Author: 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?

Beating The Dead Horse That Is Microsoft Windows (Part 2)

This is part two of a two-part series focusing on what’s gone wrong with Microsoft Windows. If you want to read part 1, click here. If you want to know what’s gone wrong with Microsoft Windows and what its probable future will be…well, read on….

Before you criticize someone, you should walk a mile in their shoes. That way when you criticize them, you are a mile away from them and you have their shoes.

Microsoft’s Core Beliefs

A company’s actions invariably revolve around its core beliefs. What then are some of the core beliefs that helped to shape Microsoft’s most recent Windows 8 campaign?

“We don’t see things as they are, we see them as we are.” – Anaïs Nin

A) “THE WINDOWS AND OFFICE CASH COWS MUST BE PROTECTED AT ALL COSTS.”

The advantages inherent in protecting the company’s biggest moneymakers is obvious. (The disadvantages, on the other hand, are far more obscure.) Focusing on what the company is especially good at – and where most of the company’s monies are made – is the default strategy of almost all businesses.

If the company is doing something well, then the norm is to keep on doing what they’re doing – only more of it.

“Nothing is more important at Microsoft than Windows.” — Steve Ballmer, CES 2012 Keynote

B) “THE WINDOWS’ BRAND IS VERY VALUABLE.”

Microsoft sincerely believes that the “Windows” Brand is both beloved and valuable. It only make sense then for Microsoft to leverage the value of that Brand by slapping it onto nearly everything they make.

“Convictions are more dangerous enemies of truth than lies.” ~ Nietzsche

C) “WE CAN DO IT TOO AND WE CAN DO IT MUCH, MUCH BETTER THAN YOU.”

Two classic business strategies are the “first mover” and the “fast follower”. I’d classify Microsoft as a “slow follower”. Microsoft seems to believe that the best way to compete in new markets is to do what the new product leader is doing…only do it better. Microsoft waits until a clear market winner has emerged and then they try to jump in, mid-race.

The obvious advantage to such a strategy is that Microsoft is able to wait and identify which markets are going to be winners. They can also learn from the mistakes of those who went before them and incorporate those learnings into their own, subsequent, product offerings.

Most importantly, Microsoft believes that their late start can be overcome by their superior technological know-how — aided, of course, by leveraging their existing Windows and Office monopolies and by exploiting their huge cash reserves. Such a belief reveals the incredible sense of self-confidence that Microsoft has in its own abilities. Some might call it hubris, but in Microsoft’s defense, their seemly arrogant strategy has been validated by past successes.

Microsoft dominated personal computing for 25 years. For many, many of those years, they controlled 95% of the personal computing market – a monopoly that is virtually unheard of without the assistance of government mandates. In computing, Microsoft was the very embodiment of the allegorical 900 pound gorilla. What Microsoft wanted, Microsoft took.

For example, Microsoft was late to the internet market, but when they put their mind and muscle to it, they slowly, but surely, smushed their Netscape internet challenger and made their own Internet Explorer THE default internet browser for the vast majority of personal computer users.

Similarly, Microsoft was a very new entrant in a very old gaming console market, but when they put their full weight behind the Xbox, they eventually (after going 5 billion dollars in the hole) became the gaming console market leader. Is there any other company that has the patience, perseverance or cash reserves necessary to follow such a strategy?

Microsoft won the internet wars and the console wars, and they did it with sheer brute force. When you are as big and as strong and as successful as Microsoft, is it any wonder that you think highly of your own abilities?

“An old belief is like an old shoe. We so value its comfort that we fail to notice the hole in it.” ~ Robert Brault

D) “THE MICROSOFT OFFICE SUITE IS THE KILLER APPLICATION, BOTH IN DESKTOP AND MOBILE COMPUTING.”

The Office Suite gives Microsoft a huge strategic advantage in the notebook and desktop markets. Microsoft Office wasn’t the first killer application, but it is the biggest, baddest suite of killer applications of our time.

Microsoft believes that Office is their ace in the hole in the mobile wars. The other mobile platforms may have a large lead in apps, but the Office Suite is the killer app that levels the playing field.

When in doubt, observe and ask questions. When certain, observe at length and ask many more questions. ~ George S. Patton

E) THE TABLET IS MERELY ANOTHER (LESS PRODUCTIVE) KIND OF PC.

Microsoft has always insisted that the tablet is simply another kind of PC. Microsoft contends that tablets alone don’t cut it. What people really want is a productive tablet, a two-in-one device that serves as both a tablet and a notebook, a hybrid that “powers people on-the-go for the activities people really value.”

A belief is not true because it is useful. ~ Henri Frédéric Amiel

Strategy

I believe Microsoft wanted to both differentiate Windows 8 from the offerings of their competitors and to strike at their competitors where they were the most vulnerable. This is a classic strategy known as “exploiting the line of least resistance.” Walmart parlayed this strategy into an empire by initially building their mega-stores in rural areas that their competitors found unprofitable.

Exploit the line of least resistance – so long as it can lead you to any objective which would contribute to your underlying object. ~ B.H. Liddell Hart, Strategy

Microsoft’s line of least resistance was – hybrid computers. In strategic terms, hybrids offered Microsoft a wealth of opportunities. First, no one else was seriously competing there. Second, Windows 8’s dual OS was the seemingly perfect hybrid operating system. Third, hybrids were a natural bridge that could be used to migrate Microsoft’s huge existing desktop customer base onto and into the burgeoning tablet market space.

In strategic terms, Microsoft was partially successful.They did go where Apple and Android were not – which is the beginning of a good strategy. However, they also went where the market was not.

Microsoft exploited the line of least resistance, but the reason it was the line of least resistance was because it didn’t lead to a meaningful objective. It does one no good to exploit a pass unguarded by the enemy if the reason the enemy left that pass unguarded was because it led to nowhere.

A girl phoned me the other day and said, “Come on over; nobody’s home.” I went over. Nobody was home. ~ Rodney Dangerfield

Following the line of least resistance is good strategy – but only if it takes you to your desired goal.

Microsoft’s Windows 8 Campaign

In their Windows 8 campaign, Microsoft made (at least) four key strategic decisions:

1) Create their own (Surface) hardware, but continue to license their operating system software to third-party manufacturers too.

2) Create three separate operating systems for the phone, tablet and desktop, then attempt to unify all three under one name and one user interface.

3) Start a brand new, incompatible, tablet platform named “RT” and supplement it with software from the existing Windows Office Suite.

4) Create a dual OS operating system that would work on tablets, notebooks and desktops but be tailored to run on tablet/notebook hybrids.

Every one of Microsoft’s major campaign decisions contains an inherent contradiction, an internal inconsistency, a self-destructive insistence on having things “both ways”. Let’s see how these decisions played out in practice.

You can’t dance at two weddings at the same time; nor can you sit on two horses with one behind. ~ Yiddish proverb

1) CREATE THEIR OWN HARDWARE, BUT CONTINUE TO LICENSE THEIR OPERATING SYSTEM SOFTWARE TO THIRD-PARTY MANUFACTURERS TOO.

1.1) Microsoft’s share of connected devices sales (in effect, PCs plus iOS and Android) collapsed from over 90% in 2009 to under 25% today.

Source: Benedict Evans

Microsoft is painfully aware of the fact that their Windows operating system is rapidly sliding from monopoly status to third place, behind Android and iOS.

“If things go wrong, don’t go with them.” – Roger Babson

1.2) Microsoft’s smart phone licensing strategy has been an utter disaster. Not only is Microsoft’s share of the smart phone market tiny, but Microsoft can’t charge the consumer for the operating system like it does on the PC, and Microsoft’s royalty fees from licensing the Windows Phone OS to manufacturers like Nokia, HTC and Samsung are being given back to these companies in the form of marketing dollars.

1.3) In light of these facts, Microsoft decided to adopt Apple’s integrated model and make their own hardware as well as their own software.

When people are free to do as they please, they usually imitate each other ~ Eric Hoffer

Microsoft is virtually telling the world “Our business model works great — except when it doesn’t.”

1.4) The good news is:

— Vertical integration allows Microsoft to better control the user experience from start to finish. ((“What this reorganization makes clear is that Microsoft now thinks it will have to control its own destiny: no longer will it depend on Intel for the computing power, Dell for manufacturing expertise, or HP for marketing heft (and, lest we forget, all of them for its technical support) to get its technologies in front of the public.”))

— It enables Microsoft to make money on hardware.

— It puts Microsoft in a position to directly compete with Apple. ((Microsoft CEO Steve Ballmer told CRN in an exclusive interview Monday that the company’s Surface tablet marks a new era in which the computer software giant will leave no “stone unturned” in its innovation battle against Apple.))

1.5) Make no mistake about it, this is a fundamental shift in the company’s business model, and it could absolutely end up backfiring.

— Microsoft has decided that third-party hardware manufacturers are part of the problem, and not part of the solution.

— Microsoft has stripped funding from its partners and reallocated it to their own hardware efforts. ((“Microsoft’s marketing budgets that are allocated so far for Q2 2013 include absolutely no support for Windows Phone partners.”))

— Microsoft’s strategy distances their interests from the interests of their hardware partners, such as Acer, ((Acer won’t do Windows Phone this year, wants Microsoft to pick up the pace.)) Samsung, ((Something Else Revealed At Samsung’s Launch Event: Disdain For Windows RT.)) Nokia, ((Nokia pulls plug on Windows RT tablet, signals end MSFT)) device makers based in Asia, ((Device makers based in Asia are not keen on Windows RT. That has become painfully clear.)) and trade shows such as Computex. ((One year after debut, Windows RT is a Computex no-show.))

— Microsoft’s policy encourages their hardware partners, such as AMD, ((After years of Windows OS exclusivity, Advanced Micro Devices is opening the door to design chips to run Google’s Android and Chrome OS in PCs and tablets.)) to migrate to Android. ((Android has become a hedge against Microsoft and Windows.))

— Hardware is – no pun intended – hard. Probably a lot harder than Microsoft thought. ((Switching from software to hardware, however, is proving very hard. I’m sure quite a bit harder than (Microsoft’s) management thought.))

— All of this hardware diversification is causing massive customer confusion. Quoting from “Making Sense of All the New Laptop Flavors“:

“Milunovich cites the two different models of Microsoft’s Surface — the ”RT” model running on an Nvidia (NVDA) microprocessor, and the … “Pro” model running on Intel‘s (INTC) microprocessor, as one prominent instance of possible “confusion among consumers relating to software versions and the herd of vendors churning out product.”

“Milunovich thinks the increasing diversity in tablets offered on the market plays to Apple’s advantage, because “user confusion favors Apple given its leading brand, relatively simple product line, and retail store support,” he argues.”

1.6) The entire exercise is counter-productive. The Surface RT and the Surface Pro are not taking sales away from iOS and Android devices. If anything, Microsoft’s hardware is cannibalizing their partner’s Ultrabook sales. ((“Surface Pro is really a PC, and potential buyers will also be considering notebooks and ultrabooks.” noted Moorhead.)) What purpose does that serve?

“A house divided against itself cannot stand.” ~ Abraham Lincoln

2) “CREATE THREE SEPARATE OPERATING SYSTEMS FOR THE PHONE, TABLET AND DESKTOP, THEN ATTEMPT TO UNIFY ALL THREE UNDER ONE NAME AND ONE USER INTERFACE.”

It has always been the dream of programmers to use one underlying code base to run software everywhere. Microsoft has turned that dream on its head and has, instead, devised a scheme that uses three, wholly separate and incompatible phone, tablet and desktop code bases, to run one, seemingly self-same, user interface.

Microsoft has gotten it completely backwards.

Try imagining using one user interface on three different form factors. For example, would you want the same user interface on your bicycle, your motorcycle and your car? On a trowel, a shovel and a backhoe? On a cork-board, a blackboard and a scoreboard? Even the iPad – which critics view as “merely a big iPod touch” – employs a separate user interface from that of the iPhone.

The form factor should not be tailored to the user interface. It’s the other way around. The user interface should be tailored to the form factor. In Microsoft’s desire to have one user interface across all of their Windows devices, they forgot about the most important thing – the user experience.

“How many legs does a dog have if you call the tail a leg? Four. Calling a tail a leg doesn’t make it a leg.” – Abraham Lincoln

How many operating systems do you have if you call them all “Windows 8”? Three. Calling three operating systems by one name does not make them one operating system.

3) “START A BRAND NEW, INCOMPATIBLE, TABLET PLATFORM NAMED “RT” AND SUPPLEMENT IT WITH SOFTWARE FROM THE EXISTING WINDOWS OFFICE SUITE.”

3.1) Microsoft knew that Windows RT was starting at a severe disadvantage to the incumbent tablet makers. It was late, late, late in the platform game and their iOS and Android competitors had literally racked up millions of competing mobile apps. What to do, what to do?

Well, here’s a couple of things that you should probably not do when launching a brand new platform:

— Call your new platform “RT” for “Run Time. (I mean…are you kidding me?)

— Craft your tablet advertising campaign around…a keyboard? RT is supposed to be a tablet platform, right? Focusing tablet advertising on the keyboard is like focusing car advertising on the trailer hitch.

— Introduce the platform with virtually no native software.

— Introduce a platform that doesn’t run Windows 8 applications on the very same day that you introduce Windows 8.

— Make it hard for App developers to know where they’re supposed to focus. (Windows Phone 8, Surface RT, Windows 8?)

— Osborne yourself by telling potential customers that you will be, in a few months, releasing a Windows Pro tablet that will do everything that the RT tablet does not.

— Introduce your platform with no clear message, no clear identity and no clear use case.

You have two systems (and operating systems) that look the same and run some of the same apps, but aren’t the same. ~ Mashable

Let me put this to you, the reader. Can you adequately explain the difference between Windows RT and the Windows Pro in a sentence? In a paragraph?

Neither can Microsoft.

If you want to give God a good laugh, tell Him your plans. ~ Yiddish proverb

3.2) Microsoft thought that the Office Suite would be the killer app that would drive sales of the RT platform. But does RT’s ability to run the Office Suite make up for its inability to run the 199,999 apps it’s missing? Not hardly.

Office is not the killer app that Microsoft thinks it is. Non-Microsoft competitors are already far more useful on touch devices. Porting the desktop Office to the touchscreen device is merely an exercise in futility. ((Microsoft Office for the iPhone Is Here. Yawn. / Office for iPhone downloads start with a bang, but fizzle before 4th; Office Mobile for iPhone: Why? / Microsoft Doesn’t Seem To Be Fooling Anyone With Its New Office For iPhone App / Office for iPhone is a belated, ambivalent move, analysts say / Microsoft Office not worth wait / Microsoft’s Office For iPhone: Wrong Product, Wrong Market))

Microsoft’s Office gambit has failed. If you really want Office on your computer, RT is not the solution for you. You’ll be far happier with a Windows laptop or desktop.

Most manufacturers have already dropped plans for developing Windows RT-based products, given the timid sales of their first batch, due to the limited number of applications for the platform. Microsoft’s second Surface RT tablet might be the sole king of a barren land.

“A half-baked idea is okay as long as it’s in the oven.”

4) “CREATE A DUAL OS OPERATING SYSTEM THAT WILL WORK ON TABLETS, NOTEBOOKS AND DESKTOPS BUT WILL BE TAILORED FOR TABLET/NOTEBOOK HYBRIDS.”

4.1) Microsoft seems to truly believe that tablets are underpowered, unproductive devices and that people don’t really want to use them. Of course, this completely ignores the success of the iPad, but let’s set that aside for the moment.

Microsoft believes that what people really want is a single device that they can use to get serious work done; what people really want is a hybrid that does it all; what people really want is a replacement for both the PC and the iPad. According to Microsoft, ordinary people may need to use a tablet here and there, but what they really want in a tablet is the power of a PC and a PC powered by Microsoft Windows.

Microsoft’s products and advertising say it loud and say it proud:
— Two operating systems are better than one;
— A two-in-one device is twice as good as owning two separate devices; and
— A dual Operating System that runs on tablets and desktops and hybrids (oh my!) is the best of all possible worlds!

Whenever you look at a piece of work and you think the fellow was crazy, then you want to pay some attention to that. One of you is likely to be, and you had better find out which one it is. It makes an awful lot of difference. ~ Charles Franklin Kettering

4.2) Only, here’s the rub. All of Microsoft’s assertions and assumptions fly in the face of reality.

