Apple To World: “Doomed? I Know What You Are, But What Am I?”

John Kirk / October 4th, 2013

Last week, I talked about Apple: The Splendid Failure. How Apple was viewed as a failure because they prioritized product and customer experience over profits. This week, I try to put things into perspective and demonstrate where Apple really stands in relation to their rivals. Next week, I’ll conclude by focusing on Apple’s true dilemma.

Two Tenable Business Positions

strategy101Almost all industries have two tenable positions: the differentiated high-end, and the low-cost low-end:

This is not controversial. It’s Business School 101.

The iPhone faces little threat in the differentiated high-end of the market. “(C)ounting the days until customers flee for cheap phones is silly.” – Ben Thompson

Apple’s iOS Dominates The Differentiated High End (Premium)

Life is like a dog sled team. If you ain’t the lead dog, the scenery never changes.” – Lewis Grizzard

Apple is clearly the lead sled dog and their competitor’s view hasn’t changed much since 2007. Apple dominates the differentiated high-end (premium) portion of the connected computing devices market.1

Apple’s iOS Dominates The Premium Purchasers

(T)he iPhone is more expensive than most of the phones on the market, and this shapes the kind of people who buy it. ~ Benedict Evans

“Premium device sales produce immediate benefits in the form of increased profit margins, but they also engender a number of recurring benefits.

Apple still has the customers that everyone else wants.

Owning the premium markets means having the customers who are best educated, wealthiest and most likely to buy accessories. Apple users are more educated and affluent than Android users, for example. iPhone users upgrade devices more regularly than most other mobile phone users. (T)hese users are more likely to buy accessories, and Apple has more users between the ages of 18 and 34, which is widely considered by advertisers to be the demographic that drives taste. As Forrester’s David Johnson told InformationWeek in a recent interview, Apple still has the customers that everyone else wants. ” ~ Michael Endler, Apple’s iPhone Battle Plan: 6 Factors

The public is the only critic whose opinion is worth anything at all. ~ Mark Twain

Apple’s iOS Dominates The Premium Developers

“Premium customers attract premium developers. Despite Android’s massive advantage in global market share, surveys regularly show that iOS is still developers’ biggest priority. Why? Some of the imbalance has to do with logistics — Android is much more fragmented than iOS. But here’s a bigger reason: Apple’s customers are the ones spending money.” ~ Michael Endler, Apple’s iPhone Battle Plan: 6 Factors

Apple Doing What Apple Does Best

Price is what you pay. Value is what you get. ~ Warren Buffett

Apple’s premium strategy focuses on their strengths.

  • Apple is NOT competing on features, they’re competing on benefits;
  • Apple is NOT competing on hardware alone, they’re bundling hardware, software and services into a single ecosystem that their competitors cannot match;
  • Apple is NOT selling you a phone or a tablet, they’re selling you an experience.
  • Apple is NOT competing on price, they’re competing on value.

The quality will remain when the price is forgotten. ~ Henry Royce

If you disagree, well, Apple won’t sell you their iPhone.

What we want to do is make a really great product and provide a great experience. And I’m sure we’ll get enough customers that want to buy that. ~ Tim Cook

What’s Wrong With Being Mercedes-Benz, BMW or Disney World?

“Apple’s market share is bigger than BMW’s or Mercedes’s or Porsche’s in the automotive market. What’s wrong with being BMW or Mercedes?” ~ Steve Jobs

Apple is avoiding a market share fight, which is ultimately about price and compromise. Instead, they’re focusing on premium products, premium purchasers, premium developers and premium profits.

Pricing to gain market share simply for the sake of market share is a chump’s game. ~ Bill Shamblin

Apple has solidified its hold on the Mercedes-Benz/BMW portion of the U.S., European and Asian markets.

“Wait, wait, wait!”, I hear you say. “There IS no Mercedes-Benz/BMW Asian market.”

Bite your tongue.

Apple’s products are out-of-reach of the vast majority of Asian consumers but that doesn’t mean there is no market for them. Apple’s products are aspirational. And there are a LOT of people who can afford them.

Saying stupid things like “the iPhone 5C is equivalent to the average monthly salary in China” belies a fundamental misunderstanding of China, its inequality, and its sheer size. ~ Ben Thompson

Mercedes Benz and BMW dominate motor vehicle profits with little market share. Disney World dominates Amusement Park profits with relatively little market share, too. No one ever says that they’re doomed or that they need to create a lower priced product in order to attract larger market share.

What’s wrong with being the Mercedes-Benz, the BMW, or the Disney World of smart connected devices?

Presuming all decisions are based on price is the easiest way to mispredict the future. ~ Ben Thompson (@monkbent)

The Cult Of Market Share And The Mostly Misunderstood Network-Effect

“Aha!”, cry the Naysaysers, “There’s the fatal flaw in your argument. It’s okay for Mercedes-Benz, BMW or Disney World to have small market share, but the iPhone and the iPad are built upon Platforms and Platforms play by a different set of rules.”

Third-party companies are building apps and services to run on smartphone and tablet platforms. These apps and services, in turn, are making the platforms more valuable. Consumers are standardizing their lives around the apps and services that run on smartphone and tablet platforms. Because of these “network effects,” in platform markets, dominant market share is huge competitive advantage. ~ Henry Blodget

“At a certain point, growth becomes more important than absolute levels, so even if Apple is currently sending more money to developers than Android, if Android’s growth is faster than Apple’s, developers will bail and go to Google Play.” ~ Tero Kuittinen, analyst at Alekstra

Yeah, right. Almost all industries have two tenable positions: the differentiated high-end, and the low-cost low-end – but let’s carve out a non-existant exception for the iPhone. Sheesh.

