maybe the penny will finally drop?

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      1. So Kizedek, according to your understanding, Apple could theoretically achieve >90% market share in mobile and not be a monopoly?

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         1. Were there particular problems in the MP3 Player market as far as you are concerned? Should there have been some anti-trust suits against Apple?

            Reply

            1. It could be argued that there was anti-competitive behavior with the iPod. Apple prevented other companies and user’s from using any software, other than iTunes to control their property. Still, it was not yet close to being a “computer” until the iPod Touch, and it was then that things started getting weirder.

               The popularity argument is weak. Some things can’t be abdicated. User tolerance for the anti-competitive behavior under the hypothetical high market share we are discussing does not negate anti-trust law.

            2. Totally agree. Which is why I didn’t suggest that. There is no “popularity” argument. Certainly not one that negates anti-trust law.

               “Popularity” is generally equated with marketshare, and if anyone uses “popularity” as an excuse for their actions, it is MS, Amazon and Google (or Google fans). That certainly wouldn’t make it a legitimate excuse for Apple, were Apple ever to be “popular” (which it is not), and were Apple to do something nefarious to either become popular or remain popular.

               Rather, I was suggesting that, in the absence of “popularity”, Apple relies on satisfying its end customers. That is what makes it tick. All evidence suggests it will continue to try and satisfy its customers, as it becomes increasingly popular, or less popular, and even if it attains “monopolistic levels”.

               Quite right, popularity is not a defense… but “what makes Apple tick” is an evidence that Apple goes about what it does very differently than other companies.

               Of course disgruntled parties are going to try to initiate action against Apple. Amazon was one such “aggrieved” party (ha!). Despite appeal, and regardless of the facts, Apple may well have to pay a fine brought about by that “anti-trust” action. (If so, I would suggest that Apple will actually pay real money and not, as did MS, pay off penalties in software licenses!).

               It is even true that by “aligning their interests with the consumer”, Apple may well step on the toes of developers from time to time. Apple may need to tread a fine line in order to keep their developer’s as happy as their customers. I believe they do.

               But your contention that the definition of “computer” is pertinent has little to do with it. Either you exert horizontal power across the whole industry/market (of like things, such as “smartphones”), or you don’t. Usually you do this by leveraging other products (say, Intel restricts access to its large processors if you don’t also buy its integrated chipsets, thereby harming, say, AMD — oh wait!).

               Therefore, having a vertical model certainly does mitigate a lot of this danger and a lot of the issues. You can howl all you want that “vertical control over your own platform” is the same as monopolistic abuse across a whole industry or market. But, it simply is not. The iPhone, or the iPad, is not a “market”. It just isn’t.

            3. Then that would have applied to MS as well. Can’t have it both ways.
               They strived to be “vertically integrated” in everything as well, except for maybe hardware at that time.

            4. No, Microsoft did not strive to be vertically integrated. In fact Apple’s vertical model was mocked during the time period you reference. Even today it is mostly mocked and viewed largely as the wrong approach. How can you still not understand this?

            5. MS leveraged the OS to extend to Office Suites, programming languages, internet integration, data compression, and just about anything having to do with software. They wanted to play in all aspects of software and control it. How is that not vertical integration?

            6. Because it’s horizontal. Any other questions?

            7. Your proclamations notwithstanding, you’ve not shed light on the matter.

            8. Well, more than one person has explained these concepts to you, and I think every one here has been more than generous with their time doing so. If you choose to misunderstand what is being explained to you simply because it doesn’t fit your preconceived notions, I can’t help you. As jfrutal already said, I’m out.

            9. Because I can’t pop the DVD into a slot in my head and enjoy all that “integration” — I require a …PC?

            10. Not a trick question.

         2. After reviewing the thread growing out of this post, it’s pretty evident that what you refer to as ‘vertical integration’ is not vertical integration.

            Reply

            1. I conformed to the thread’s “definition”, though I object to it.

10. I suspect you have infected a good number people who have become addicted, or come to appreciate the maxim, saying or succinct quote. My fav on health is Hippocrates on food and medicine, “Let your food be your medicine and your medicine be your food” and it has benefitted our children’s health. It underscores a lesson we want them to carry though this latest incarnation.

    The perfect maxim is like the picture and the thousand words. Sadly, in the field of tech and Apple, the foot that rests in the mouth of some analyst’s, as in the case of J.C. Dvorak, highlights a grave weakness in a chosen profession; but on the brighter side, to the grave and beyond some may live to be a delight to good humour somewhere on this literate planet.

    Upon my desktop I now have a folder, whose icon is my children’s Hippocratic maxim, to collect the little jewels that help give meaning or bring a smile to my daily adventures.
    Namaste and care,
    Mike

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11. Apple’s premium, elitist iOS strategy together with Google’s populist, everyman Android strategy co-exist so well that they have all the profits in the world-wide mobile device & software market. There is no hope for any other platform.

    Reply

12. Until such time as the critics understand that the Orchestral performance — the overall ecosystem — is worth far more than its component parts, they will never understand Apple.

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    Reply

13. Believing that the direction of Apple stock determines the value of an Apple Event is like believing that a weathervane controls the direction of the wind. ~ John R. Kirk

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    Reply

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