— No single manufacturer has successfully combined a full PC with the form factor of a tablet and made it work. That should be telling you something.

— The Windows 8 interface baffles consumers.

— People don’t want to use apps on their desktop PC. People don’t want a two-in-one device or touchscreen on their PC. People don’t want a tablet OS with the desktop OS bolted on. People don’t want a tablet on their PC.

— People don’t want legacy Windows applications on their tablet. People don’t want a two-headed OS on their tablet. People don’t want a desktop computer on their tablet.

— People don’t want an all-in-one computer. People DO want multiple connected devices

“Many users are realizing that everyday computing, such as accessing the Web, connecting to social media, sending emails, as well as using a variety of apps, doesn’t require a lot of computing power or local storage,” said IDC analyst Loren Loverde. “Instead, they are putting a premium on access from a variety of smaller devices with longer battery life, an instant-on function, and intuitive touch-centric interfaces.” ~ AllThingsD

The market has voted: Tablets that are just tablets are trouncing Microsoft’s hybrid tablet/PC devices.

PCs are like Humpty Dumpty; they are being broken into pieces and won’t be put back together again. ~ Stratechery

4.3) The sad thing is, Microsoft knew better.

Mossberg: What’s your device in five years that you’ll rely on the most?

Gates: I don’t think you’ll have one device. I think you’ll have a full screen device that you can carry around and you’ll do dramatically more reading off of that – yeah, I believe in the tablet form factor – and then we’ll have the evolution of the portable machine and the evolution of the phone will both be extremely high volume, complimentary, that is if you own one you’re likely to own the other… ~ AllThingsD, 2007

Bill Gates saw the future, but he – and Microsoft – abandoned their vision in an attempt to salvage their Windows empire. The future, they knew, was multiple connected devices. But that future had touch operating systems – not Windows operating systems – at its core. And Microsoft couldn’t have that.

Windows 8 is not an attempt to create the future of computing.

Windows 8 is an attempt to preserve Microsoft’s past.

Vision without action is daydream. Action without vision is nightmare. ~ Japanese proverb

Conclusion

“If you cannot answer a man’s argument, all it not lost; you can still call him vile names.” – Elbert Hubbard

Are Microsoft’s Windows 8 problems fixable or are they intractable?

— So long as Microsoft does both hardware and software, either Microsoft’s hardware sales, or the hardware sales of their partners, or both, will suffer.

— So long as Microsoft has 3 different operating systems, Developers and app development will suffer.

— So long as RT tries to use the Office Suite as a substitute for native apps, RT sales will suffer.

— So long as Microsoft’s tablet OS runs dual operating systems tailored for hybrids, their tablet sales (and their tablet owners) will suffer.

Post-PC does not mean no PC. It means that the PC is no longer the dominant device; the center of the computing world.

It is a certainty that Microsoft Windows will continue too. But it is just as certain that it will no longer be the dominant operating system. And unless Microsoft radically changes its strategy – which I highly doubt – Window’s will not be vying for dominance – it will be vying for relevance.

One meets his destiny often in the road he takes to avoid it. ~ French proverb

Whose funeral is this, anyway?

Beating The Dead Horse That Is Microsoft Windows (Part 1)

Few people enjoy beating a dead horse more than I do, but man, beating up on Microsoft Windows is simply no fun anymore…because everybody’s doing it.

The defining company of the PC era — which for the purposes of this discussion we’ll consider the 25 years from 1981 to 2006 — has not articulated a unique and compelling vision for the future of computing since the iPhone rocked it to its core in 2007. ~ Tom Krazit, Gigaom

Yup, that about sums it up.

The first part of this two-part series will focus on what’s gone wrong with Microsoft Windows. Next week, I’ll conclude the series by focusing on why Microsoft is in this position and what, if anything, they can do to resuscitate the dead horse that is Windows.

Let Me Count The Ways

So, exactly how badly is Microsoft losing in the personal computing space? Let me count the ways:

1) PCs are in decline;
2) Mobile is ascendant;
3) Windows Phone 8 sales have been disappointing;
4) Windows RT sales have been disappointing;
5) Microsoft Surface sales have been disappointing;
6) Third-party Windows 8 tablet sales have been disappointing;
7) Ultrabook sales have been disappointing;
8) Windows 8 adoption has been disappointing;
9) Microsoft App Store growth has been disappointing;
10) Business and Enterprise is moving on without Microsoft’s products or services;
11) Microsoft has lost its monopoly and its monopoly powers; and
12) Microsoft is dependent upon legacy products – Windows and Office – for the bulk of its profits.

No reasonable person is arguing that Microsoft is going away. What rational people ARE contending is that Microsoft is becoming irrelevant in the front end – the consumer facing portion – of the personal computing space.

How did it come to this?

1) PCs Are In Decline

If you don’t cannibalize yourself, someone else will. ~ Steve Jobs

Evidence of the PCs decline is indisputable and, frankly, no one is trying to dispute it.

— Dropoff in PC Sales Is Accelerating and Tablets Are the Culprit, Says IDC

— In mature markets, the PC is saturated. And that’s where tablets are secondary devices. Shim says in emerging markets tablets are going to be primary devices. If the tablet takes off there, that kills the traditional PC’s chances of ever growing again.

— …for the 4th quarter PC sales declined by almost 5% according to Gartner research, and by almost 6.5% according to IDC. Both groups no longer expect a rebound in PC shipments, as they believe homes will no longer have more than 1 PC due to mobile device penetration, a market where Surface and Win8 phones have failed to make a significant impact or move beyond a tiny market share.

— In the model IDC used to forecast the 7.8% decline, the second quarter — which ended June 30 — was to be down 11.7%, a smaller drop than the first quarter’s historic 13.9% plunge. Shipments in the third and fourth quarters, meanwhile, would decline 4.7% and 1.6%, respectively, from the same periods in 2012.

2) Mobile is ascendant

“The best way to predict the future is to invent it.” ~ Alan Kay

— Half of U.S. adults now own a tablet or smartphone, Pew study finds

— …mobile devices — in particular iOS and Android — will continue to cannibalize PC sales throughout the year. Put simply, consumers and enterprise buyers prefer to spend their money on post-PC devices rather than on PCs.

— Next year, tablet sales will beat notebook sales for the first time ever, says NPD’s DisplaySearch. It is projecting tablet shipments of 240 million units versus notebook shipments of 203 million units. That’s 64 percent growth for tablet versus a 5 percent decline for notebooks.

— IDC: Tablets to outsell notebooks in 2013, all PCs in 2015

— The latest prediction from NPD DisplaySearch shows just how quickly the market has changed. It was six months ago, in July 2012, that the same organization predicted that it would take until 2016 for tablets to surpass notebook shipments.

3) Windows Phone 8 sales have been disappointing

I wish developing great products was as easy as writing a check. If that was the case, Microsoft would have great products. ~ Steve Jobs

Source: Ben Evans

— iOS and Android comprised 92.3% of Q1 2013 smartphone shipments

— According to Murtazin, Microsoft’s royalty fees from licensing the Windows Phone OS to manufacturers like Nokia, HTC (2498) and Samsung (005930) are being given back to these companies in the form of marketing dollars. In Nokia’s case, an arrangement similar to the one Murtazin describes is a matter of public record, as per the company’s 2011 annual report

— Windows Phone gets no traction despite the Nokia deal and RIM’s collapse

— Manufacturers reportedly ignoring Windows Phone due to OS fees… and Nokia

— Rumor: Microsoft paying $100,000 to some Windows Phone app makers?

You won’t help shoots grow by pulling them up higher. ~ Chinese proverb

4) Windows RT sales have been disappointing

It is perfectly monstrous the way people go about nowadays saying things against one behind one’s back that are absolutely and entirely true. ~ Oscar Wilde

— …Gottheil dubbed the RT tablets a “meta-tweener,” a “tweener between a tweener (Windows 8 x86) and a pure tablet like iPad,” he said. … “I don’t think Windows 8 RT can be successful unless and until its price is much lower.”

— Microsoft slashes Surface RT prices by $150 as it flounders against Apple’s iPad

— Lenovo released one of the few PCs that ran Microsoft’s ARM-based Windows RT operating system last fall with the 11 inch Yoga 11 notebook-tablet hybrid. Now it looks like Lenovo is phasing out its lone Windows RT product, as it no longer sells the Yoga 11 on its own website.

5) Microsoft Surface sales have been disappointing

To change and to improve are two different things. – German proverb

— Microsoft’s Surface Experiment Has Fallen Flat

“Perfection is the goal we’re going for, and that perfection comes with trade-offs,” said Panos Panay, general manager of Surface.

The above statement is “perfectly” ridiculous.

Someone at Microsoft needs to invest in a dictionary.

6) Third-party Windows 8 tablet sales have been disappointing

Bad engineering is solving a problem that you didn’t have in a way that you don’t understand.

— …(A)t a time when buyers seems price-sensitive, Wu finds the $500 to $1200 price tags slapped on Windows 8 hardware to be “uncompetitive” when compared to Android with prices as low as $99, and the iPad mini which starts at $329.

— Windows 8 tablet sales have been almost non-existent, with unit sales representing less than 1% of all Windows 8 device sales to date, NPD said, excluding sales of the Windows Surface tablet.

— Windows 8 device sales have not met Redmond’s internal projections, and the company is blaming it on lackluster hardware from OEMs.

7) Ultrabook sales have been disappointing

Imitation is a good servant, but a bad master.

— In October, IHS iSuppli downgraded its estimate of 2012’s ultrabook sales, cutting its projections by more than half from 22 million to 10.3 million, citing too-high prices. iSuppli argued that sales won’t take off until prices fall toward the $600 bar, perhaps in 2013. … The problem for Microsoft is that the outlook for ultrabooks, which the Surface Pro emulates, is dim. Windows ultrabook sales have been disappointing this year, and show little sign of improving sans dramatic price cuts.

— NPD: Apple’s MacBook Air dominates with 56% of U.S. thin-and-light notebook market

8) Windows 8 adoption has been disappointing

I heard that if you play a Windows 8 CD backwards, you’ll get a satanic message. But the most frightening thing is that if you play it forward, it installs Windows 8.

— The Windows 8 Sales Data Is In, And It’s Bad News For Microsoft

— Windows 8 continues to fail

— Windows 8 Is Failing to Beat Windows 7… And XP… And Even Vista!

— Worse still, Windows 8’s month-over-month growth rate is lagging further and further behind Vista’s dreadful 2007 adoption numbers. When comparing the operating systems when they were first launched, Windows 8’s adoption rate in its first month trailed Vista by just over half-a-percent among PC buyers. Now, in their 8th month out, Vista’s market-share numbers now lead Windows 8 by 3.64 percent. Needless to say, both lag far behind XP and Windows 7’s numbers at similar points in their product life-cycle.

— How bad are Windows 8 sales? In April 2013’s Net Applications numbers, Windows 8 barely crept up to 3.82-percent. That still leaves Windows 8 behind Microsoft’s last operating system flop, Vista, after seven months in the market. Windows on tablets fared even worse with touch-screen-based Windows 8 devices and Windows RT devices coming in at 0.02-percent and 0.00-percent each. The last was not a typo. The Surface RT is now in the running for worst Microsoft launch ever.

— StatCounter’s findings follow a similarly worrying report from NPD this week, which found that Windows 8 had captured just 58% of all Windows device sales since its launch, while Windows 7 captured 83% during the same period.

9) Microsoft App Store growth has been disappointing

“There comes a time in the affairs of man when he’s got to take the bull by the tail and face the situation.” – W.C. Fields

— In a classic chicken-and-the-egg conundrum, the Windows Store needs more Windows 8 customers and Windows 8 customers need more worthwhile apps from the store. Microsoft has failed miserably at attracting compelling content, a painful fact for any developer — or software company — thinking about committing the resources to bring a Metro app to market. How bad is it? … In short, it’s a wasteland.

— Microsoft expected 100,000 Windows 8 apps in 90 days. It took 248

— Sources: Microsoft Is Paying Developers Up To $100,000 To Write Windows Phone 8 Apps

Source

— Windows 8 users are turning to apps, on average, 1.52 times a day. Breaking this down by type indicates that tablet users are the heaviest app users, launching them 2.71 times per day, while touch-screen notebook users launch 47 percent more apps than those on a standard notebook. … Desktop users make the least use of Modern apps. … Soluto crunched the data further, and took a closer look at those who launch fewer than one Modern app a day. Here, the company noticed that a staggering 60 percent of users launch an app less than once a day. Even when it comes to tablet users, the heaviest users of Windows 8 apps according to Soluto, 44 percent of those sometimes go a day without launching an app.

10) Business and Enterprise are moving on without Microsoft’s products or services

If you’re in a card game and you don’t know who the sucker is, you’re it. ~ Anonymous

— Gartner: By 2014, Apple will be as accepted by enterprise IT as Microsoft is today

— Thanks To BYOD, Apple Invades The Enterprise

— More Data Showing iOS, Especially The iPhone, Still Killing It In The Enterprise

— Why companies are still deploying iOS apps first

— Fortune 500 Companies Moving to iPad Hits 94%

— Apple’s iOS still dominated the enterprise mobile circuit with 75 percent of total device activations last quarter.

11) Microsoft has lost its monopoly and its monopoly powers

That which has been believed by everyone, always and everywhere, has every chance of being false. ~ Paul Valery

— Forrester Report: Microsoft’s Windows Dominance Is Over

— …and Windows is no longer the dominant end-user operating system when PCs, smartphones and tablets are considered.

— In the greater end-user market, as Mary Meeker, the well-regarded analyst and venture capitalist, pointed out in her May 2013 Kleiner Perkins Caufield & Byers’ 2013 Internet Trends report, Windows is on the decline no matter how you measure it. Apple iOS and Android now have the lion’s share of computing devices, including PCs, smartphones and tablets, with 65-percent share over Windows’ 35-percent.

Source

— Microsoft’s mobile operating system share is actually worse than it appears. None of its most recent smartphone/tablet operating systems, Windows 8, Windows Phone 8 or RT. even breaks the 0.01-percent mark on NetMarketShare’s mobile/tablet operating system market share chart. How bad it is that? Android 1.6, with 0.01-percent, does make the chart.

— While Microsoft apologists focus on Windows continuing to be the dominant desktop operating system, they keep missing the two elephants in the room: Windows 8 continues to fall behind Microsoft’s previous top operating system failure, Vista, and Windows is no longer the dominant end-user operating system when PCs, smartphones and tablets are considered.

Men occasionally stumble over the truth, but most of them pick themselves up and hurry on as if nothing had happened. ~ Sir Winston Churchill

— “We had a little bit different expectations for Windows 8 than previous OS launches,” Jeff Barney, VP and general manager of Toshiba America’s PC and TV business, said. “In the past Windows was the only game in town, when it was Windows 7 or Vista it was the big event of the year. These days it’s a different environment.”

— The erstwhile truism You Won’t Get Fired For Buying From Microsoft has lost its luster.

— In the consumer market, we expect to Apple to gain share as the younger generation has grown up on Apples at school. … Pretty soon it could be that the ‘rebels’ will be the Windows users rather than the Mac users.

12) Microsoft is dependent upon legacy products – Windows and Office – for the bulk of its profits

There is only one boss: the customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else. ~ Sam Walton

— Microsoft makes more than 75% of its profits from Windows and Office. Less than 25% comes from its vaunted servers and tools. And Microsoft makes nothing from its xBox/Kinect entertainment division, while losing vast sums in its on-line division (negative $350M-$750M/quarter).

Microsoft uses a licensing model. A licensing model only takes a portion of the total profits from a sale. In a licensing model, volume matters.

If Microsoft can’t move its Windows and Office products and services onto mobile phones and tablets, well…

Next Week

The first part of this two-part series focused on what’s gone wrong with Microsoft Windows. Next week, I’ll conclude the series by focusing on why Microsoft is in this position and what, if anything, they can do to resuscitate the dead horse that is Windows.

This Is It. This Is Apple. This Is Their Design.

On June 10, 2013, during the Apple World Wide Developer Conference (WWDC) keynote, Apple unveiled two new videos: “Intention” and “Our Signature”

Two videos, but only one message.

Author’s note: All of the quotes from Apple’s videos are: “in bold text”.

“This is it.”

In those videos, Apple revealed its mission, its purpose, its essence, its raison d’etre and – perhaps – a bit of its soul.