The Counter-Argument

The Math Is All Wrong

You can’t simply take two things of unequal value, divide them into two separate piles, total the piles and declare the numerically superior pile to be the more valuable.

Question #1: Pile “A” has 10% of the items and pile “B” has 90%. Which pile is more valuable?

Answer #1: If you answered Pile “B”, congratulations, you’re a small child. Run along, now, and go play with a nice Unicorn.

If you answered “There’s no way to know which pile is more valuable”, congratulations, you have a lick of common sense.

Question #2: Pile “A” has 10% of the items and consists of ten, one-hundred dollar bills ($1,000). Pile “B” has 90% of the items and consists of 90 dimes ($9.00). Which pile is more valuable?

Answer #2: If you hesitated, even for a moment, to pick pile “A”, congratulations, you may have what it takes to become a TV talking head who evaluates Apple for a living. Run along, now, and go play with a nice Unicorn. Everyone else is qualified to read on.

The Comparison Is All Wrong

  • I could argue that not all market share is alike – that some customers are move valuable than other customers (See: The Math Is All Wrong, above).
  • I could argue that “Android” is not really a single entity and that it shouldn’t be totaled all together – that Android is many different operating system versions, forked user interfaces, innumerable screen sizes and hardware configurations, etc.
  • I could argue that things like customer satisfaction and ecosystem matter more than sheer quantity.
  • I could argue that market share doesn’t matter if the unit ends up in a drawer or isn’t isn’t interacting with the platform.

Yeah, I could argue all of that. And it’s all true, too. But I don’t really need it to prove my case, so let’s set all that aside.

The Naysayers Are All Wrong

Remember, it doesn’t matter whether you win or lose; what matters is whether I win or lose. ~ Darrin Weinberg

Apple doesn’t give a damn how much market share you have so long as their business is viable and profitable.

The “market-share-uber-alles” theory is like a marshmallow — easy to chew, but hard to swallow. If market share is King, then why are former market share leaders Nokia and Blackberry such Jokers?

Turns out pricing a phone at cost (i.e. the Lumia 520) gets you share! It’s the worst kind of share, but, yay! ~ Ben Thompson (@monkbent)

Focusing on market share instead of profits is like trying to make your car go faster by honking on the horn. (HINT: It’s going to take something more.)

Thunder is good, thunder is impressive; but it is lightning that does the work. ~ Mark Twain

Market share is good, market share is impressive; but it is profit that does the work.

Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves.” ~ Albert Einstein

Any company who can drive market share while simultaneously pleasing their customer is simply not giving their customer the attention they deserve.

Technology Tourettes

Some Pundits have “Technology Tourettes.” They keep shouting out inappropriate things like “open” and “market share” and “history repeats” at all the wrong times and in all the wrong places. ~ John R. Kirk2

“But, but, but…” the afflicted stammer, “…history is repeating. PC vs. Mac. Windowzzzzzze!”

Apple’s approach in mobile ignores history, specifically the Mac/Windows wars of the 1990s, which Apple clearly lost. In this scenario, Android is Microsoft’s Windows—available to all kinds of manufacturers—while iOS is on only Apple devices.~ Sam Grobart, Bloomberg

Yeah, yeah, yeah, that’s all very nice, but it’s also all very irrelevant.

“Those who do not remember the past are condemned to repeat it.”-George Santayana

Maybe so, but those who only THINK they remember the past are condemned to misinterpret it.

“People that keep talking about smartphones evolving like PCs are just so clueless. … In actuality, the only lessons that can be drawn is that most low-end Android has zero lock-in. As expected. ~ Ben Thompson (@monkbent)

Tech history is not repeating itself, tech historians are repeating each other — and they’ve got it all wrong.

“God cannot alter the past, though historians can.”-Samuel Butler

Two Big Differences

I think we can agree. The past is over. ~ G. W. Bush

So what’s different this time around? Well, practically everything. But let’s just focus on two major changes that have occurred over the past twenty years: Platform and Scale.

Study history, not historians.

Platform

As a child my family’s menu consisted of two choices: take it, or leave it.”~ Buddy Hackett

When computers were in their adolescence, the Operating System menu consisted of two choices: Windows or Mac. They really weren’t compatible with one another so you had to make a choice. As it turned out, most chose Windows.

Is that true today with iOS and Android? Well let’s see. Whether you choose iOS or Android, can you still:

— Make phone calls?
— Do email?
— send texts?
— Transfer files?
— Surf the Internet?
— Make online purchases?
— Listen to music and watch videos?

You bet you can. Both iOS and Android are almost entirely interchangeable with one another because they both run on the same platform — the Internet.

The Internet is a gateway to get on the Net. ~ Bob Dole, former senator

The REAL platform is the Internet. And both iOS and Android have equal access.

Switching costs between mobile OSes are negligible. ~ iSky (@skyxi)

Seen in this light, let’s re-examine Blodget’s “Android-Must-Win”, thesis again:

Consumers are standardizing their lives around the apps and services that run on smartphone and tablet platforms.

Wrong. Customers are standardizing their lives around the Internet. iOS Apps and Android Apps are incompatible in the same way that Diesel fueled cars are incompatible from Petroleum based cars. The engines that power the vehicles are very different, but they’re more alike than unalike (four wheels, similar size, run on roads, fuel at gas stations, etc.). Similarly, the engines that power iOS and Android are very different, but the Infrastructure that they both run on is one and the same.

Choosing between iOS and Android is not like choosing between a Mac and a PC. It’s like choosing between a BMW and a Ford.

Scale

scale: noun|the relative size or extent of something.