This is the post-Steve Jobs manifesto. This is Tim Cook’s Apple. This is Apple’s new brand. This is Apple.

Something happens to companies when they get to be a few million dollars — their souls go away. And that’s the biggest thing I’ll be measured on: Were we able to grow a $10 billion company that didn’t lose its soul? ~ Steve Jobs

“This is what matters.”

“Listen up,” Apple is virtually saying to its customers, its employees, its investors, the analysts, the media, the pundits, and even to its competitors. “Listen up,” Apple is saying, “we’re telling you who we are and how we roll. This is our plan. This is our design. This is our intention. You should be paying attention.”

The Questions One Asks Inform The Answers One Receives

“The greatest challenge to any thinker is stating the problem in a way that will allow a solution.” ~ Bertrand Russell

“The first thing we ask is:

How it makes someone feel.

The experience of a product.

Who will this help?

Will it make life better?

Does this deserve to exist?”

Wow. Just wow.

Look at the types of extraordinary questions that Apple is asking itself. Talk about Thinking Different. It takes one’s breath away.

— Do you think that Microsoft asked such questions before it foisted Windows 8 on its customers?
— Do you think that Google asked such questions before it announced the Nexus Q?
— Do you think that Dell asked such questions — about anything, ever?
— Do you think that Apple asked such questions before they announced their mapping solution last year? ((Maps was a strategic move, a business move, perhaps even a mandatory move. But Apple has paid a terrible public relations price for prioritizing their needs over the needs of their customers.))
— Does your organization – or any organization you know – ask such piercing questions?

Judge a man by his questions rather than his answers.
—Voltaire

Let’s pause and take a moment to parse these questions a bit further.

“How it makes someone feel. The experience of a product.”

Ultimately, of course, design defines so much of our experience. ~ Jony Ive

This is huge. Apple doesn’t start with the specs or the features. They don’t start with corporate budgets or corporate agendas. They don’t start with what it should look like or how it fits into their current product lineup.

You’ve got to start with the customer experience and work back toward the technology — not the other way around. ~ Steve Jobs

Apple starts with how the product or service makes someone FEEL. That person’s EXPERIENCE with the product.

It’s not just a people first approach, it’s an emotion first approach too.

Apple doesn’t define the “job to be done” in technological terms. They define the job to be done in emotional terms — by whether their devices make their customers feel:

“Delight, surprise, love, connection”

This is the ecosystem argument. That devices are superior when they are less centered around technology and features and more centered around cohesiveness and experience.

The fallacy most make when critiquing Apple’s services is to believe that Apple needs to out-innovate competing services. The truth is, all they need to do is out-integrate them. ~ Ben Bajarin

Bill Gates once said that Steve Jobs “never really understood much about technology.” But that’s because Bill Gates wanted to believe that superior technology alway wins. He actually had it backwards. It’s not about making technology that works. It’s about making technology that works the way we do.

“The main thing in our design is that we have to make things intuitively obvious.” ~ Steve Jobs

“(T)he opportunity is not in designing a better “user interface” but designing a better “user experience.” ~ Damir Perge

“… we think that our job is to take responsibility for the complete user experience. And if it’s not up to par, it’s our fault, plain and simple. ~ Steve Jobs

“Who will this help? Will it make life better?”

They say that Apple understands what makes people tick; that Apple is a human-focused technology company. If Apple starts their product design by asking great questions like these, is it any wonder that this is so?

Apple’s magic is in the way it evaluates a product in order to answer the question “How would average humans like to use this?”—without actually asking average humans. … (W)hen you rely on focus groups and checklists of features, you end up with a projector phone. Or, like HP, you end up with computers that look exactly like Apple’s but lack the ease of use and thoughtful design. ~ John Moltz

Much of the difference between Microsoft and Apple — or between Apple and just about everyone else — is not the technology, but the usability. The real killer appeal of the iPod or the iPhone or the iPad is how easy they are to use, and how integral that ease of use and design is to the product itself.

I’m sure when Bill Gates looks at the iPad or the iPhone, he thinks about all the features it doesn’t have, or all the things that it can’t do. But no one else thinks about those things — all they are interested in is what they can do, and how much fun it is doing them, and how appealing those devices are. And that is one of Steve Jobs’ biggest gifts to the world of technology and design. ~ Mathew Ingram, Gigaom

Customers can’t tell you what they want, but they can most certainly tell you what dissatisfies them. It’s in the customers’ unmet needs that the real opportunities for technology lie.

“Good design makes a product understandable. It clarifies the product’s structure. Better still, it can make the product talk. At best, it is self-explanatory.” ~ Dieter Rams ((“Jobs was a famous admirer of Dieter Rams, a designer for Braun who had a number of mottos and aphorisms about design — one of which was that “good design will make a product understandable.” That applies to a lot of Apple’s most famous products, which were so painstakingly designed to be usable, even when (like the original iPod shuffle) they didn’t even have a screen to tell you what was going on inside them.))

“Does this deserve to exist?”

Talk about bringing things into focus. What a brutal filter to use in order to curate what does and does not get made at Apple.

“(W)hy are we doing this in the first place?” ~ Steve Jobs

Most companies are so busy asking whether something “could” be done that they never stop to ask themselves whether something “should” be done. ((Take the Microsoft Kin, for example. (Please!) ))

“We figure out what we want. And I think we’re pretty good at having the right discipline to think through whether a lot of other people are going to want it, too.” ~ Steve Jobs

Remember the quote, above, the next time you think about the rumored low-cost iPhone (or a myriad of other rumored Apple products.) Apple doesn’t cripple their products just to achieve lower price points because Apple only makes products that they, themselves, want to use. And they don’t want to use the equivalent of a Kin, Google TV or Nook. ((To be perfectly fair, no one else wants to use a Kin, Google TV or Nook, either.))

He who wants to keep his garden tidy doesn’t reserve a plot for weeds. ~ Dag Hammarskjöld

This Is Our Design

Where does Apple start? Do they start where they are? Do they start with their current design?

No.

“We start over”

“…Jobs was willing to completely start over with a product or service if it missed the mark. This requirement for perfection is highlighted numerous times in his biography and is rarely, if ever, followed by traditional companies when they are headed down the path of launching a new product, service or experience. ~ Eric V. Holtzclaw, Inc.

Starting over changes everything.

“When you start by imagining
What that might be like,
You step back.
You think.”

It allows one to see, not what can be added to what already exists, but what can be created from all of existence. It allows one to contemplate, not just the conceivable but what was once thought to be inconceivable too. It allows one to untether from what is, and to explore what might be.

It allows one to imagine. It allows one to dream.

“One’s destination is never a place, but a new way of seeing things.” ~ Henry Miller

When you or I buy a sofa, we move around the contents of the room in order to make the new sofa fit in. If Apple buys a sofa – and they think that it is perfect – they are willing to re-design and re-build the entire house in order to make the house fit in with the sofa.

“Logic will get you from A to Z; imagination will get you everywhere.” ~ Albert Einstein

Starting over allows one to paint with a fresh palette.

“I dream my painting and paint my dream.” ~ Vincent van Gogh

White. A blank page or canvas. So many possibilities. ~ Stephen Sondheim

Starting over allows one to dream, and to dream big.

Always dream and shoot higher than you know you can reach. Don’t bother just to be better than your contemporaries and predecessors; try to be better than yourself.

“We’re gambling on our vision, and we would rather do that than make ‘me too’ products. Let some other companies do that. For us, it’s always the next dream.” ~ Steve Jobs

The future belongs to those who believe in the beauty of their dreams. ~ Eleanor Roosevelt

“Designing something requires focus.”

“We tend to focus much more. People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of many of the things we haven’t done as the things we have done.” ~ Steve Jobs

Divide the fire and you will soon put it out. ~ Greek Proverb

“There are a thousand ‘no’s’ for every ‘yes'”

Does Samsung ask the hard questions, make the hard decisions, or do they let their customers do the work? Do they ever say “no”, so their customers don’t have to? ((Samsung has 26 different screen sizes for its smartphones and tablets. Apple, by contrast, has four different screen sizes. Throw spaghetti against a wall model may be good for some, but it is not Apple’s model.

“Samsung has a history of confusing customers with an outpouring of phone models … (Samsung) revealed a bunch of new features for the phone like S Health, hovering over the phone, new security features, eye-tracking, two-way photography, and much more. Most, if not all, of these features were pointless.”

MOSSBERG: The Samsung Galaxy S4 Has ‘Especially Weak,’ ‘Gimmicky’ Software))

Does Microsoft say no? Or do they tell you that their tablet is really a notebook and their notebook is really a tablet. Does Windows 8 give you one operating system optimized for the form factor or do they give you two operating systems and let you sort it out? Or do they give you three separate operating systems in the Xbox One and actually brag about it?

Does Google say no with Android? Or do they give their users feature after feature after feature without thought to how each feature works with one another and whether the net benefit is outweighed by the cognitive cost?

Good design is honest. It does not make a product more innovative, powerful or valuable than it really is. It does not attempt to manipulate the consumer with promises that cannot be kept. ~ Dieter Rams

“We simplify”

“Simplicity is the ultimate sophistication.” ~ Leonardo DaVinci

When people talk about Apple’s design principles and philosophy, they often mention the unrelenting focus on simplicity (based in part on Rams’ motto: “Less, but better”). Jobs said that among the most important decisions in product design were what not to include and that this process involved “saying no to 1,000 things.” That’s a very difficult principle to adhere to at the best of times — but it’s especially hard if you are a technology geek and obsessed with all the ways in which your product is going to beat your competitors because of the cool features it has. That’s what causes the classic “feature creep” phenomenon, which often occurs when professional engineers get hold of a device. ~ Mathew Ingram, Gigaom

I think there is a profound and enduring beauty in simplicity, in clarity, in efficiency… True simplicity is derived from so much more than just the absence of clutter and ornamentation. It’s about bringing order to complexity. ~ Jony Ive

“Look at the design of a lot of consumer products — they’re really complicated surfaces. We tried to make something much more holistic and simple. When you first start off trying to solve a problem, the first solutions you come up with are very complex, and most people stop there. But if you keep going, and live with the problem and peel more layers of the onion off, you can often times arrive at some very elegant and simple solutions. Most people just don’t put in the time or energy to get there. We believe that customers are smart, and want objects which are well thought through.” ~ Steve Jobs

Any fool can make things bigger, more complex, and more violent. It takes a touch of genius—and a lot of courage—to move in the opposite direction. ~ Albert Einstein

“It’s been one of my mantras — focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” ~ Steve Jobs

Good design is as little design as possible. ~ Dieter Rams

“We perfect”

“Good design is thorough down to the last detail. Nothing must be arbitrary or left to chance. Care and accuracy in the design process show respect towards the user.” ~ Dieter Rams

Perfection is achieved, not when there is nothing left to add, but when there is nothing left to take away. ~ Antoine de Saint-Exupéry

“For you to sleep well at night, the aesthetic, the quality, has to be carried all the way through.” ~ Steve Jobs

Trifles make perfections, but perfection is itself no trifle. ~ Shaker proverb

I don’t think it’s good that Apple’s perceived as different. I think it’s important that Apple’s perceived as much better. If being different is essential to doing that, then we have to do that, but if we can be much better without being different, that’d be fine with me. I want to be much better. ~ Steve Jobs

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

Design Is How It Works

“Then we begin to craft around our intention”

“We are stuck with technology when what we really want is just stuff that works.” ~ Douglas Adams

“Until every idea we touch Enhances each life it touches.”

“Good design makes a product useful. A product is bought to be used. It has to satisfy certain criteria, not only functional, but also psychological and aesthetic. Good design emphasizes the usefulness of a product whilst disregarding anything that could possibly detract from it.” ~ Dieter Rams

“We have always thought of design as being so much more than the way something looks. It’s the whole thing, the way something works on so many different levels.” ~ Jony Ive

“(Apple’s) ideology is design. It is a shared belief system that ‘No’ is more important than ‘Yes,’ that focus is essential to making great products, and that no one individual (not even Steve Jobs) is essential.” ~ Ben Thompson, Stratechery

Design is not just what it looks like and feels like. Design is how it works. ~ Steve Jobs

If the question is: “What job is this being asked to do?”, then Design is the guide and the pathway to the answer.

Design is the fundamental soul of a man-made creation… ~ Steve Jobs

What Makes Apple Different?

Do you want to know what makes Apple different? What sets them apart? How they attract the types of fans that Microsoft, Google and Samsung mock and denigrate but secretly envy and aspire to attain?

“What makes Apple come up with these great ideas while other computer makers stand around waiting for Jonathan Ive to tell them what to do next? ~ Don Reisinger

Is it Steve Jobs, Jony Ive, corporate culture, focus on quality, superior marketing, how they touch our emotions or some combination of all those things?

Is it because Apple is great at editing what’s possible, selecting options, saying no to things, and making something great by making it less, but better? ((These ideas were culled from Marco Arment, Accidental Tech Podcast, #14: Pouring Champagne onto Rap stars.))

If there was ever a product that catalyzed what’s Apple’s reason for being, it’s (the iPod). Because it combines Apple’s incredible technology base with Apple’s legendary ease of use with Apple’s awesome design… it’s like, this is what we do. So if anybody was ever wondering why is Apple on the earth, I would hold this up as a good example. ~ Steve Jobs

No. What makes Apple great is their passionate pursuit of perfection.

“Our goal is to make the best devices in the world, not to be the biggest.” ~ Steve Jobs

“For us, winning has never been about making the most. Arguably we make the best….” ~ Tim Cook

Does Apple always hit their target? Not hardly. They quite often miss their mark.

But as hard as it is to achieve perfection when one is trying, it’s virtually impossible to achieve perfection when that is not even one’s aim.

“The odds of hitting your target go up dramatically when you aim at it.” ~ Mal Pancoast

At least Apple is trying. And they are passionately trying.

Perfection is not attainable. But if we chase perfection, we can catch excellence.” ~ Vince Lombardi

“I think back to Detroit in the seventies, when cars were so bad. Why? The people running the companies then didn’t love cars. One of the things wrong with the PC industry today is that most of the people running the companies don’t love PCs. Does Steve Ballmer love PCs? Does Craig Barrett love PCs? Does Michael Dell love PCs? If Michael Dell wasn’t selling PCs he’d be selling something else. These people don’t love what they create. And people here do.” ~ Steve Jobs

Nothing great was ever achieved without enthusiasm. ~ Ralph Waldo Emerson

We’re just enthusiastic about what we do. ~ Steve Jobs

Apple relishes the challenge. And they love the chase.

“You cannot kindle a fire in any other heart until it is burning in your own.”

Apple is the standard bearer of excellence. And that is why people love Apple – why they actively root for them – despite Apple’s many imperfections. People are not just rooting for Apple, they’re rooting for an ideal. They’re rooting, not just for what Apple is but, for what Apple aspires to become.

“Ideals are like stars: you will not succeed in touching them with your hands, but like the seafaring man on the ocean desert of waters, you choose them as your guides, and following them, you reach your destiny. ~ Carl Schurz

Appendix

http://www.youtube.com/watch?v=VpZmIiIXuZ0

http://www.youtube.com/watch?v=Zr1s_B0zqX0

Apple Can’t Innovate Anymore, My A$$

I am sick to death of pundits proclaiming that Apple can no longer innovate. Apparently, the less one knows about a subject, the more strident one’s opinion on that subject becomes. Nevertheless, this nonsensical posturing has simply got to stop, for it is easier to believe a lie that you have heard a thousand times, than the truth that you have heard only once.

Can’t innovate anymore, my ass. ~ Phil Schiller

The critic’s arguments seem to break into two categories, which are really two sides of the same coin:
— Apple desperately needs to enter a new product category;
— (But it’s already too late because) Apple can’t innovate anymore.

Apple Desperately Needs To Enter A New Product Category

Apple again seen losing steam, new products needed desperately
Apple managed to earn $9.5 billion in profit on $43.6 billion in sales last quarter without launching any exciting new devices, but the long wait for new launches is expected to begin taking its toll this quarter.

Apple’s business model forces it to constantly come up with groundbreaking new products
“At most companies, a year without a major new product release isn’t cause for panic. But Apple isn’t most companies. The problem with that business model is that it forces Apple to constantly come up with a groundbreaking new product.”