Most industry observers have not yet begun to grasp the difference in scale between the PC market of yesterday and the mobile market of today. The mobile market is much, much, much bigger. When compared with one another, PCs look like a baby next to a giant.

(T)hese markets are so big, and there’s so many people that care and want a great experience from their phone or their tablet, that Apple can have a really good business. A really good business. ~ Tim Cook

There has been a fundamental change in the scale of the computing industry. In 2012:

350 million PCs sold.

1.7 billion phone sold.

1.6 billion PCs in use. 

3.2 billion mobile users.

PCs replaced every 4 or 5 (or 6 or 7) years

Phones replaced every 2 years.

PCs shared.

Phones, one per person.

(E)verybody in the world is going to have a smartphone. There are a lot of people that maybe worry that the market is so big now it can’t get any bigger, but it’s going to get a lot bigger. ~ Tim Cook

Take a step back and re-look at the sheer size of today’s mobile market vs. yesterday’s PC market. We are going from a world where:

  • 350 million PCs were sold every year to a world where 2 billion smartphones are sold every year.
  • Zero iOS devices existed to a world where there are 700 million iOS devices, and counting.
  • large

  • Zero Tablets existed to a world where Tablet growth is even MORE rapid than was Smart Phone growth.
  • slide-44-638-1

  • Zero tablets to a market that is going to surpass the sales of all PCs.
  • (Just to put things in perspective,) more tablets are sold each QUARTER than streaming TV boxes have been sold EVER. ~ Benedict Evans (@BenedictEvans)

  • The niche player in mobile (Apple) is closing on the dominant player in PCs (Microsoft).
  • chart919

  • Consumers used to “upgrade” to a new operating system by buying a new computer to a world where 200 million users upgraded to iOS 7 in FIVE DAYS.

The idea that Apple is vulnerable to the low end is a relic of an idea. It goes back to the Mac of the 1990s, at a time when the world-wide computing market was orders of magnitude smaller than today and where purchasing and development decisions centralized in the hands of a few large companies. And even when looking at that competition, the Mac somehow managed to survive.

That’s not likely to be the case for those who found themselves in competition with the Mac in its pocketable re-incarnation. ~ Horace Dediu, Asymco

Perspective: The iPhone Stands Alone

You say that iOS is a niche that’s going to be overwhelmed by Android? I don’t think so.

Just to put things in perspective, the iPhone – a product that did not exist in May 2007 – is, by itself:

  • Bigger than 474 companies on the Standard & Poor’s 500-stock index
  • Bigger than 21 of the 30 component companies in the Dow Jones industrial average.
  • Bigger than Microsoft and Amazon.
  • Bigger than Coca-Cola and McDonalds.

$AAPL 9M iPhone launch generated >$5.4 B in revenue in 3 days, more than $MSFT Surface, $GOOG Motorola, $AMZN Kindle and $5B put together. ~ Daniel Eran Dilger (@DanielEran)

1 out of every 800 people ON THE PLANET ordered an iPhone over a single weekend in September, 2013. Does that sound niche to you?

Apple’s revenue from iPhones in the launch weekend was around double its total revenue in the quarter Windows 95 was launched. ~ Benedict Evans (@BenedictEvans)

Apple is so much larger than Microsoft, that the iPhone — by itself — is larger than all of Microsoft and Apple — sans iPhone — is STILL larger than all of Microsoft.

Chart 2

That’s right. If the iPhone disappeared from the face of the earth, Apple would STILL be bigger than all of Microsoft.

Apple Is Doomed…Not!

I have never made but one prayer to God, a very short one: ‘O Lord make my (critics) ridiculous.’ And God granted it. ~ Voltaire

You say Apple is doomed because the iPhone is niche? Are you kidding me?

So many companies wish they are as doomed as Apple. ~ ßen ßajarin (@BenBajarin)

If the iPhone is niche, then what is the Kindle Fire, the Surface, McDonalds, Coca-Cola, Microsoft, the S&P 500 and the Dow?

Apple Now Holds 10% of All Corporate Cash ~ Moody’s

The whole debate is so silly, so childish, that sometimes I think that Apple would be well within their rights to simply say:

“‘Doomed?’ I know what you are, but what am I?”

I like companies who have a future and women who have a past.

Conclusion

“A conclusion is the place where you got tired of thinking.” ~ attributed to Arthur McBride Bloch

Question: Does Apple have enough market share to control its destiny?

Weather forecast for tonight: dark. ~ George Carlin

Some things are easy to predict. Some things are not.

Conversation would be vastly improved by the constant use of four simple words: I do not know. ~ Andre Maurois

The truth is, I don’t know. No one knows for sure. But one thing is for sure — Apple is betting the company on it.

Never tell me the odds. ~ Han Solo, Star Wars

Question: How much time does Apple have?

The iPhone is Apple’s Windows. It’s a moneymaker, par excellence. The only question is whether the proceeds from the iPhone will give Apple enough time to come up with a new profit stream.

Microsoft milked Office & Windows for 25 years without another big hit. Adwords is 13 years old. iOS is only 6 years old. ~ Benedict Evans (@BenedictEvans)

Based on the above, I’d say Apple will be just fine.

The problem is not that there are problems. The problem is expecting otherwise and thinking that having problems is a problem. ~ Theodore Rubin

Post Script:

I have heard your views. They do not harmonize with mine. The decision is taken unanimously. ~ Charles de Gaulle

Next week, I’ll conclude the series with: “Apple’s True Dilemma.” Until then…

There are two kinds of people in the world, those who need closure

  1. How much premium ground has the iPhone lost? Based on an Aug. 5 note by investment research firm Consumer and Intelligence Research Partners (CIRP), Apple’s still holding its own; over the last year, 78% of iPhone users upgraded to another iPhone, but only 67% of Android users upgraded to another Android device.