Apple needs new hardware
“There’s two reasons Apple needs new hardware: To prove it can still create killer new product categories post-Steve Jobs and because that’s how it makes its money.”

Find a new category to go innovate
“I keep trying to tell Apple…” Misek says, “Find a new category to go innovate.”

Any man who thinks he knows all the answers most likely misunderstood the questions.

Apple, a once-great innovator
“With Apple wrapping up its developer conference this week, the contrast between the once-great innovator that brought the world into the smartphone and tablet era and current Silicon Valley revolutionary Google couldn’t have been more stark … innovation is ideas like Google Glass, which represent new paradigms of human interaction with technology.”

Apple’s trailblazing days are over
“Google’s gaming console: The latest sign that Apple’s trailblazing days are over?”

Apple hasn’t been able to enter any major new product categories in years
“Apple’s stock hasn’t slid because it’s been putting out uninspired hardware — it’s slid because the company hasn’t been able to enter any major new product categories in years….”

If it can’t reinvent a category again soon, Apple could be in big trouble “(Apple) transformed itself from a niche company in the computer world to one that created entirely new categories of gadgets. If it can’t do that again soon, Apple could be in big trouble.”

The list of areas where Apple can repeat its act is dwindling
“In the past, Apple snuck up on people. It entered markets filled with clunky, overly-geeky products, released groundbreaking consumer-friendly versions, and established its dominance before rivals had the chance to respond … But today, we have huge companies investing millions of dollars in products that Apple “may release in the future.” … If there’s any area in which Apple can innovate, chances are, someone has already imagined it, written a blog post about it, Photoshopped it, and created a ready-made blueprint for any company that wants to gamble on it. … The list of areas where Apple can repeat its swoop-in-and-turn-the-industry-upside-down act is dwindling. ((The list of areas where Apple’s opportunities are supposedly dwindling: “TV? Microsoft beat Apple to the punch with futuristic voice and gesture control, and Hollywood doesn’t appear willing to let anyone innovate on the content distribution front. Wearables? Everyone and their mother is making a smartwatch, and Google has Glass locked, loaded, and almost ready to fire. Mobile/desktop PC convergence? Microsoft has already put its chips in that basket. … and then there’s gaming. The established players Sony and Microsoft are continuing to innovate, and now that Google is reportedly making this Android-based gaming console, that’s one less way that Apple can sneak in the backdoor and set the house on fire”.))”

By the time Apple does it, it will have already been done
“(L)ike just about every other possible area of innovation, it’s becoming less and less likely that we’ll see more Apple “trailblazing.” … By the time Apple does it (no matter what it is), it will have already been done … and probably much more elegantly than the pre-iPod MP3 players, pre-iPhone smartphones, or pre-iPad tablet PCs.”

iWatch will be another hobby
“Just Like Apple TV, The Apple iWatch Will Be Another Hobby For Tim Cook”

Apple outfoxed: Foxconn first
“Apple outfoxed: Foxconn first to debut iPhone-compatible smartwatch”

Samsung is already working on a watch
“…Samsung …is already working on a watch of its own.”
Samsung unveiled games console first
“Sorry Google And Apple: Samsung Unveiled Games Console First”

Google to beat Apple to products Apple is reportedly developing
“WSJ: Google working on an Android-powered game system, smart watch and new Nexus Q … its reason for jumping into all these categories is to beat products Apple is reportedly developing in the same categories….”

(But It’s Already Too Late Because) Apple Can’t Innovate Anymore

It’s harder to innovate once you’re the incumbent
“Apple’s problem is that it becomes harder to innovate once you’re the incumbent rather than the challenger”.

Apple is not innovative
“Quite frankly, Apple is not innovative…”

Apple aren’t innovating any more
“(Apple) have a right to be proud of their accomplishments, but it’s not surprising that pundits claim they aren’t innovating any more.”

Apple is no longer a leader
“Apple is no longer a leader. Apple has become a challenger that now needs to look up to other leaders across the multiple categories it competes in and figure out what to do next.”

Apple is just another product company
“(T)herein lies the rub and the real tragedy: Apple is quickly becoming just another product company….”

Another company out-innovating Apple
“Cramer: Another Company Out-Innovating Apple?”

Apple has become a design follower
“Apple has become a design follower instead of a leader — and it may be just fine with that”

Apple is a lagging brand
“Apple’s Fall From Leading To Lagging Brand”

Stunning nine month gap between product events
“Apple will hold its first major product event in nine months on Monday, a stunning gap for a company that relies on regularly impressing customers with new innovations.”

A bear walks into a bar and says, “Bartender, I’d like a gin . . . . . . . . . . . . . . . . and tonic.” And the bartender says, “Sure, but what’s with the big pause?”

Jony Ive is meddling in software
“Sir Jony has been trapped in a monochromatic hardware world of his own making for so long that now that he’s allowed to meddle in software, he’s pulled out that box of Crayolas he’s kept locked in the bottom drawer and let loose his inner Wonderland.”

The end for Apple exceptionalism
“iOS 7 redesign: the beginning of the end for Apple”

Apple plays catch up
“Apple’s primary motivation (with iOS 7) was to play catch up with… no, not Android but with Microsoft.”

All been done before “…Apple has not only failed to truly innovate in its own right, the changes and additions it has introduced (in iOS 7) have all been done before.”

Nothing new
“Is iOS 7 Apple’s admission that it has nothing new to bring to the table?”

I miss John Dvorak and Rob Enderle…but my aim is improving. ~ John Kirk

The Wide Lens

“The farther back you can look, the farther forward you are likely to see.” ~ Winston Churchill

I mean, honestly, could Apple’s critics be any more wrong? Could they have it any more backwards? Do they know nothing at all about Apple or the Tech industry? The very people who seem most certain of Apple’s future (or lack thereof) are also the very people who seem most ignorant of Apple’s past. The following lengthy excerpts are quoted from Ron Adner’s: “The Wide Lens: What Successful Innovators See That Others Miss.”

[pullquote]Jobs tended to be late for everything because he wanted everything to be ready for him[/pullquote]

“(Steve) Jobs tended to be late for everything because he wanted everything to be ready for him. Jobs understood that the natural trajectory of challenges is toward the (smart mover, not the) first mover. (When the co-innovation of an ecosystem is required), the pioneer has no advantage. In fact, the pioneer is at a slight market share disadvantage relative to laggards. The “system” works to resolve co-innovation challenges, while industry rivals figure out execution.” “Reflecting on catching technology waves in 2008, (Steve Jobs) said:

“Things happen fairly slowly, you know. They do. Those waves of technology, you can see them way before they happen, and you just have to choose wisely which ones you’re going to surf. If you choose unwisely, then you can waste a lot of energy, but if you choose wisely, it actually unfolds fairly slowly. It takes years.”

“His insight was to ‘surf’ the co-innovation wave, knowing that its challenges would be resolved over time. His brilliance was to wait to expend his energy on the execution challenge.”

Waiting To Catch The MP3 Wave “Steve Job’s iPod journey is an exemplary illustration. Jobs knew that, on its own, an MP3 player was useless. He understood that, in order for the device to have value, other co-innovators in the MP3 player ecosystem first needed to be aligned.” “Jobs constructed the iPod ecosystem. (Then) Apple waited, and then waited some more…. As the iPod’s co-innovation risks faded away — when (the) pieces were solidly in place — both MP3s and broadband were finally widely available — (Apple) finally made its move, putting the last two pieces in place to create a winning innovation: an attractive, simple device supported by smart software.” “With its proprietary hardware-software combination, (Jobs) didn’t just put down the last piece, he put down the last two pieces. And he made sure they interlocked. Apple didn’t launch the iPod as a product. In combination with its iTunes music management software, the iPod was a solution.” “By shifting to offering solutions, Apple increased the execution challenge for itself as well as for everyone else, effectively lowering the value of competitor’s previous efforts and increasing the barrier for rivals to achieve future success.”

Waiting To Catch The Smart Phone Wave

[pullquote]Once again, Jobs was late – five years late[/pullquote]

“Once again (with the iPhone), Jobs was late – five years late.” “And rivals didn’t seem to care.” “Reacting to Apple’s January 2007 announcement of the iPhone (six months before its launch), Jim Balsillie, co-CEO of BlackBerry shrugged, “It’s kind of one more entrant into an already very busy space with lots of choice for consumers.” “Asked to react to the announcement of the iPhone, Microsoft CEO Steve Ballmer literally laughed out loud.” “Steve Jobs could smile because he knew what (his) ecosystem carryover meant. Of the 22 million iPods sold during the 2007 holiday season, 60 percent went to buyers who already owned at least one iPod. The iPhone was not going to be a new entrant fighting to capture attention in a crowded mobile phone market. It was the next generation iPod. By carrying over the key elements of the iPod ecosystem, he would carry over his buyers too.”

The Critics Have Gotten It All Wrong

Apple’s critics seem to be diagonally parked in a parallel universe

After reading the excerpts from Ron Adner’s book, you can see just how wrong the critics have been.

A bartender walks into a church, a temple and a mosque. He has no idea how jokes work.

Some technology pundits appear to have no idea how tech works, either.

“Some people get lost in thought because it’s such unfamiliar territory.” ~ G. Behn

Not only have the critics gotten it wrong, but they have gotten it exactly backwards. Their advice constitutes the worst possible course of action for Apple, not the best.

Listening to free advice of a certain kind costs you nothing…unless you act upon it.

The critics don’t remember Apple’s history or tech history or the history of innovation.

Why don’t Apple’s innovation critics make ice-cubes? They can’t remember the recipe.

[pullquote]Stop telling us that you can predict the future when you can’t even recall the past[/pullquote]

Apple’s critics need to stop telling us that they can predict Apple’s future when they’ve already proven that they are not even capable of accomplishing the far simpler task of recalling Apple’s past.

The past, the present and the future walked into a bar. Then things got tense.

The facts can always be ignored, but one does so at one’s peril.

A drunk walks into a bar. “Ouch!” he says.

Nor does ignoring the facts change the facts or make them go away.

“Facts do not cease to exist because they are ignored.” ~ Aldous Huxley

When you’ve got your facts wrong, the second thing you need to do is more research.

I went to a bookstore and asked the saleswomen, “Where’s the self-help section?” she said if she told me, it would defeat the purpose.

When you’ve got your facts wrong, the first thing you need to do is just shut up.

First law on holes – when you’re in one, stop digging. ~ Denis Healey

First

What is this obsession with being first to market?

[pullquote]It is better to be a smart mover than a first mover[/pullquote]

— Did being first help MP3 Man in MP3 Players, Palm, Nokia or Rim in smart phones, Microsoft in tablets, Microsoft or Google in TVs?
— Did not being first hurt Apple in iPods, iPhones or iPads?

No, in an ecosystem that demands co-innovation, it is better to be a smart mover than a first mover. Arguing that Apple has missed the streaming music or the console or the TV or the wearables market is like arguing that Apple has missed the train when the tracks have yet to be laid.

Apple Is Surfing The Innovation Wave (Like Mavericks)

Apple is doing what it has always done – and what it has always done successfully. They are surfing the innovation wave, just waiting for the complementary ecosystem parts to catch up. Apple isn’t late, the co-innovation wave is late. And when that co-innovation wave finally arrives, history tells us that Apple will be ready.

Rainbows & Innovations

Rainbows don’t appear when it isn’t raining or in the darkness of the night or after every rain shower, but that doesn’t mean that there will never be a rainbow ever again. Rainbows only occur when all the conditions are right.

Significant tech innovation doesn’t appear every day, or every month, or every year, and new tech categories are rarer than hen’s teeth, but that doesn’t mean that there will never be innovation ever again.

Innovations only occur when the conditions are right.

Study the industry. Wait for the conditions to be right. And while you’re waiting for the next tech innovation, the next tech category, or even the next rainbow…

…don’t be an a$$.

In Education, The Tablet Tide Has Turned…And It’s Turned Into a Tidal Wave

Apple introduced the modern day tablet in April 2010. That’s just a little over three years ago. Educational institutions are notoriously conservative – slow to change and slow to adopt new techniques. Yet, here are two stories that show just how quickly tablets are being adopted for use by school age children:

An iPad For Every Student In Los Angeles Public Schools

Los Angeles’ school system, the second largest in the country, is ordering iPads for all its students…$30 million worth of iPads as the first part of a multi-year commitment…Apple says the initial order is for more than 31,000 iPads.

The Los Angeles Unified School District has more than 640,000 students in kindergarten through 12th grade.

It wasn’t even close. The vote of the school board was 6-0.

Despite PC’s “preferred” status, Maine schools go with tablets

Apple’s dominion over Maine schools looked like it would change in April when the Maine Governor’s office announced that the MLTI’s new preferred vendor was Hewlett-Packard – specifically, the HP ProBook 4440 running Microsoft’s Windows 7 operating system.

Maine’s massive Maine Learning Technology Initiative (MLTI)…(revealed) that of more than 69,000 machines, only 5,474 will be the preferred Windows laptops. More than 92 percent of state schools are staying with Apple, the majority of which are turning to iPads… 39,457 students and educators in the MLTI are using iPads for the first time.

A Rising Tide Lifts All Tablets

My father was a school superintendent, so I am painfully aware of how maddeningly slow the wheels of education turn. However, the stars may be aligning for a significant change.

1) A tablet for every school child is a done deal. Most people just don’t know it yet. It’s going to happen and it’s going to happen oh-so-very-fast.

The Pew Research Center has been tracking tablet ownership from May 2010 when it recorded that 3% of American’s 18 years and older owned a tablet. From its most recent survey in May of 2,252 adults 34% of American’s owned a tablet, almost a doubling from April 2012.

Tablets have become an accepted part of everyday life and soon they will become an accepted part of education too. In three short years, we’ve already moved from the “Tablets are a stupid idea and it should never be done” phase to the “Of course Tablets are a great idea in education and why haven’t we done it already?” phase.

2) The tablet software industry is already well-established. Mobile software can be purchased cheaply and easily and installed almost instantaneously.

3) Apple has pulled out all the stops to cater to the education sector in its latest iOS version. Microsoft is giving away Surfaces for $199 each. Heck, everyone is going to want a piece of this market.

4) Win-Win. With millions upon millions of children getting tablets, and with hundreds of thousands of app developers using their creativity to develop educational apps in order to make money, maybe – just maybe – we’re on the cusp of seeing a revolution in computing software for education.

I am cautiously optimistic.

Source

Do The Math: iOS 6 Is The World’s Most Popular Mobile Operating System

In fact if you do the math, you would find that iOS 6 is the world’s most popular mobile operating system and in second place is a version of Android which was released in 2010. ~ Tim Cook, WWDC 2013 (1:13:55)

http://www.youtube.com/watch?v=SRmjUzcpLO0

Okay, let’s do the math.

Total iOS Sales vs. Total Android Activations

We know that there are approximately 600 million iOS sales and 900 million Android activations.

Now all we need do is multiply the total sales/activations times the version percentages claimed by iOS and Android.

Source: Is iOS Fragmenting? Not Nearly as Much as Android.

“And by the way, this is the most ideal state of Android. It only includes a version of android which talk to the Google play store so it doesn’t include things like Kindles and Nooks. ((In addition to excluding Kindles and Nooks, Google’s statistics exclude the millions of Android devices in China and other regions that don’t use Google’s services. Google is inflating their total activation numbers by counting them all and inflating their Jelly Bean numbers by only counting units that contact the Google Play Store.))~ Tim Cook, WWDC (113:30)

The Math

558 Million (93.0% x 600) iOS 6 (Fall 2012)
329 Million (36.5% x 900) Android Gingerbread (Winter 2010)
297 Million (33.0% x 900) Android Jelly Bean (Summer 2012 and Winter 2012)
230 Million (25.6% x 900) Android Ice Cream Sandwich (Fall 2011)
043 Million (04.8% x 900) Android older than Gingerbread
036 Million (06.0% x 600) iOS 5 (Fall 2011)
006 Million (01.0% x 600) iOS older than iOS 5

Analysis & Commentary

[pullquote]iOS 6 is the world’s most popular mobile operating system[/pullquote]iOS 6

— Tim Cook was correct: iOS 6 is the world’s most popular mobile operating system.
— iOS 6 leads second place – Android Gingerbread – by ~229 million users.
— iOS 6 leads Android’s most recent version – Jelly Bean – by ~261 million users.