    In addition to better retaining customers overall, Apple also appears to have had an edge among high-end shoppers. According to CIRP, those buying a smartphone for the first time preferred Android to iOS by a wide margin, 56% to 35%. Those upgrading from another smartphone, however, preferred iOS 49% to 46%. First-time buyers tend to be less affluent, and to go for budget devices. Longtime smartphone owners tend to be more affluent, and to maintain or improve the luxury of their devices.

    An Aug. 12 CIRP note added more context. It found that whereas 20% of Apple’s customers come from Android, only 7% of Samsung’s customers come from iOS. This is despite the fact that Samsung, according to IDC, now represents half of all Android shipments. Samsung users were also less likely than iPhone users to upgrade within the same brand. ~ Michael Endler, Apple’s iPhone Battle Plan: 6 Factors []
  2. I often quote myself; it adds spice to my conversation. ~ George Bernard Shaw []

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?
  • Good article. Thanks.

  • Ronald Milan

    Well done.

  • rationalchrist

    To the phone pundits, they forget iPhone is not a phone, it is a personal computer with one or more phone apps on it.

    To the PC pundits, they forget iPhone is not just a computer, it is a personal one. When things get personal, people value them more than just features, GHz, etc.

    Compared MAC to PC, whose shoe you rather be in now: HP/Dell etc or Apple? Apple has 90% of >$1000 PC market, 45~50% profit share of PC market with ~10% market share. Apple’s iPhone has more or less ~30% market share (depended on how you calculate).

    And Apple recovery of PC market started from 1998 with iMac cube, way before iPhone halo effect kicking in. Design, style, and taste matter, pundits. If you don’t have taste, don’t drag other down with your tasteless bashing.

    • TheEternalEmperor

      That’s a great point. Tech, specifically, Apple seems unique in that it is the only item where the cost card is played. Let’s put it this way: We can all drive the cheapest used cars, shop at Wal-mart, live in the smallest home possible and eat only store brands.

      We, collectively, don’t. Yet I never hear questions like:

      Why don’t you shop at a thrift store? Jeans are jeans.
      Why don’t you drink Pabst Blue Ribbon or Schlitz? Beer is beer.
      Why don’t you drive a nice used Civic. A car is a car.
      Hey? That bike…that’s not a Huffy? You got more money than brains!

    • Anders CT

      I think the comparison to the car industry misses the point a little bit: The counter-argument would be that the Corolla, Civic, Volkswagen, and Ford T made a much larger impact on the car industry than the Lexuses and Maseratis. Secondly, there is little networking effect with cars.

      Now I personally think that there is a lot less network effect with smartphones than there was on the desktop in the golden age of the Windows PC. Most of the current platforms with high networking effects are cloud services like Dropbox, Instagram, Whatsapp, Facebook, Skype and so on. And they are generally available on all OS’es. So I really dont buy the “it’s happening again like last time with Mac and Windows-PC” narrative. But it will be interesting to see what happens when Android and iOS becomes PC-operating systems.

      • rationalchrist

        So in another word, OS is not the platform, Internet and its connectivity is the platform. Once one has Internet via cellar/wifi/etc, he can have all the services he wants regardless OS. OS becomes irrelevant to services, but more relevant to personal taste.

        • benbajarin

          That may not be entirely true. The OS may maintain quite a bit of relevance even in a cloud based services world. In an integrated approach the services are better when integrated. Thus the OS becomes the integrator or the glue to tightly integrate said services.

          More on this topic in my column on Monday.

        • Anders CT

          Well, for some usecases yes. Facebook and Netflix invests heavily in aquiring a userbase and developing the backend. Once that investment is made, it makes little sense not to support every platform out there with a cheap client. That is probably not the case with things like CAD-programs, Audio-editors, finite-state simulators etc. But people rarely use that kind of software on their phones.

      • Space Gorilla

        I’m not sure Android can ever be a PC OS in the same way iOS is. Apple is the only vendor that provides me with a complete computing solution, from desktop to pocket, all within a curated ecosystem, all well supported, with everything working together very nicely. That’s a total integrated experience, and very tough to duplicate.

        I would also argue iOS already is a PC OS, has been for quite a while. That’s a key point many analysts miss.

        • benbajarin

          Google’s vision is that the computer is in the cloud. So they are not incentivized to focus on handheld computing. Also anytime you use an App on Android you are not browsing the web or using Google services. So why should they care about anyones apps but their own?

          This is why Google’s vision of computing is so different than Apple’s and Microsofts. Honestly I’m not sure Google’s is the one that should win but should rather just be a part of the experience.

          • Anders CT

            I don’t know about that. They made Android didn’t they?

            At any rate, it matters less now what Google thinks or wishes. They are less the caption of that ship than an important passenger. Or as you say, they are just a part of the experience.

        • Anders CT

          Android is already a PC-OS. I’m writing this on an Android laptop.

          • Space Gorilla

            Hmm, so why did you write “it will be interesting to see what happens when Android and iOS becomes PC-operating systems”?

            I agree that Android is capable of covering many PC use cases, but we can see from usage data that the vast majority of Android devices aren’t being used that way. And most Android devices are smartphones. Android needs to break out of the smartphone market *and* needs to increase engagement.

          • Anders CT

            Jelly bean needs a bit of polish to work fully on the desktop: Better task-menu, splitscreen and windowed multitasking, power management profiles for noteboks, sudo privileges for debuggers and IDE’s, better x86 64bit support, native printer support, and many other little details. Many of these things are already in the source, they just needs to be exposed in a sensible manner. I think we will see much of it in 4.4

            But you can do quite complex things on an Android laptop already. Vector graphics, circuit simulation, programming etc.

          • Space Gorilla

            Setting aside that what you’re describing is actually a lot of work and not “a bit of polish”, people have to start using Android devices in this fashion, and that isn’t happening in large enough numbers to drive a computing platform. Plus where is your support going to come from? Google has no financial incentive, and the vendor that made the device is already operating on slim margins. For Android to become a robust computing platform a lot more than “a bit of polish” has to happen.

          • Anders CT

            Well then let me put i like this: That bit of polish has already been done, and will probably be released shortly in 4.4. If you read the Android source-code, there are support for things like trackballs, different kinds of hardware keyboards, drag and drop between windows, multi-monitor support, trackpad gestures, and all kinds of stuff that makes more sense in a desktop setting than on a phone.

            Moreover, every major PC maker, Acer, Asus, HP, Dell, Samsung etc are beginning to push Android laptops, tablets and convertibles. And yes, they operate on ultra-slim margins. That is one of the reasons they are seeking alternatives to windows.

            As for the adoption-rate and engangement you are completely right. There are many ifs and buts, including Googles commitment. So I’m not saying it is a done deal, I’m just saying that it looks to me, that Android will make a desktop debut as a clamshell OS. And iOS also.

          • Space Gorilla

            I think we’re mostly in agreement, although I do have questions about the technical ‘underpinnings’ of Android and whether they are robust enough. The two main problems I see going forward for Android are 1. Google’s incentive to drive it, and 2. Getting users engaged. Manufacturers will certainly make all sorts of Android devices, but will those devices engage users? I have my doubts.

      • benbajarin

        I don’t either and I’ve written about my disbelief that this narrative has already been written at length.

    • klahanas

      If you consider a tablet or smartphone to be a PC (notice the brand independence), then what would you consider the traditional general purpose PC? They clearly are not the same.

      -The PC is directly programmable, in native code, right on the machine itself.
      -You actually need a PC, or other general purpose computer, to program a smartphone or tablet.
      -The PC is under complete control of it’s owner. No App approval.

      I don’t believe that this is hardware based, rather, it’s implementation based. Today’s smartphones and tablets are intentionally limited, by design, not by technology. A more apt term is appliance computer, since it only runs pre-canned programs.

      • Glaurung-Quena

        “A more apt term is appliance computer, since it only runs pre-canned programs.”

        And 99.99% of all desktop and laptop computers are already used as “appliance computers.” Guess what? The only people in the world who aren’t running “pre-canned programs” are programmers.

        • klahanas

          Oh I agree, most people use PC’s as if they were appliance computers. If I could correct one aspect, however. People do hire programmers to write stuff for them, or would like to use any program someone wrote, without needing anyone else’s permission.

          Still, my original question remains. If a tablet is a PC, what would you then call the PC. They ARE fundamentally different, and I showed a couple of facts as to why.

        • Space Gorilla

          The form factor is different, but they’re both PCs when you view them through the lens of ‘jobs to be done’. My iPad 2 in a ZAGGFolio has replaced my MacBook Pro for business/travel use. The characteristics you list to show the differences between a tablet and a PC are meaningless to almost all users. Users care about what they can do with the device, and for almost everyone an appliance is what they need. The abstraction and curation of the computer is actually helpful for most users, it makes the device more attractive, not less. This is something nerds do not understand.

          Should I make fun of you because all you did with your fridge or TV was buy it and plug it in? Of course not. Those things need to be simple appliances for almost everyone. Computing is moving in this direction because it is what users want/need. You’ll get used to it, just as you are used to buying a car that you just start and drive, a fridge you just plug in, a TV you just turn on, and so on.

          EDIT: This reply was of course meant for klahanas, it appears to have ended up replying to the wrong person.

          • klahanas

            Thanks for your response, My question is more from a computer science, not a marketing point of view. It’s not intended to make fun of anybody, and it’s brand neutral. General purpose computers remain important, Very important. If we “elevate” the tablet to the technical status of a general purpose computer, then what will we call general purpose computers?

            Further, like I said, it’s about implementation. My car would never only drive on pre-approved road with routes pre-installed from another device. It can go anywhere. Some roads are great, some bumpy, some even dangerous. We have a real world analogue for this. Is a streetcar a bus?

          • Space Gorilla

            You seem to be going out of your way to prove that certain appliance computers aren’t capable enough because they are controlled or limited. Back in the 80s the nerds always blathered on about graphical user interfaces being ‘for babies’, a GUI clearly wasn’t powerful enough for real work, any computer that used a GUI wasn’t a real computer. The general purpose PC you use today was once considered a toy for newbies, it was the fridge, the streetcar. You’re making the same mistake now.

          • klahanas

            You’re far too defensive. I’m simply asking for a distinction. The PC in general was also called a toy computer by the mainframe guys, but the distinction between a mainframe and a PC is clear, and remains. Statements like “Tablets are PC’s” are trying to artificially blur the lines, when they are clearly distinct.

          • Space Gorilla

            No, the right question is “Will a tablet replace a PC for your needs and wants?” And the answer is clearly yes. Surely you understand it is only a matter of time before a device like the iPad meets or exceeds all the items on your list re: what a real PC is.

            BTW, it wasn’t mainframe guys complaining about the graphical user interface, it was pretty much all nerds who didn’t use a GUI at the time (and it was mostly a reaction to the original Mac). They couldn’t see that the GUI would become more than powerful enough to meet their needs and wants. They judged it by what it was capable of right then (but even that view was heavily biased against the GUI), instead of looking ahead. As I said, you’re making that same mistake right now. The lines are not distinct, we’re in a transition period.