And if you look at the customer’s of each operating system that are using the latest version, it’s not even close. ~ Tim Cook, WWDC 2013 (1:13:40)

[pullquote]75% of Android users and only 7% of iOS users are on non-current versions of their respective operating systems[/pullquote]

— 75% of the Android ecosystem is on the non-current versions of the operating system.
— 7% of the iOS ecosystem is on non-current versions of the operating system.

Gingerbread
Google reports that, as of June, the largest segment of Android devices are still running version 2.3 Gingerbread (36.5 percent), which was released in the Winter of 2010.

More than a third of android users are using an operating system that was released in 2010. ~ Tim Cook, WWDC (1:15:25)

Jelly Bean
Only 33 percent are running the latest major version, Android 4.1 Jelly Bean, which was announced last summer alongside Apple’s debut of iOS 6.

Ice Cream Sandwich
Another 25.6 percent are still on Android 4.0 Ice Cream Sandwich, which was released the same month as iOS 5.

Android older than Gingerbread
Another 4.8 percent of Android users use software older than Gingerbread.

iOS 5
Only 6 percent are still using last year’s iOS 5, the last version supported by the original 2010 iPad, 2009 iPod touch and 2008 iPhone 3G.

iOS older than iOS 5
Just 1 percent of Apple’s App Store visitors still use a version older than iOS 5, released in October 2011.

Do Versions Really Matter?

Android advocates claim that fragmentation isn’t really a problem. What nonsense. Ignoring the deleterious effects of fragmentation doesn’t even pass the smell test. ((Definition of “the smell test”: A cursory test of something’s authenticity or legitimacy ~ Dictionary.com)) It stinks to high heaven, both of cognitive dissonance and hypocrisy.

— It’s terrible for users who don’t have the latest features and the latest security updates.

Now this isn’t just bad for users, but this version fragmentation is terrible for developers. ~ Tim Cook, WWDC 2013 (1:13:45)

— It’s terrible for developers who want to use the latest APIs – who want to take advantage of the newest tools, techniques and technology – but can’t because they have to support years old operating systems.

— It’s illogical. If being on the latest version of an operating system doesn’t matter, then why even do newer versions?

— It’s partisan. It violates’s Kirk’ first law of objectivity ((I feel fairly certain that this will come back to haunt me.)):

“Would you maintain the validity of your contention if the positions were reversed?”

Please. Arguing that operating system versions don’t matter is the same as arguing that reality doesn’t matter. Every piece of data available supports the hypothesis that iOS is the stronger platform, despite Android’s numerical superiority. That either means that activation numbers don’t matter as much to a platform as pundits contend they do, or that Android’s activation numbers need to be discounted.

Or both.

Discounting

Definition: discounting, verb, Deduct an amount from (the usual value of something)

Even if you think that raw numbers are the essence of a strong platform – and you really shouldn’t – you have to agree that older versions of iOS and Android must be discounted ((Other discounts should be applied as well, such as engagement, usage, demographics, security, ease of access and use, etc.)) if we are to make a proper comparison of the two operating systems. The problem is that the discount rate is unknown. ((Or, at least it’s unknown to me.))

If, for example, you:
— Disregard the versions of iOS and Android that are older than 3 years; and
— Discount iOS 5 and Ice Cream Sandwich by 25%; and
— Discount Gingerbread by 50%; then

Your revised and re-calculated numbers would look like this:

558 Million (558 x 1.00) iOS 6
005 Million (006 x 0.75) iOS 5
563 Million iOS Total, After Discount

297 Million (297 x 1.00) Jelly Bean
173 Million (230 x 0.75) Ice Cream Sandwich
165 Million (329 x 0.50) Gingerbread
635 Million Android Total, After Discount

Of course, the problem is that I just made these discount numbers up out of my head. I showed my math so that you can change the discount numbers and do your own calculations. If anyone knows a way of obtaining a truer, more objective discount number, I would be grateful if they would share it with us in the comments, below.

Appendix

iOS 6.1.2 is the Most Popular Version of iOS Less than One Week Following Launch

Why Android Updates Are So Slow

Google engineers: We’re trying to fix Android fragmentation

The Orphans of Android: “I believe there are a lot of Android devices from months and years gone by that are sitting in drawers at home or are being sold on eBay.”

Fragmented Android drives big dev to Apple: “(The (BBC) Trust found a series of quite logical reasons why Android lagged iOS when new features were added to iPlayer, mostly surrounding the “complexity and expense” of developing for Android.

The company also noted a couple of other logical reasons why developers dealing with limited time and budget would opt for Apple’s mobile OS:

— Engagement is higher on Apple devices
— Android is fragmented
— Android development is complex and expensive

Comparing The Market Share of Android Phones To The iPhone Is A D@mned Lie

Disraeli is reputed to have said that there were three kinds of lies: Lies, damned lies, and statistics.

“Lies, damned lies, and statistics” is a phrase describing the persuasive power of numbers, particularly the use of statistics to bolster weak arguments. ~ Wikipedia

Comparing the market share of Android phones to the market share of iPhones is a damned statistical lie and it should never be done. Here’s why.

Venn Diagrams

If you drew a Venn diagram of “all iPhones” and “all iPhones that ran iOS”, they would be one and the same. Here is another example of such an overlapping Venn Diagram:

Source: thehighdefinite

— If you replace “Male friends who joke about having sex with you” with the words “all iPhones”; and
— If you replace “Men who would have sex with you if you showed the slightest interest” with the words “all iPhones that ran iOS”…

…you would ruin a perfectly good joke. But you would also have a Venn diagram that accurately represented the overlap between “iPhones” and “iPhones that run on the iOS operating system.” All iPhones run on iOS. But the opposite is not true. iOS is more than just iPhones.

On the other hand, Android phones are made by many manufacturers. About 40% are made by Samsung and the other 60% are made by Motorola, Sony, HTC and a variety of different hardware manufacturers. Why then do we lump all Android phones together and count them as one?

The only legitimate reason to group all Android phones together is in order to suggest a causal relationship between the number of Android phones and the strength of the Android platform. But is there such a relationship?

[pullquote]Comparing Android’s phone activation numbers to the iPhone’s sales numbers is akin to comparing fish to whales and concluding that fish outnumber mammals.[/pullquote]

The Folly Inherent In Comparing Android Phones to iPhones Instead Of Comparing Android To iOS

Comparing Android’s phone activation numbers to the iPhone’s sales numbers – and concluding that Android outnumbers iOS – is akin to comparing fish to whales and concluding that fish outnumber mammals.

Fish MAY outnumber mammals, but not nearly by the margin that fish outnumber whales. And Android devices do outnumber iOS devices but not nearly by the margin that Android phones outnumber iPhones. When making comparisons, one needs to compare like to like, otherwise, it skews the results.

There have been over 900 million Android devices activated and over 600 million iOS devices sold. And – if Flurry’s clientele is representative – the total number of active Android devices may only exceed the total number of active iOS devices by little more than 10% (see chart, below).

Source: Flurry

Comparing an operating system to an operating system; comparing all active devices to all active devices; comparing like to like; ((And don’t even get me started on the limited VALUE that Android’s market share brings to their platform. Android’s market share is literally a joke.

And if you are going to compare Android phones to iPhones, then it would be wiser and fairer to compare premium Android phones – such as the Samsung Galaxy S4 and the HTC One, etc. – to the iPhone.

And if you REALLY want to contend that market share translates directly into platform strength, then it would be far better to compare operating system VERSIONS against competing operating system VERSIONS, rather than simply lumping all of an OS’s versions together, totaling them, and pretending that they were of equal value to the platform.)) – now THAT is the proper basis for a comparison.

You do not compare an entire class of things to a subset of another class, and you do not compare phones that run the Android operating system to a subset of devices (iPhones) that run on the iOS operating system ((By the way, the exact same logic holds for comparisons of Android tablets to the iPad. Those comparisons are just as wrong as comparisons of Android phones to iPhones and they are wrong for the exact same reason – a class should never be compared to a subset of a class if your goal is to compare the two classes. Hardware models should be compared to hardware models. Operating systems should be compared to operating systems. Hardware models should never be compared to operating systems and vice versa.)), otherwise, you are likely to get is a skewed result…

…and a damned lie…

…or (-shudder-) a “Chart Of The Day.” ((A “Chart Of The Day” pretends to be based on relevant statistical data – but it often is, basically, the same thing as a damned lie – only worse.))

Legitimate Reasons Vs. Bogus Reasoning

There are legitimate reasons to compare fish to whales and there are legitimate reasons to compare Android phones to iPhones.

But if you’re actually trying to compare fish to mammals or the Android operating system to the iOS operating system, such a comparison conceals – rather than reveals – the truth. It is deceitful, dishonest, untruthful, false, duplicitous, mendacious; hypocritical, untrustworthy, unscrupulous, unprincipled, two-faced, double-dealing, underhanded, crafty, cunning, sly, scheming, calculating, treacherous, Machiavellian, sneaky, tricky, foxy, crooked, fraudulent, counterfeit, fabricated, invented, concocted, made up, trumped up, untrue, false, bogus, fake, spurious, fallacious, deceptive and misleading.

In other words, it’s a damn lie.

In The Bizarro World In Which We Live, It’s Microsoft That Complains About Monopolies

Apple Inc. won a $30-million contract Tuesday from the Los Angeles Unified School District, paving the way for the company to provide every student with an iPad in the nation’s second-largest school system. ~ Los Angeles Times

Microsoft, unsurprisingly, objected to the purchase. But what was surprising was the rationale Microsoft used to support their position:

A Microsoft representative urged the board to try more than one product and not to rely on one platform. Doing so could cut off the district from future price reductions and innovations, said Robyn Hines, senior director of state government affairs for Microsoft.

But district staff countered that Apple offered the superior product.

Wow. Payback is a witch.

Microsoft Has Windows 8 Exactly Backwards

I understand (that Windows 8 is) the same experience across phone, tablet, and desktop…but it’s not the same software, it’s not the same operating system, and it’s not the same apps. ~ Leo Laporte, Windows Weekly Podcast 316

This is a great synopsis of everything that is wrong with Windows 8.

— Apple contends that you should use the right tool for the job at hand.
— Microsoft contends that Windows 8 is the right tool for every job.

— Apple makes the operating system fit the device.
— Microsoft pretends that the Windows 8 operating system – even though it’s really three operating systems – fits every device.

— As much as possible, Apple integrates the user interface across its desktop operating system (OS X) and its phone and tablet operating system (iOS) but it doesn’t pretend that the operating systems are one and the same.

— As much as possible, Microsoft disguises the fact that you are using three separate operating systems on the phone, tablet and desktop, concealing them all behind the facade of a single user interface.

— Apple’s iOS and OS X are two very different operating systems, proudly performing two very different functions.
— Windows 8 is three very different operating systems, slyly pretending that they can serve all functions.

— Apple’s iOS and OS X are playing to their strengths.
— Windows 8 is pretending that it doesn’t have any weaknesses.

— Microsoft’s goal is to have a consistant user interface.
— Apple’s goal is to have a consistent user experience.

And therein lies all the difference.

Is Apple Making A Play For the PC Market Too?

Everyone knows that Google’s Android operating system dominates phone market share, Apple’s iOS operating system dominates tablet market share (for now) and Microsoft’s Windows dominates PC market share. While Windows is shrinking in overall market share – if you combine phones, tablets and notebooks/desktops together (and you should) – it has, until now, been a given that Windows will continue to dominate the massive, but shrinking, PC marketplace.

But is that true?

— The MacBook Air used to be a high-priced luxury product for Apple. Now it is their lowest priced, base model. For a thousand dollars, you get one of the lightest, fastest, most powerful notebooks on the market.

— Windows owns the low-end of the market, but the low end is being swallowed whole by tablets. When faced with a choice between a bottom-of-the-line $350 HP or Dell notebook and a top-of-the-line $350 iPad Mini, many consumers are opting for the latter.

Apple has captured 90 percent of the PC market for machines over $1000 since 2009. And given the rapid collapse of the PC market (at the hands of Apple’s iPad and smartphones), that’s a pretty sweet segment of the market to own. ~ AppleInsider

Microsoft has virtually no presence in either the phone or tablet markets. But they also have virtually no presence in the high end of the PC market either. And that’s the only end of the market making money and, in the long-run, it may be the only end of the market that survives the invasion of phones and tablets, too.

Thoughts?

Source for Graphic: NPD Group

Apple’s WWDC: Instant Analyses

Introduction

Through the graciousness of Techpinions and Apple Inc., I was able to attend the Apple World Wide Developer Conference (WWDC), held this past Monday, June 10, 2013. I have a couple of in-depth articles that I’m working on, but since we, here at Techpinions, are far more about perspective and far less about the latest news coverage, I’m going to give those articles a little time to “breathe” so that I can develop them further. I’m very excited about these upcoming articles and I’m looking forward to sharing them with you in the very near future.

In the meantime, since the WWDC was so broad and so far-reaching, I thought that I would go through the conference video, step-by-step and provide some “snap” analyses of some of the less well known – or perhaps less well appreciated – aspects of the keynote speech. If you have additional insights, please let us know in the comments, below.

Overall Impression: Apple events are incredibly well-organized. The presentation was two hours long and it was packed full. The pace of the presentation was fast and furious as Apple tried to deliver as much information in those two hours as they possibly could.

Apple’s Philosophy

“Only Apple could do this…” – Tim Cook

00:10: If you want to know how Apple sees itself or, at the very least, how Apple wants the world to see them, watch the video that opens the conference. There’s a lot of depth to this short video. Expect to read much more about it, here, in a future Techpinions’ article.

Developers, Developers, Developers, Developers

03:20: 6 million registered developers. 1.5 million new developers in the past year alone. Sold out the developer’s conference in 71 seconds.

07:40: 50 billion Apps.

That’s a lot of zeroes (50,000,000,000).

375,000 apps designed specifically for the iPad. Competitors? In the hundreds. One of Apple’s key differentiators.

575,000 million accounts, most with credit cards attached. Don’t underestimate the value of this. It’s HUGE. Think iTunes. Think iTunes Radio. Think payments. Think BIG.

“More accounts with credit cards than any store on the internet that we’re aware of” ~ Tim Cook

08:48: Apple paid developers 10 billion dollars.

5 billion of that paid just in the last year … three times more than all other platforms combined.” ~ Tim Cook

If there is one thing that the analysts are overlooking, it is this. If you want to truly measure which operating system is doing better, don’t look at the number of sales, look at the number of developers and the number of dollars being paid to those developers. By that measure, Apple is running away from the pack.

OS X: Mavericks

With Apple, it’s not about gathering the latest features together, it’s about having features that work the greatest together. Apple doesn’t strive to be the first, they strive to be the best.

iCloud Keychain

36:15: Apple will suggest, retain and maintain your passwords and credit card numbers. I’ll have to see how this works in practice before I make a final judgment, but this was the first of many times when I thought, “Aha!”:

– My mom could do this, moment #1

Apple’s Technology Philosophy

An aside about Apple’s technology adoption and legacy philosophy. Apple is quick to discard the old, slow to adopt the new. It’s a weird mix that confuses many observers. Google aggressively moves forward. Microsoft aggressively retains backwards compatibility. Apple moves forward conservatively and discards the old aggressively.

Weird, right? Get used to it. It ain’t going to change anytime soon.

MacBook Air

In the age of the iPad, what is the future of the notebook?

48:00: (Hint from Apple: “It’s the MacBook Air”.)

The new MacBook Air is almost identical to the old MacBook Air except that it contains Intel’s newest Haswell processor. The key difference is battery life:

— 9 hours for the 11 inch MacBook Air
— 12 hours for the 13 inch MacBook Air

TWELVE HOURS! Yikes.

Of course, no retina display. As Renee Ritchie of iMore is fond of saying, smaller, better battery life or retina display…pick two.

There was no mention of the MacBook Pro at the event, but rumor has it that it too will appear with a Haswell chip AND a retina display in the next 3 to 4 months.

By the way, is Apple seriously going after the PC market too? Stay tuned. More on that from Techpinions, yet to come.

Mac Pro

“Can’t innovate anymore, my ass.” – Phil Schiller

52:15: Some say that Phil Schiller’s comment, above, was defensive. Hmm. I would say that words like “defiant”, “decisive” or “determined” would be much more aptly employed to describe the true tenor of his remark.

The Mac Pro has incredible design, power and speed, all housed in a teeny-tiny casing. The numbers being thrown around to describe the device were pure tech porn to the nerds attending the convention ((Nerds like me)).

However, while the Mac Pro will undoubtably be great…will it be great for anybody? Sure it will be perfect for someone like Pixar. But how many Pixar’s are out there? Will it truly be practical for many others? Not so sure. We’ll just have to wait and see.

Designed in California, Assembled in USA

01:39: This is Apple’s new tagline. Apple is now making the Mac Pro in the United States and they’re naming their OS X software after locations in California (starting with “Mavericks”). This is about as politically correct as it gets.

Expect to see this new tagline…like…ya’ know, – A LOT.

The Mac Is Back

60:00: One. Full. Hour.

Spent on the Mac.

If you thought that the Mac was dead, you were dead wrong. And it you thought the Mac was going to become the iPad, then get used to disappointment.

iWork In The iCloud

Create on your Mac, edit on your PC, present on your iPhone.

62:00: Sort of Apple’s take on Google Docs. I’ll have to wait until I get my hands on it but, without a doubt, a fascinating new direction for Apple.

Is iOS Both The Best AND The Most Popular OS?

69:30: Tim Cook seems to think so.

You can bet your life that I’ll be “liberating” large parts of this portion of the keynote for use in constructing an Insider’s article on this topic in the very near future.

If you can’t wait and want to have it served to you straight from the Cook’s kitchen, go have a look at the video starting at the 69:30, mark.

Apple’s Design Philosophy

“True simplicity is derived from so much more than just the absence of clutter and ornamentation. It’s about bringing order to complexity.” ~ Jony Ive

75:10: If you want to understand what Apple’s design philosophy is, go watch this video…

…then watch it again.

And again.

Tim Cook And Company Relish The Challenge

79:45: If you want to see a happy Tim Cook – a genuinely happy Tim Cook – just watch the video, starting at the 79:45 mark.

Apple may be under pressure from Wall Street but, if they are, Tim Cook and company seem to relish the challenge. I’ve never seen Steve Job’s captains look more upbeat, more excited, more confident or more determined than they did in this presentation. A lot of humor. A lot of enthusiasm. A lot of energy. A lot of optimism. Lot’s and lot’s of of optimism.

iOS 7’s Icons

81:15: Saying that iOS 7 is doomed to fail just because of the look of the icons introduced at the World Wide Developer Conference, is like saying that a bride is doomed to ugliness just because of how she looks, sans makeup, when she’s having her wedding dress fitted.

Let’s all take a deep breath, step back and give this thing a chance to unfold, shall we?

I’m not saying that there has been a rush to judgment…

…I’m saying that there has been a “gush” of judgment – most of which will, hopefully, be flushed away by the tides of time.

My take: They say there is nothing new in iOS 7. But there’s also nothing new in a cake or souffle. It’s not new ingredients that count, it’s how the ingredients are put together that makes a meal a masterpiece. ((Tip o’ the hat to Jean-Louise Gasse, for the analogy.)) Let’s give this cake a little time to bake and see if it rises, okay?

Gestures For Moving In And Out…

85:10: Universal gesture from left edge of display for moving in and out of apps…

– My mom could do this, moment #2

Control Center

87:20: A universal gesture, available from anywhere, even on your lock screen.

– My mom could do this, moment #3

Multi-Tasking

88:00: Simple. Powerful. Simply powerful.

And as Ben Bajarin reminded me, this may be an even MORE powerful feature on the iPad.

– My mom could do this, moment #4

Siri

101:45: New interface; new voices; new commands; answers more questions; hooks to wikipedia, twitter and Bing….

Hmm. Definitely a wait and see kind of deal.

iOS In The Car

103:25 Very quiet introduction. May be a much bigger thing than people realize. Need to wrap my brain around it. Go see Horace Dediu’s initial thoughts on it, here.

Automatic System And App Updates

105:35: – My mom will love this, moment #5

Music Match And iTunes Radio Integration

106:00: Hmm. Not hearing much buzz surrounding this. Yet I think it could be huge.

Music Match iCloud integration makes it easy to recover your music from the cloud. iTunes Radio makes it easy to discover your music from the cloud. Music Match costs $24.99 per year. iTunes Radio is free with ads…or free without ads if you are a Music Match subscriber.

Hmm. Music discoverability…built right into your existing music app…integrated with iTunes…easy, one-button purchases…that play on your iPod, iPhone, iPad, Mac or Apple TV. That’s not a big deal?

Now the discoverability portion of the product is a complete unknown. That will make or break this service. Will iTunes Radio be another Ping…or will it be the next big thing?

– My mom could do this, moment #6

Activation Lock

112:05: If an unauthorized person tries to turn off “Find My iPhone” or wipe my device, they won’t be able to reactivate it. A powerful theft deterrent.

– My mom could understand the importance of this, moment #7

1,500 New APIs

112:55: ‘Nuff said. ((One possible caveat: An API to integrate with 3rd party game controllers? Hmm. Start packing your bags, game console makers.))

“Biggest Change To iOS Since The Introduction Of The iPhone”

115:05: By my count, Tim Cook and company said words to this effect on three – perhaps four – occasions.

iOS is not just a coat of paint. It is designed to be a “comprehensive end-to-end redesign of the user experience.”

Apple’s goal with iOS can be summed up this way:

It’s like getting an entirely new phone, but one that you already know how to use.

That is one truly ambitious goal. Only time – and the market – (and definitely NOT the critics) – will tell if Apple was able to pull it off.

Apple’s Signature

116:45 Final video and Apple’s future Ad campaign. A branding campaign, not a product campaign. And what does Apple want their brand to stand for?

— This is what matters.
— The experience of a product.
— How it makes someone feel – delight, surprise, love, connection.
— Does it deserve to exist?

This is our signature…and it means everything.

(M)ore than just words…values we live by… ~ Tim Cook

If you don’t get Apple after watching this video…you just don’t get it.

Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

Author’s note: Many of the commentators aren’t even reading the article but, instead, are basing their comments on the article’s title alone. Let me throw one final analogy into the mix in the hopes of clarifying my position:

Apple is in the dairy business and Android is selling meat. Apple has the cream (pun intended) of the milk-producing cows but Android has far more cows that produce far less milk, but far more meat. Both are winning because they are selling different things, but pundits think that Android has won simply because they have more cows.

Apple has the profits. Android has the market share. And they’re both doing great.

Now back to the original article…

“My belief, though, is that what Google is winning with Android is a booby prize — overwhelming majority share of the unprofitable segment of the market.” – John Gruber

The Platform Business Model

“A computing platform includes a hardware architecture and a software framework…where the combination allows software to run. … A platform might be simply defined as a place to launch software. ~ Wikipedia

The advantage of a platform business model is that once the platform is established, others do much of the work to make the platform valuable. It’s like setting up a marketplace ((I never understood why Google changed their store’s name from Google Marketplace to Google Play. I thought that “Marketplace” was the ideal name. Oh well.)). Once it’s set up, the vendors do most of the work. The platform provider benefits either by taking rents or by taking a commission from each sale or by using their access to the customers gathered by the marketplace in order to sell some complementary product or service of their own.

The Mostly Misunderstood Network Effect

“In economics and business, a network effect…is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service is dependent on the number of others using it (emphasis added).

The classic example is the telephone. The more people own telephones, the more valuable the telephone is to each owner. This creates a positive externality because a user may purchase a telephone without intending to create value for other users, but does so in any case.” ~ Wikipedia

This is key, so please forgive me for repeating it:

“…a user may purchase a telephone without intending to create value for other users, but does so in any case.”

In other words, every user adds to the value of a phone network – even if they have no intention of doing so – JUST BY BEING ON THE NETWORK.

It is this understanding (or misunderstanding) of the network effect that makes so many mobile computer industry observers confident that:

— Market share alone creates the network effect;
— Android has market share; therefore
— Developers, profits and all the other benefits associated with the network effect MUST necessarily follow where Android’s market share leads.

Source: Benedict Evans, On Market Share

The high priests of market share contend that since Android HAS won the battle for market share, the network effect makes it inevitable that Android WILL win the war for mobile phones.

Derek Brown, ReadWrite:

In the world of technology platforms, ubiquity matters (a lot) when developers, manufacturers, etc., are considering future products/solutions.

Google Chairman, Eric Schmidt:

“Ultimately, application vendors are driven by volume, and volume is favored by the open approach Google is taking…. ((“(M)y prediction is that six months from now you’ll say (that Android apps are beating iOS versions to market…)” ~ December 7, 2011))

Matt Asay, ReadWrite

Over time, those developers are going to move to where the market share is. They have to.

John Gruber, The church of market share:

It’s an article of faith in the Church of Market Share that Android is nearing a tipping point where its market share lead will inevitably turn into a developer share lead, too.

So is it true? With Android holding such a commanding market share lead, do developers, and then users, and then profits, and then, ultimately, all smartphone users – including iPhone users – have to convert to Android?

No, of course not. Here’s why.

Phone Networks Are Not The Same As Computer Networks

— In a phone network, the value is in the phone owner.
— In a mobile computing network, the value is in the app, not the mobile phone owner.

— In a phone network, the more phone owners there are – the more people you could call and be called by – the more powerful the network effect and the more valuable the phone network becomes.
— In a mobile computing network, the more developers there are – the more apps available for consumption – the more powerful the network effect and the more valuable the computing network becomes.

— In a phone network, there is no difference between a phone owner and a phone user – they are one and the same.
— In a mobile computing network, there is a HUGE difference between the mobile phone owner and the mobile user.

— In a phone network, the phone owner begins contributing to the platform the moment they buy the phone.
— In a mobile computing network, the mobile phone owner doesn’t begin contributing to the platform until they voluntarily decide to participate, either by buying apps or content, consuming advertising or contributing data.

— In a phone network, the phone owner’s mere PRESENCE makes the phone network more valuable.
— In a mobile computing network, you don”t measure the value of a mobile phone owner by their mere presence, you measure their value by their PARTICIPATION.

Presence, without participation, adds no value to a mobile computing network.

It is fairly easy to simply add up all of the mobile phone sales and activations for a particular operating system. It is also fairly meaningless. The trick is to discern how much those mobile phone owners are participating and the value that their participation brings to the network.

Most mobile computing industry observers are measuring the wrong thing, the wrong way:

It’s not about counting the customers. It’s about having the customers that count.

Android can count more customers than iOS can, but they don’t count for much. The ranks of Apple’s iOS owners are filled with credit card carrying cash cows. As a result, Apple’s platform profits are udderly enormous. The ranks of Google’s Android activations are a lot less cash cow and a lot more Bull. ((Being a bad customer is not at all the same thing as being a bad person. I, myself, am a great Crispy Creme Donuts customer but a very poor customer for exercise equipment. That doesn’t make me a bad person, just a bad customer.))

It’s hard to milk a Bull. Dangerous too.

How Do You REALLY Measure The Success Of A Platform Business Model?

You measure the success of a platform in three ways:

1) The health of the platform – is it self-sustaining?
2) The wealth of a platform – the amount of net profits acquired from the platform.
3) The stealth of a platform – does it serve an ulterior purpose?

The Health Of A Platform

By any meaningful standard, Apple’s iOS platform is robust, healthy and rapidly growing.

Take a look at the two pie charts, below. From Q1:10 to Q4:12, Apple’s share of the smartphone market grew from 16% to 22%. But during the same span of time, the pie itself QUADRUPLED from 55 million units to 219 million units!

Source: KPCB, Internet Trends

Further, “smartphone share” is not even the right way to measure the market that Apple is competing in. The more relevant market is the “mobile phone market”, not the “smartphone market”.

“… there is no such thing as a ‘smartphone market’. Or rather, talking about the ‘smartphone market’ is like talking about the ‘3G’ market or the ‘colour screen phone’ market: you’re picking out a sub-segment that is going to grow to take over the whole market. And ignoring the growth.

The whole mobile phone market is converting to smart. Apple is taking the high end and Android is taking the rest. Both are growing very fast, and Android is growing faster. But what matters is phone share, not smartphone share. ~ Benedict Evans

Source: Benedict Evans, On market share

Finally, the “mobile phone market” is still not inclusive enough. When we’re comparing operating systems, we need to compare ALL of the devices in the operating system, whether they be MP3s, phones or tablets.

Source: “Apple Q2 2013 hardware sales: By the numbers”

“Cumulatively, Apple has sold almost 375 million iPods, over 356 million iPhones, and nearly 140.5 million iPads since the respective products were first released. In 23 quarters, Apple has sold almost as many iPhones as it has sold iPods over 46 quarters, and sales of the smartphone are likely to overtake the aging media player during this quarter if the respective sales trajectories hold true. Put that another way: the iPhone has sold twice as fast as the iPod did.” – Apple Q2 2013 hardware sales: By the numbers

I would only add that the iPad has been selling THREE times as fast as the iPhone did.

When one looks at the WHOLE market for iOS vs. the WHOLE market for competing operating systems, the metrics supporting the health of Apple’s iOS platform are so overwhelming and so voluminous that it was difficult for me to even find a suitable method for properly displaying them. Ultimately, I resorted to simply sorting them alphabetically, by category, in the extensive appendix, below. I dare you to read the associated links in the appendix and then tell me that the iOS platform is anything but healthy. No, wait…”I triple dog dare you.”

If the purpose of a platform is to be self-sustaining, then Apple’s iOS platform is as successful as it gets.

Open Trade-Offs

Android is no slouch ((By which I mean it is one of the greatest computer operating systems ever.)) as a platform either, but Android is based on an “open” philosophy. Open is not inherently good or bad, it is a tradeoff. It has many advantages but it has many disadvantages too. The same open policies that make it easier for Android to gain market share are also the same open policies that make it inherently harder for Android to maintain a strong platform.

— An open policy towards carriers encourages rapid dissemination of devices but it also permits the carriers to take unwanted liberties with Android’s core services and allows them to shirk their responsibilities with regard to operating system updates.
— An open policy towards manufacturers allows for rapid hardware iteration but it also creates rapid hardware fragmentation.
— An open policy towards the sales of applications leads to a wide variety of apps but it also leads to a wide variety of piracy, cloning and malware too.
— An open policy towards the operating system allows for rapid feature iteration but it also allows competitors to split off a confusing variety of competing operating systems and App Stores too.

The BBC Trust:

…a couple of … logical reasons why developers dealing with limited time and budget would opt for Apple’s mobile OS:

— Engagement is higher on Apple devices
— Android is fragmented
— Android development is complex and expensive

The Wealth Of A Platform

Google is profiting from their Android platform via advertising, app and content revenue. However, as I pointed out in “4 Mobile Business Models, 4 Ways To Keep Score“, none of these revenue streams add up to very much.

Google could also be benefitting from their Android platform via the gathering of mobile computing data. This is the big “get out of jail free card” that Android advocates play whenever it is pointed out that Google is not directly profiting from Android. “The data alone”, they protest “is invaluable.” Hmm. Unless you can draw a direct line from the data being gathered to the profits being made – and you can’t – data, in lieu of profits, seems like a very poor consolation prize, indeed.

Apple too is profiting from their iOS platform via advertising, app and content revenue. However, that revenue – a few billion dollars – barely registers on their books. The vast majority of Apple’s iOS revenue is generated from the platform’s related hardware sales. (See: “Android’s Market Share Is Literally A Joke“.)

The Stealth Of A Platform

I have stated that you measure the success of a platform by its health and its wealth. I am, however, keenly aware of a third way to measure the success of a platform – an exception to the rule that is so large that it might swallow the rule altogether.

What if Google had an ulterior motive in Android? What if Android was actually a stealth weapon designed, not as a profit making engine but, as an engine of destruction aimed at Google’s mobile phone competitors?

If the purpose of Google’s Android platform was a defensive action designed to destroy Google’s adversaries and ensure that Google’s advertising and services would run on every meaningful mobile platform, then I will grant you – based on the evisceration of Palm, webOS, Windows Mobile, Windows Phone 8, Nokia’s Symbian, MeeGo, Blackberry and Linux – that Android may well be one of the most successful computing platforms of our time or of all time. ((However, that is not the end of the story for Android but, perhaps, only the end of the beginning of the story. As Android splits into different self-serving streams – like the Amazon Fire and the various Chinese Android variants – will Google’s Android ultimately be seen as having successfully salted the lands of its enemies while simultaneously sowing the seeds of its own destruction?