          • klahanas

            “No, the right question is “Will a tablet replace a PC for your needs and wants?” And the answer is clearly yes.”

            a) So you agree the question is not whether a tablet is a PC, it seems that you agree that it’s not. If so, that’s the only point I was making
            b) If it meets the items on my list, then I too agree it would be a PC. Right now it’s not, and the only one’s I see working towards that goal right now are M$ and Intel and their OEMs. Ubuntu is up to something too, but it’s not shipping.

            My mainframe comment was an additional fact of supporting a distinction. As far as to whether a tablet will become my main machine, it may happen, one day. Right now it’s a couch/bedtime machine. What I can assure you though, is that my main machine in the future will be strictly under my personal control. It may even have to be Linux, by necessity. I chose to be by own IT department.

          • Space Gorilla

            I chose not to need an IT department, which is why I bought the iPad 2, and it has replaced my MacBook Pro for all business and travel use, since 2011. It works just fine as a PC for me. You reveal your bias when you say a tablet is a “couch/bedtime machine”. That isn’t even close to the truth of what the iPad can do, right now. Maybe that’s all you’ve ever used a tablet for, which is fine, but once again you are making the classic nerd mistake of thinking your experience = everyone’s experience.

          • klahanas

            You do have an IT department. Apple.
            My bias? Yes I have a bias. My main machine is a self built hexacore i7, yada, yada, yada. I’m not a gamer. I also have a Mac mini server. Since 2008 my family has owned 4 MacBook Pro’s (one of them was mine), but we’ve moved out of the fold. We’ve also had every iPhone, ever, up to the 5.
            I made no mistake, I spoke only for myself and no one else.

          • Space Gorilla

            Please read more carefully: “I chose not to *need* an IT department”. And you did make a mistake and speak for others when you said “Right now it’s a couch/bedtime machine.” If you were speaking only for yourself you would have written “Right now, *for me*, it’s a couch/bedtime machine.”

            Here’s my set up right now, an iMac and an iPad 2 (we have many more Macs, iPads, and iPhones in the house, but I only need two computers personally). I have no idea what the technical specs are and I don’t care. I have more important things to do with my time. Some nerd on some other thread asked me what I thought about Thunderbolt something or other on the upcoming Mac Pro. My answer: As long as it does what I need why do I care about the details? I pay Apple to worry about the details. My time is valuable. Can it do the job I need? Yes. That’s all I need to know. Nerds just do not get that.

          • klahanas

            You do *need* an IT department, and Apple fills that need for you. Who specs out your machine? Who runs the only store you can get applications and media from? Who decides what you can or cannot run (and sometimes read)? Who protects you from malware? These are all IT functions, and Apple provides them for you.

            Mea Culpa. Yes, for me, it’s a couch/bedtime machine. But, who else would I be speaking for?

            It’s fine if you don’t care about technical specs, it’s also fine if you don’t care about a lot of other things too. It’s the geeks who keep them honest. (Sort of). This applies to all companies, not just Apple.

          • Space Gorilla

            Geeks are a vocal minority with little real power. Thanks goodness for that, we’d never make progress. “But GUIs are bad!”, “But I need a floppy drive!”, “But tablets can’t do X, Y, Z!” And so on.

          • klahanas

            What do you care about someone other than you needing a floppy drive? Don’t like it? Don’t use it. I think forbidding is more egregious. Like not having the ability to watch Blu-Ray on a Mac, even as an option.

          • Space Gorilla

            Come now, as a percentage of the total, jailbreaking is quite small. Strong? No, ‘vocal minority’ is more accurate.

  • steve_webb

    When I was growing up there was a saying: “A bird in the hand is worth two in the bush.” Relating that to smartphone buyers one might think, “Yes, Apple has a bird well in hand, but there are more than two birds in the bush. How many birds need to be in the bush to make risking the bird in hand worthwhile?”

    The debate can be re-phrased: “Apple has a well honed system for catching mallard ducks, but the pigeons are getting away. How many pigeons does it take to equal a mallard duck?”

  • stefnagel

    Ha. There are, really, only two kinds of people in the world: Those who think there are two kinds of people and those who don’t.

    • immovableobject

      There are 10 kinds of people… those who know binary and those that don’t.

      • FalKirk

        There are three kinds of people. Those who are good at math and those who aren’t.

  • Space Gorilla

    I think a lot of the anti-Apple ‘dooooooomed’ nonsense stems from a vocal minority of angry nerds. Apple’s approach to computing wasn’t supposed to work, let alone win. Oh, hear the cry of the nerd: “Apple devices are toys for babies, not meant for real users or real work!”

    • TheEternalEmperor

      And yet most of those tecno-dilettantes do actually DO anything with Android’s opens but install widgets and themes.

      I’ve yet to hear of even one truly interesting use of Android. You’d think one so-called hardcore Android user would have his own personal version of Android that encrypts everything, disables all ads and tracking or at least used his or her own face for a launcher.

      • Space Gorilla

        What is also interesting is that the actual ‘real users’, tend to use Apple gear. All the comp sci grads I work with are Apple users, but they have Masters degrees in programming, they’re not hobbyist nerds. I think the nerds that are angry about Apple’s success are more often hobbyists, people who defined a large part of their identity as ‘good with computers’, and they aren’t needed anymore, not really, their importance has dramatically decreased. It’s only human nature to be angry about that. There’s also human ego at work, so many people chose Windows, and now it is becoming obvious that was a poor choice. Nobody wants to be reminded that they made a poor choice or the wrong choice, it’s uncomfortable.