“We often give our enemies the means for our own destruction.” ~ Aesop))

Source: “Apple 2.0, Which is more valuable to Apple, its market share or its brand?”

Apple Is Like DisneyWorld And Android Is Like A Chain Of Amusement Parks

Apple is playing the “give away the rides for free once you’re in the park, but charge for admission to the park” game. The purchase of Apple’s hardware is the golden ticket ((A Willie Wonka reference? Really? How many metaphors can this author mix together?)) that gives one entrée to their park. Google is playing the “give away the rides for free to attract customers to the park but make it up in revenues generated from the sale of ads and concessions” game.

Apple’s platform model is stronger – for now – because they get their money up front, at the point of admission to their walled garden. ((As an aside, DisneyWorld has much lower “market share” (total people in attendance) than do the tens of thousands of existing worldwide amusement parks, but does anyone ever claim that DisneyWorld is “niche” or “vulnerable”?)) Google’s platform model is weaker – for now – because it requires people to voluntarily buy the concessions and consume the advertising, and – for now – a lot of Android patrons are choosing not to buy and to just go along for the free ride.

Neither Android nor iOS is going away. Both platforms have different inherent strengths and weaknesses and instead of fruitlessly trying to decide which operating system is going to win EVERYWHERE, we should be focusing our efforts on determining WHERE, specifically, each OS is likely to win.

— Android will take the low end of the market.
— iOS will take the high end.

— Android will continue to grow like a weed.
— iOS will continue to grow like a well tended farm.

— Android will continue selling a mind-numbing array of diverse products.
— iOS will continue selling three year old iPhones as if they were new, because iOS’ value is found primarily in the platform, not in the device itself.

— Android will continue to rapidly iterate their hardware and their operating system.
— iOS will continue to relentlessly integrate their hardware with their software and their platform ecosystem.

— Android will appeal to third-world nations, emerging markets, tech aficionados who admire the virtues of “open”, those who require more options, those who require more diversity, and the cost conscious.

— iOS will appeal to more established nations, maturing markets, non-technical users who admire the virtues of easy and intuitive, those who require more security, those who require more consistency, those who require more integration, the quality conscious, and those who fear Google’s ad-supported business model.

— iOS will appeal to Enterprise, businesses, governments, institutions, organizations, and other entities that require more structure, security and control. ((As one who lived through the Windows v. Mac wars, the irony of Apple’s iOS becoming the favored operating system of the Enterprise is not lost on me.))

Where Do We Go From Here?

Am I criticizing Google or Android? No, I am NOT. Android has some fantastic hardware, a rapidly iterating operating system and a brilliant and innovative company backing it. It’s a clear success story.

What I’m criticizing is the nature of the debate. Market share is not only not the best way to measure success, absent context, it is one of the worst. [pullquote]Just because Android has a winning platform does not mean that Apple doesn’t have a winning platform too. And vice versa.[/pullquote]

It would be a monumental mistake to underestimate the strength of the Android Platform – but it would also be a colossal mistake to underestimate the power of Apple’s iOS too. The truth is that iOS and Android are the two great operating systems of our time and it looks like they’re both going to remain great for quite some time to come. One platform rules market share and one platform rules profit share and – in a rapidly growing market (see graphic, below) – there’s plenty of room for both business models to survive and thrive.

Source: KPCB, Internet Trends

And The Gold Goes To…

— In mobile hardware manufacturing, Apple is the clear cut winner with Samsung coming in a strong second.

— In mobile advertising, Google is the big fish in a small, but growing, pond.

— In content sales, it’s difficult to judge, since the competitors are actually playing very different games. If you judge by revenue (and I don’t), the winner is Amazon. But if you judge by profit, you’ve got to give the nod to Apple…for now.

— In mobile platform? It’s much easier to say who has lost and that would be anyone not named “Apple” or “Google”. But so far as “winning” goes, Apple is already “winning” the only gold that matters to them (profit$) and Google’s Android has already “won” Google a seat at the mobile advertising table, which is the only gold that matters to them. They both sound like champions to me. But then, of course…

…the games are still far from over.

Read Part One of John’s column entitled: Android’s Market Share Is Literally A Joke

Read Part Two of John’s column entitled: 4 Mobile Business Models, 4 Ways to Keep Score.

APPENDIX

Adoption: iOS 6.1.2 is the Most Popular Version of iOS Less than One Week Following Launch
Adoption: Apple’s iOS 6 now accounts for 83% of all iOS-based traffic in North America
Adoption: The Orphans of Android
Adoption: “An OS that is 2 years and 2 months old controls over 45 percent of the Android ecosystem. An OS that is 1 year and 4 months old controls another 30 percent. 75 percent of the entire Android ecosystem is still on the non-current versions of the OS. It’s 2013.”
Advertising: Why 75 cents of every dollar spent on mobile advertising is spent on iPhone and iPad
Advertising: Apple’s iOS Mobile Ad Metrics Dominates Android
Advertising: iOS leads Android in mobile ad revenue
Advertising: iPad Still Dominates Tablet Ads
Advertising: iPhone Still Ranks Far Above Samsung Galaxy Line In Mobile Ads, Says Velti
Apps: Where’s Twitter Music For Android? Why Today’s Tech Companies Are Still Going iOS First
Apps: Walt Mossberg: How Apple Gets All the Good Apps
Apps: The Data Doesn’t Lie: iOS Apps Are Better Than Android
Apps: Why Android Takes Forever to Get Cool Apps
Apps: Games: Why Game Creators Prefer iPhone to Android
Apps: Games: Game developers still not sold on Android

Business: “Apple’s iOS still dominated the enterprise mobile circuit with 75 percent of total device activations last quarter.”
Business: Google Android’s enterprise problem
Business: Study Says iOS Still Trumps Android at Work
Business: Fortune 500 Companies Moving to iPad Hits 94%
Business: Apple’s iOS continues to dominate the mobile enterprise
Business: Apple may have sold up to 4 million iPhones to businesses in Q4
Business: “Gartner: By 2014, Apple will be as accepted by enterprise IT as Microsoft is today”
Business: Forrester Report Says Apple Will Sell $39 Billion In Macs and iPads To Businesses Over Next 2 Years
Business: Bad news for Android: enterprise share dropped in Q4
Business: More Data Showing iOS, Especially The iPhone, Still Killing It In The Enterprise, At Android’s Expense
Business: Over 80% of organizations plan to support iPhones and iPads
Business: Apps: Why companies are still deploying iOS apps first

Source: “Who’s Winning, iOS or Android? All the Numbers, All in One Place”
Commerce: FAB.COM: More Than A Third Of Our Visits Are Now Mobile–And 95% Of Those Are iPhones And iPads
Consumption: Data: Study finds iPhone owners to be more data hungry than Android users
Consumption: Video: NPD Group: iTunes owns the internet video market
Consumption: Video: Apple Continues To Dominate Mobile Video Viewing, With 60% Occurring On iOS Vs. 32% On Android
Consumption: Video: Apple users watch 2X more video than Android users
Consumption: Video: Watching a Video on Your Phone? You’re Probably Using an iPhone, Not an Android.
Demographics: Android Owners Aren’t Real Smartphone Owners
Demographics: Age: Sorry, Samsung, iPhone Is Not Your Mother’s Smartphone
Demographics: Age: 48% of U.S. teens own an iPhone. 62% plan to buy one.
Demographics: Age: Nearly Half of Surveyed U.S. Teens Using iPhones, Over One-Third Using iPads
Demographics: Age: Greater percentage of Generation Y own iPhones than any other age group
Developers: Android fragmentation predicted to squeeze out independent developers
Developers: Apple And Google’s App Stores Now Neck And Neck – Except On The Metric That Matters Most To Developers
Engagement: Why Aren’t Android Users Actually Using Their Handsets?
Engagement: Validating the Android engagement paradox
Engagement: iPhone users found to spend more time on their handsets
Forks: Google’s penetration of Android
Forks: Google Shuts Down Its Shopping Service in China
Fragmentation: Fragmented Android drives big dev to Apple
Fragmentation: Google engineers: We’re trying to fix Android fragmentation
Loyalty: Survey Suggests, Loyalty, Upgrade Frequency, Says Raymond James
Loyalty: Survey shows iPhone loyalty still beating out Android
Loyalty: Apple Has The Most Devoted And Loyal Computer Users [Report]
Loyalty: Survey: Apple to Eclipse Android by 2016
Loyalty: Android’s Leaky Bucket: Loyalty Gives Apple the Edge Over Time
Malware: Mobile malware exploding, but only for Android
Malware: Malware On Mobile Grew 163% In 2012, Infecting Around 32.8M Android Devices
Malware: 99.9% Of New Mobile Malware Targets Android Phones
Malware: Spam: Nearly 60K Low-Quality Apps Booted From Google Play Store In February, Points To Increased Spam-Fighting
Reliability: Apple’s iPhone tops smartphone reliability ratings by wide margin
Retail: Apple retail revenues per visitor reach new record
Retention: The iPhone’s Greatest Weapon: Retention
Retention: Android’s Leaky Bucket

Source: Apple’s 500M user accounts second only to Facebook, viewed as key driver of future growth
Revenue: Canalys: Apple dominates with 74% of worldwide mobile app revenue
Revenue: Apple: App Store Now Makes Over $1 Billion In Profits Per Year
Revenue: iOS App Store accounts for nearly 75% of mobile app download revenue
Satisfaction: iPhone dominates in customer satisfaction
Satisfaction: iPad tops in satisfaction among tablet owners
Satisfaction: J.D. Power: Apple iPad ranks highest in tablet customer satisfaction for second consecutive time
Satisfaction: J.D. Power: Apple ranks highest in smartphone customer satisfaction for 9th consecutive time

Source
Security: ACLU to FTC: Mobile carriers fail to provide good Android security
Shopping: Online: Apple’s iPad dominates online shopping traffic & revenue generation
Store: iTunes: NPD: Apple’s iTunes accounts for 67% of TV downloads, 65% of movies
Support: Apple tops Consumer Reports survey on PC tech support
Trade-In: Study finds Apple’s iPhone retains more value than top Galaxy models
Trade-In: Galaxy S4 announcement spurs trade-ins of other Samsung phones, not iPhones
Updates: Why Android Updates Are So Slow
Usage: You Spend a Lot of Time With Your Mobile Device at Home — Even More if It’s an iPad
Usage: Apple’s iPad expands lead in tablet use at the expense of Amazon, Android, Microsoft Surface
Usage: Apple devices dominate in-flight Wi-Fi usage
Usage: Apple iPad continues domination with over 80% usage share in U.S. and Canada
Usage: Apple rules the skies with 84% in-flight share vs. Android’s 16%
Usage: Apple’s iOS continues to dominate with nearly 60% Web usage share vs. Android’s 26%
Usage: Apple’s iOS ups massive lead over Android in U.S. Web traffic with 69% share in April
Usage: Apple iPad dominates website traffic tablet share
Usage: Apple iPhone users use their devices 55% more than Android users
Usage: Safari jumps to 61 percent of mobile browser share
Usage: Android might own 75% of the smartphone market but all the action is still on the iPhone
Usage: Why The iPhone’s Usage Advantage Over Android Remains So Important
Usage: 5 Apples for every Android on Gogo Inflight Wi-Fi networks
Usage: Apple’s growing dominance of the mobile Web
Usage: Android’s Web share slipped in May, despite 10 million Galaxy S4s
Usage: iPhone owners are on their phones 53% more than Android users
Usage: The Android Conundrum: People Buy More Phones And Do Less With Them
Usage: Apple Is Destroying Android In Mobile Web Usage–Which Begs Key Question: Who Uses Android?
Usage: Apple Is Destroying Android In Mobile Web Usage–Which Begs Key Question: Who Uses Android?
Usage: Is It Time To Conclude That Android Gadgets Are Bought By People Who Don’t Actually Do Anything With Them?
Usage: Apple Continues Its Mobile-Browser Domination
Usage: Apple’s iPad Dominates Tablet Web Usage with 82% Share.
Usage: Android users: More of them than fanbois, but they don’t use the web

Vertical Markets: Doctors Are Choosing iPad Tablets Over Other Devices, Survey Says
Vertical Markets: Hospital Calculates The ROI Of An iPad At 9 Days
Vertical Markets: Why Android is losing in aviation
Vertical Markets: As medicine goes digital, Apple’s iPad is top choice among doctors

4 Mobile Business Models, 4 Ways To Keep Score

The hundred meter dash, archery, weightlifting and the long jump are four very different Olympic sports with four very different methods of keeping score. The hundred meter dash is scored on speed. Archery is scored on accuracy. Weightlifting is scored on strength. The long jump is scored on distance. You don’t judge the participants in the hundred yard dash by how much weight they can lift. That would be the wrong way to measure them.

“…looking at ‘smartphone share’ or ‘profit share’ or ‘platform share’ all tell you something about the industry, but all three metrics mislead you if you try to treat them as a way to see who’s ‘winning’, because ‘winning’ means different things for Apple, Samsung or Google. After all, Google may well still make more money from searches on iOS than it does from searches on Android.” ~ Ben Evans, On market share

Hardware manufacturing, advertising, “razors-and-blades” content sales, and platforms are four very different business models and they have four very different methods of keeping score too.

You don’t take the metrics used to measure one business model and apply them to another business model. That would be the wrong way to measure them.

Each business model demands its own specific forms of scoring. The goal should be to devise, discover, or discern a form of measurement that properly and accurately reflects how a business is performing in the business model in which it is participating.

Biathlons, Triathlons and Decathlons are all unusual Olympic events in that they group together several disparate sports and then determine an overall winner. Think of Apple, Google, Samsung, and Amazon as Olympic teams that compete with one another in the four interrelated mobile business models – hardware manufacturing, advertising, “razors-and-blades” content sales, and platforms – a sort of Quadrathlon. Each team has its strengths and its weaknesses, each team wants to win the events that they’re best at and maximize their score in the other events in order to win the overall Quadrathlon.

Let the games begin!

Hardware Manufacturing

Last week I tried to explain how using only market share to analyze mobile hardware manufacturing was not only the wrong way to keep score of that business model but that it was actually obscuring the real score.

“The truth is that focusing on market share as the primary metric is the only way to paint the iPhone as anything other than a roaring success.” ~ John Gruber

I suggested an alternative measurement known as the “Fair share profit analysis,” in order to generate some perspective but, truth be told, the only real way to accurately “score” who’s winning in hardware manufacturing is with net hardware profits. When it comes to selling mobile hardware, do Apple, Samsung, HTC, Motorola, etc. really care what their market share is? No they do not. That’s the top line, a means to an end. The only thing that matters when they are selling mobile hardware is profit. That’s the bottom line, the end for which the means were made. Market share is all well and good but only if it brings home the profits. Keep your eyes on the prize – and profits are the prize.

So who’s winning the medals in the olympic sport of mobile hardware manufacturing?

Source: “Who’s Winning, iOS or Android? All the Numbers, All in One Place”

Awards Ceremony: Apple walks away with the Gold (both figuratively and almost literally), Samsung takes the Silver and no one else even medals. The Bronze podium stands empty.

Advertising

The only proper way to score advertising is net advertising profits retained. Market share and platform may be used to garner advertising revenue but they are only the means and they should never be confused with profit, which is the end.

Today, there are three great truths in mobile advertising:

1) Google is killing it in mobile advertising.
2) Google is killing it in mobile advertising…but mobile advertising is still relatively small; and
3) The vast majority of Google’s mobile advertising revenue is generated on the iOS platform, not the Android platform.

1) Google is killing it in mobile advertising.

Google dominates the mobile search market with 93% of US mobile search advertising dollars, according to eMarketer. Facebook is at No. 2.

2) Mobile advertising is still relatively small.

The mobile ad market alone stood at roughly $4.1 billion at the end of last year, up from $1.5 billion at the end of 2011. Google, currently has more than half the mobile ads market with annual revenues of around $2.2 billion.

Just to keep things in perspective, mobile ad revenue only accounted for 9% of all online ad revenue last year, although the percentage of mobile ads vis-a-vis other online ads is rapidly growing. And mobile ad revenues paled in comparison with mobile hardware sales. While it took an entire year for ALL mobile ad revenue to reach $4.1 billion, Apple alone, and in 90 days, and in what many considered a down quarter, brought in revenues of approximately $31.4 billion just from iPhone and iPad sales.