        • TheEternalEmperor

          Yep. My BS is in CompSci.

      • klahanas

        What do they do? They do what they want. Who are we to judge? Widgets and Themes are but two things, but that alone is sufficient to many.

  • paperbirch

    I love reading your posts John.
    The interesting quotes you use to punctuate your points makes your writing unique, and very humorous.
    It makes reading blogs more fun. I’ve even got my wife reading them now.
    Thanks.

    • FalKirk

      ‘I’ve even got my wife reading them now.’ – paperbirch

      Could there be a higher compliment? 🙂

  • JoeS4

    More bizarre Apple-worship. Why invest so much time and energy into blindly worshiping a corporation? They’re a business that makes products. Consumers benefit from competition. It is clear that Steve Jobs was the primary driver of Apple’s success. It is clear that with him gone, they are floundering. The iPhone is falling far behind the rest of the market. It offers slightly better construction and slightly better basic operation than the competition, but it is now dwarfed when it comes to features. They have not merely failed to innovate, they have failed to keep up with the market. When you buy an iPhone, you are now paying more for less than you get with most Android phones.

    That’s not to mention the horrendous design change of iOS7, that is virtually guaranteed to start whittling their market down to teenage girls.

    • Anders CT

      iOS7 is a great update. There simply are a ton of improvements to the framework. I’m looking forward to KitKat too 🙂

    • FalKirk

      ‘Why invest so much time and energy into blindly worshiping a corporation?”

      Why invest so much time in responding to that which you declare unimportant? Methinks thou doth protest too much (both figuratively and literally).

      • JoeS4

        Compare the length of my comment to the length of your article and I think it’s hard to draw an analogy. I owned an iPhone (4) until a few weeks ago. I have nothing against Apple inherently, but I find the way some people idolize the company very strange, and frankly annoying. I strongly dislike the aesthetics of iOS7, and once I started shopping for a new phone, there was no question it would not be a 5s/c. Screen size and resolution alone would have been enough, then you add in the cameras, etc that are out there – long story short, I got a Samsung Galaxy S4. I would get another iPhone if they matched the specs, and gave people customization options beyond “My Little Pony”. Like I said, they aren’t just failing to reinvent the wheel, they’re failing to keep up.

        • TheEternalEmperor

          So move on. I like iOS and think your taste sucks. Now what?
          Enjoy “air gesture.”

          • JoeS4

            The smartphone market is starting to look like a repeat of the PC market. The primary motivator of Microsoft’s success wasn’t Windows vs. Mac OS. It was the PC’s more numerous and affordable hardware and software options vs Apple’s one-size-fits all computers.

            The Android market has eclipsed the iPhone for the same reasons, and now Apple is falling behind, without Steve Jobs. It’s basically an exact repeat of history from 20 years ago.

            Phones and tablets are starting to more and more resemble PCs and do the same things. It’s not as new as it looks. Microsoft could even make a comeback if they recognize the familiarity of the market, and confront Android on its own terms. Synergy with Windows PCs could be the thing that gets Windows onto phones and tablets, rather than trying to build their hardware.

          • Space Gorilla

            I’m not sure you should use the words “productivity” and “Windows” in the same sentence.

          • rationalchrist

            Let’s for a moment assume your ranting about phone market looking like a repeat of the PC market is true. But what PC market? The PC market which Apple has 90% market share of >$1000 PC, and 40~50% profit share with only tiny ~10% market share is not a bad place to be. How about you just ask IBM who wisely sold PC division years ago, HP who tried hard to get out of PC market but can’t, Dell who has to go private, Asus, Acer, etc what position they rather be now? In three to five years, look for Microsoft/Intel announcing 40% staff cut, just like Blackberry and Nokia. You hear here first.

          • JoeS4

            That was not remotely a rant. I ranted slightly about the new iPhones and iOS, because I owned one and didn’t particularly want to switch, but Apple let me down.

          • TheEternalEmperor

            Not is not even close to being an exact repeat. Not even close. But if you can’t see that, then we don’t have much to talk about.

  • Defendor

    I always like reading all the quotes in these postings. My favorite might be this.

    “The quality will remain when the price is forgotten”

    I never understand why people will buy no name crappy products to save a few bucks. You save a few bucks today and spend potentially years being annoyed. Spend a few more bucks and get something you will enjoy using for years.

    I agree with most of your post, but I don’t agree that the only platform is the internet. The app ecosystem is vital part of any platform and it is listed as a weakness in almost any tablet review, that isn’t an iPad, which has the most robust app ecosystem.

    • FalKirk

      “I don’t agree that the only platform is the internet.” – Defedor

      I’m not saying that the Internet is the only platform. However, I am saying that it is the primary platform and that iOS and Android are sub-platforms, beneath it. Switching costs between these two sub-platforms are very low.

      • Defendor

        Switching costs are lower because app cost is lower but IMO the same mechanism is at play. Once a user has a bunch of apps that he likes on a platform that would require repurchase, or don’t have good equivalents the cost is higher to them.

  • melci

    Why are pundits so fixated on quarterly “smartphone” market share figures? If you are going to compare platforms, ignoring half the devices that make up that platform is lunacy.

    iOS is bigger than just the iPhone. With an installed base of 700 million iOS devices, iOS is 70% the size of Android’s 1 billion devices.

    However, in terms of actual active app-running devices, it is even closer at 510 million iOS vs 564 million Android according to Flurry Analytics. That puts iOS at 90% the size of the active Android platform and half a billion of the world’s total population.

    In other words, Apple has Mercedes size margins and user demographics, but close to half the total active installed base share – equivalent to GM, VW, Toyota, Hyundai and Ford put together in terms of the car analogy.

    In terms of growth, Apple sold 206 million iOS devices last year up from 134 million the year before – hardly the hallmark of a platform in trouble.

    These are the important facts that analysts conveniently forget.

  • John Milan

    I try reading your columns but each quote you’re inserting makes it difficult; Like a context switch every couple sentences. There are so many messages from others that it’s obscuring yours.

    • FalKirk

      Thank you for the feedback. Some people seem to love the quotes, others – like you – find them distracting.

      I’m going to keep the quotes because they often say what I mean better than I could, but I’m going to try to pull back and use them less often.

      • Dear FalKirk, i followed your insightful comments for years. I just started a blog about Apple, Technology and Consulting that will accompany a new business i build right now. Is it possible for you to give me a one-time critical insight on my writing style, if you want on an unpublished article? Thanks in advance! Markus

  • peter

    For a long time I thought that iOS vs would be a replay of Mac vs Windows. I have slowly changed my view. A couple of reasons:
    –As noted in the article, the mobile market is orders of magnitude bigger than PCs were circa 1990. That also means that platforms with 20% market share can support long-tail apps;
    –The source of stickiness appears to have been changing. Both data migration issues and software training caused quite a lot of stickiness. That is still the case for PCs (moving your law firm’s staff away from MS Office and redoing all form letters/reports is hard), but consumers seem to be far less bothered by this in mobile;
    –The persistence of premium pricing is common in consumer goods (mobile phones), it even exists for products that are largely commoditised;
    –Microsoft got a big lift out of predatory pricing practices quite early on. iOS and Android have no price, so this is not happening this time;
    –In the PC market, two component manufacturers (Microsoft and Intel) we’re able to capture the bulk of the industry’s profit. In mobile this just has not happened.

    Having said all of this, I still think network effects greatly matter because they impose a minimum viability threshold on any platform. Using the car metaphor, if BMW and Mercedes required some special European fuel, then they would always need to be mindful about the economics of the petrol stations carrying that fuel. In other words, the financial health of iOS developers should be of concern to Apple. Their developers can get quite a lot of lift from an increased iOS market share, provided that those additional users spend the same way as the current user base Horace Dediu likes to note that the iPhone is a good sales person for data service, but it is also an excellent sales person for apps.

    • FalKirk

      First, let me say that this is a very well thought out comment and that I’m in complete agreement with almost all of it.

      “if BMW and Mercedes required some special European fuel, then they would always need to be mindful about the economics of the petrol stations carrying that fuel”

      Diesel IS a special fuel all its own. Diesel is a majority product in Europe and a minority product in the U.S. Diesel is a separate platform, but its sold at all gas stations, so it co-survives with petroleum.

      If demand for diesel fuel disappeared, gas stations would stop selling it. There needs to be enough demand to force gas stations to devote at least one pump to diesel. Same with iOS. They don’t need to dominate, but they need to be big enough to remain viable.

  • pawhite524

    John,

    What a treat to read your columns! As it is in my nature to be a gadfly (in the Aristotelian manner) I try to find part of someone’s point that can be expanded upon.

    Again, I have had no success in this endeavor with your work. My conclusion? I am spellbound or you are that excellent at formulating a thesis.

    And, by the way, I am very rarely spellbound at my age…

    Thanks, again,

    Peter

  • aardman

    People keep referring to the Windows/Intel PC as the rule that governs the evolution of hi-tech devices: i.e. ‘openness’ (whatever that means) and non-integrated design and manufacture wins. In fact it is the exception. It is the exception that has been able to resist the force of gravity (if I may mix my metaphors) because of the wielding of overwhelming market power that was last seen in a company named Standard Oil.

    In the category of Complex, Mass Market, Consumer Products only the PC has remained ‘open’ and non-integrated as long as it has because Bill Gates was a master monopolist, (and IBM, a master bungler) who sewed up the market and was able to kill any serious competition (and by the way, held back innovation in the personal computing industry) for well nigh 20 plus years.

    You look at all the other Complex, Mass Market, Consumer Products and if they didn’t start out as such, they all evolved towards ‘closed’ and integrated. Automobiles are the most obvious example. Television sets, hi-fi audio, video game consoles, you name it.

    And smartphones? The industry is still evolving but Google acquiring Motorola and MS acquiring Nokia doesn’t look like a resounding endorsement of ‘open’ and non-integrated.

    • JoeS4

      The unique factor in high tech devices is the ability of the user to customize the device. Relatively open platforms have the advantage of free product development “crowd sourced” by users. Consumers like having options, and in today’s world they increasingly expect and demand them. Apple gives users too few options, and they’re too reliant on their own internal processes for innovation. Rather than “giving the customer what they want” and paying attention to what the competition is doing, Apple builds take-it-or-leave-it products. That model can only work if Apple’s products are consistently and substantially superior to the competition. Their resurgence started not with the iPhone, but with the iPod. They parlayed that into the iPhone, and then parlayed the iPhone into the iPad. In the absence of that next new integrated product that everyone must have, they start falling behind the competition. And they have never developed that kind of product without Steve Jobs.

  • baerjamin

    Just like to point out that historically there is an ignored anomaly in this thinking: the low priced leader – low prices with an optimized supply chain and manufacturing is a good niche to be in. I’m thinking of PCs. Dell and HP fought over leadership in that segment for years. I’d still think of Dell as a leader in an optimized supply chain and distributor (Apple blows them away but that’s an unfair comparison). I wouldn’t think of Dell as an industry leading PC vendor though. Is anyone making undifferentiated PCs and making money today?

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