3) Google is making its advertising money on iOS, not Android

“(I)t’s Android’s large market share that is the winner for Google. The more Android devices being used, the more Google services with Google ads are being used.” – Virtual Pants

Actually, not so very much. Most of Google’s advertising dollars are generated by iOS’s relatively smaller market share, not by Android’s massive market share.

Source: MoPub

Take a good hard look at the chart, above. The iPhone ad spend doubles the ad spend share of ALL of Android. The iPad almost matches ALL of Android BY ITSELF. And even the lowly iPod has one-quarter of the ad spend that ALL of Android does. Market share is all that matters? I don’t think so. That’s like arguing that acreage is all that matters in real estate. The size of the lot does matter in real estate but location, location, location matters more, more, more. And market share does matter in mobile advertising but it is the location of the market share that matters even more.

— Apple’s iOS Mobile Ad Metrics Dominates Android

— Why 75 cents of every dollar spent on mobile advertising is spent on iPhone and iPad

— iOS leads Android in mobile ad revenue

— Apple’s iPad dominates online shopping traffic & revenue generation

— iOS Still Top Platform For Monetising Mobile Ads, Opera’s Q1 Study Finds, iPhone Also Beating Android For Generating Ad Traffic

— iPad Still Dominates Tablet Ads With iPad Mini Gaining, Velti Finds

“My belief, though, is that what Google is winning with Android is a booby prize — overwhelming majority share of the unprofitable segment of the market.” – John Gruber

When it comes to ad revenues and profits, we shouldn’t be counting Android as a single entity anyway. Ad revenues don’t help Android, the platform. They help specific digital stores. Ads going to Amazon, Google, and the various stores in China and elsewhere need to be broken out separately, not lumped together.

Awards Ceremony: Google wins the Gold and they win it going away. But they receive their Gold medal standing on the Apple iOS platform, not the Android platform.

Silver and Bronze? I’ll let you decide if it’s Facebook, Yahoo, Microsoft’s Bing or someone else. They’re all so far back that it doesn’t much matter now anyway. That may change over time but we’ll have to wait and see how this market develops.

“Razors-And-Blades” Content Sales

“(T)he razor and blades business model, is a business model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as supplies…” ~ Wikipedia

The “razors-and-blades” business model is tricky to score.

— Hardware revenues and profits mean NOTHING in the “razors-and-blades” model. In fact, it’s not unusual to LOSE money from hardware (razor) sales.

— Market share means both nothing and everything in the “razors-and-blades” model. It means nothing because it doesn’t actually generate any profits but it means everything because it is a prerequisite to generating profits. In fact, the only reason you’re giving away your hardware in the first place is to acquire massive market share which, in turn, will hopefully lead to massive profits.

— Ultimately, the only way to measure the success of the “razors-and-blades” model is on the net profits generated by the sale of the complementary goods (razors). In mobile, the complementary goods are content such as music, video, books, etc. and apps. Amazon also has the added advantage of being able to sell everything from their sprawling retail catalog.

As I tried to explain in my tersely titled article: “Selling The Amazon Kindle Fire and Google Nexus 7 Is As Silly As Selling Razor Blades To Men Who Love Beards“, the “razors-and-blades” model makes no sense in this market space. At least it makes no sense to me. In the “razors-and-blades” model, the complementary sales – whether it be blades for razors, or ink for inkjet printers or games for gaming consoles – must be proprietary and must command a premium price. That’s the whole point. Give away the razor, make it back – and more – by selling the blades at a premium.

If you’re selling content, you want to be platform agnostic so that you can sell as much content as possible. This, in my opinion, should be Amazon’s strategy.

If you’re giving away hardware in order to sell content, then you want that content to be tied to your hardware product so that you can monopolize the sale of the complementary product and command a premium price.

In the mobile space, the complementary sales ARE NOT proprietary, they ARE subject to competition and they DO NOT command a premium price. Amazon and Google don’t sell content that is any different or superior to that being sold by Apple and other content providers and their content isn’t being sold at a premium. In fact, Amazon often sells their merchandise at a DISCOUNT which – in the “razors-and-blades” business model – is completely bat-manure crazy. ((Then again, we all know that Jeff Bezos is crazy like a fox.))

So who’s winning in the “razors-and-blades” business model? Why, surprisingly, it’s Apple and it’s Apple in a runaway.

— Google Play now at 90% of iOS app store downloads; iOS still holds a 2.6X revenue lead

Despite growing competition from other tablets, Apple’s iPad still accounts for a whopping 89.28 percent of e-commerce website traffic, and also rakes in more money on a per-user basis than any other platform. ~ Monetate

Distimo reports that iOS App Store revenues were 430% larger than Android during 2012. ~ Apple F2Q13 Earnings Call

“…iTunes inclusive of Apple’s own Software generates as much as 15% operating margin on gross revenues. That’s over $2 billion a year.” ~ Asymco, So long, break-even

Source: Canalys

Apple sells their content, not in order to make money but, in order to make their hardware more attractive so that they can sell ever more hardware and make ever more profits. With regard to tablets, Apple is playing the OPPOSITE game that the Amazon Fire and the Google Nexus are playing. While Amazon and Google subsidize their tablets (razors) in order to make money on the sale of their content (blades), Apple should be subsidizing the sale of their content (blades) in order to make money on the sale of their hardware (razors). But that’s not how Apple rolls. Instead, Apple sells their hardware at a premium AND they sell their content at a premium. That’s not supposed to happen but that’s just how good the Apple ecosystem is.

It’s like a walk-on winning the Olympic marathon while everyone else is stuck in the starting blocks.

You can say that it’s elitist or arrogant to argue that iOS users are better customers than Android users. But you can also say that it’s the truth. ~ John Gruber, Church of market share

One last thing. If Amazon and Google have an incentive to sell discounted hardware and premium content and Apple has an incentive to sell premium hardware and discounted content, one of those business models is going to fail and it’s going to fail hard. Since Apple is, so far, successfully selling premium hardware AND premium content, I’ll let you be the judge of how this is going to play out.

Awards Ceremony: I’m tempted to award all three medals to Apple just for having the sheer audacity to win a game that they didn’t even enter. But I guess Apple will have to console themselves with just winning the Gold.

And the Amazon Fire and the Google Nexus tablets? Disqualified for not understanding the rules of the game that they were playing.

Remember, Amazon and Google sell their hardware at cost. They don’t make a penny off those sales and they might even be taking a loss.

Market share? Yes, they have taken some minor market share…in a market where they are GIVING AWAY THEIR MERCHANDISE. And market share is not how you score in the “razors-and-blades” game. While the press and the pundits fawn over the market share of the Amazon Fire and the Google Nexus, what they’re entirely missing is that in the “razors-and-blades” business model, market share should be a GIVEN. I mean, honestly, if you can’t obtain overwhelming market share when you’re giving away your product at cost, then you should be ashamed, embarrassed, abashed, chagrined, humiliated and mortified ’cause you’re doing something terribly, terribly wrong.

You win the “razors-and-blades” game by scoring the most content profits. All those Amazon Fire and Google Nexus market share numbers that the analysts are always going gaga over? Meaningless. They should be removed from the count. They’re probably not hurting the sales of the other available tablets and they’re not helping the bottom lines of their makers either. There is zero proof that Amazon and Google’s hardware giveaways have led to increased retail sales which, after all, in the “razors-and-blades” model, IS the point.

And if you’re going to prophesy that market share alone gives Google data that will someday, somehow, be worth something to someone, then you need to go back and re-read how the “razor-and-blades” business model is scored.

What we desperately need in analyzing mobile computing is far more attention paid to profits and far less attention paid to prophets.

Next Time

Next time I will finish with the “mother” of all business models – platforms – and do the medal count.

Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

Read Part One of John’s column entitled: Android’s Market Share Is Literally A Joke

Read Part Three of John’s column entitled: Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

The author would like to gratefully acknowledge the contributions of Ben Bajarin and Steve Wildstrom. All the great ideas, that you agree with, were theirs. All the bad ideas, that you disagree with, were mine.

Android’s Market Share Is Literally A Joke

This is the first of three articles looking at how we measure – and mis-measure – who is “winning” in the mobile sector. Article one focuses on market share and was inspired by an article written by Bill Shamblin, entitled: “Chasing Smartphone Market Share Is A Chump’s Game.” Article two will focus on the proper way to measure or “score” mobile hardware manufacturing, mobile advertising and the “razors-and-blades” content models. Article three will focus on the role that market share plays in the network effect and will examine the proper way to measure or “score” how well a platform is doing.

The Joke

Have you heard this one?

Two farmers bought a truckload of watermelons, paying five dollars apiece for them. Then they drove to the market and sold all their watermelons for four dollars each. After counting their money at the end of the day, they realized that they’d ended up with less money than they’d started with.

“See!” said the one farmer to the other. “I told you we shoulda got a bigger truck.”

Or how about this one?

Android is winning because they got a bigger truck.

The Joke Is On Us

Both “jokes” are based upon the old saw that one can lose money on every sale but make it up in volume. Unfortunately, the joke is on us because this is exactly the kind of nonsensical analysis that is being doled out by tech pundits and lapped up by the press and investors. You think I’m exaggerating? Take a gander at some of these recent tech headlines:

— Android is crushing Apple and Microsoft in the mobile device market
— Android looks like it’s winning
— CHART OF THE DAY: The iPhone’s Market Share Is Dead In The Water
— Despite its upmarket history, Apple needs to compete on price
— Gartner: Apple falls below 20% in smartphone market share
— Harvard Liquidates Apple Stake After IPhone Sales Lose Steam
— How Apple Is Losing Mobile
— IDC: Apple’s share of worldwide tablet market drops under 40%
— iPhone growth stalls as Android continues to nip away at Apple’s market share
— iPhone Market Share Stuck At 18%
— Nearly 75% Of All Smartphones Sold In Q1 Were Android
— Sharp to seek Samsung edge for survival as Apple sales lose steam
— Why Android Is Winning The Tablet Wars

I could link to a dozen more headlines just like them. These headlines – or their underlying articles – all have two things in common:

1) They contend that Android is winning and Apple’s iPhone is in deep, deep trouble; and
2) They point to market share as the sole or primary basis for their conclusion.

TechCrunch sums up the thoughts of many this way:

“The latest numbers are in: Android is on top, followed by iOS in a distant second. There is no denying Android’s dominance anymore. There is no way even the most rabid Apple fanboy can deny that iOS is in second place now. Android is winning.”

ReadWrite takes it one, final step further, stating:

“The Mobile Battle Is Over – And Google Won.”

In other words, pundits think that Android has won because they “have a bigger truck” (i.e. more market share) – regardless of how much – or how little – profit Android manufacturers make. Android, the pundits opine without a hint of irony, is not making much, if any, money but that’s okay because they’re making it up in volume.

But is that really how market share works? Can you tell how well a company or an operating system is doing solely by measuring its market share?

No, of course not.

Quiz #1: Market Share Alone

Question: Company A has 25% market share. Company Z has 75% market share. Which company is doing better?

Answer: With market share alone, there’s simply no way to know or tell. Company A might be bringing in all the profits and company Z might be going bankrupt.

The Wrong Way To Calculate Who’s Winning

(T)he primary problem with using market share as a measure of business health is it provides no insight into the profitability of the product being sold. ~ Bill Shamblin

Scoring by market share alone and ignoring profit is like saying that a baseball team won because it had more hits when the other team scored more runs. Scoring by market share alone and ignoring profit is like saying that a football team won because it gained more yards when the other team scored more points. Scoring by market share alone and ignoring profit is like saying that a hockey team won because it had more shots on goal when the other team had more goals.

Market share without context is not only useless, it is worse than useless because it is likely to be misinterpreted.

First, market share without context assumes that each percentage of market share is equal to another – that every Android activation is equal to an iOS sale. Nothing could be further from the truth. You can’t simply total up market share and determine a winner any more than you could count up coins or poker chips without knowing the underlying value of those coins or chips. A penny does not have the same value as a quarter and only a small child would rather have more coins than fewer coins but more money.

Second, market share without context implies that market share is a zero sum game – that market share gains for one always result in a loss to another. But in a rapidly growing market, a company can actually LOSE market share yet have both positive unit sales and profit growth. Not growing as fast as another company is not nearly the same as “losing”, especially if the growth is coming in a more desirable portion of the market.

For example, despite a decline in Q1 market share, iPhone sales actually increased based on year over year comparisons. (iPhone sales were not declining,they were growing slower than the overall market.)

The same was true of tablet sales. Last quarter, Apple LOST tablet market share, but because the entire market was rapidly growing, they GREW unit sales by 65%.

Source: Apple 2.0, “Pie charts of the day: Tablet sales grew 140% year over year”

The “Fair-Share” Way To Calculate Who’s “Winning”

What matters is not only market share and not only profit share but the ratio between them. This is called Fair share profit analysis. Fair Share Profit Analysis contends that 1 point of market share should deliver 1 or more points of profit share.

Less than a 1-to-1 ratio of profit share to market share demonstrates that a company is buying market share; that the company has not been able to differentiate its product in the market and is likely competing primarily on price.

More than a 1-to-1 ratio of profit share to market share demonstrates a company’s ability to differentiate its products, provide more value than its competitors, command higher prices, charge a premium and enjoy pricing power.

Quiz #2: Market Share or Profit Share

Question: Company A has 25% market share and 75% profit share. Company Z has 75% market share and 25% profit share. Which company is doing better?

Answer: If you said anything other than company A, then you are dumber than a doorknob. Any intelligent person would take company A’s profit share over that of company Z’s market share.

No one would be confused if Apple had 50 percent market share and 50 percent of the profits. But apparently it’s very confusing to some that Apple has only 5 percent of the market share and well over 50 percent of the profits. ~ John Gruber, The church of market share

Imagine, for example, that Apple were a hamburger chain who made more money than McDonalds, Burger King, and Wendys combined, but only sold 5% of the total hamburgers. Would anyone seriously contend that Apple was “losing” the hamburger wars?

Apparently so. For example, take this analysis from Matt Asay of ReadWrite (please!):

For those who say market share doesn’t matter, that Apple still commands most of the industry’s tablet profits, they clearly haven’t been paying attention to the smartphone market.

It turns out it’s a really big deal to maintain market share, and not simply profits. Profit share follows market share.

Profit share follows market share? Are you kidding me? Show me a business sector where profits have a 1-to-1 correlation with market share and I’ll show you the exception that proves the rule. The reason market share doesn’t necessarily correlate to profit share is because profits are made up of both market share and margins. And market share alone tells us nothing about margins, therefore market share and profit share are almost always going to be unbalanced.

Source: Asymco, Escaping PCs

Take, for example, the Apple Mac. As the pie chart above demonstrates, the Mac has 45% profit share with only 8% of the market share. That means that Apple pulls in an awesome 5.63% of the sector’s profits for each and every 1% of its market share.

Profit share always follows market share? Not hardly.

The truth is, anyone can get market share if they want it badly enough. All they need to do is sell their product at cost, give it away for free or, better yet, subsidize (pay their customers) to take the product off their hands. This is called “buying” market share, but it always comes at the cost of profits.

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

The problem is, you can “cheat” and buy market share, but you can’t do the reverse and “cheat” to buy profits. You have to EARN profits. Buying market share is a downhill race to the bottom but gaining profits is an tortuous uphill climb and it can only be made if the manufacturer is able to produce highly valued and differentiated products. The company that buys market share must inevitably go out of business or reverse its course and fight its way back up to profitability. The company with the value and the profits, on the other hand, has the advantage of holding the high ground and can choose to take market share at will.

Quiz #3: Less Market Share Can Be Better Than More

Question: Company A has 25% market share and 50% profit share. Company Z has 75% market share and 50% profit share. Which company is doing better?

Answer: Anyone with any business sense would say company A.

Company A is commanding 3 times the price of Company Z. The formula is 50% profit share divided by 25% market share (50/25 = 2). This means that for every one percent of market share, company A has two percent of the profit share. Company Z’s position is reversed. For every one percent of market share, they command only 0.5% profit share (50/75 = 0.66). Company Z would have to work three times as hard and sell 3 times as much product just to match the profits of a single sale by company A.

Grading The Contestants

Android accounts for approximately 70% of global smartphone shipments and 29% of global profits. This means that the average Android manufacturer creates just .41% of profit for each point of market share (0.29/0.70 = .414). In other words, the average Android manufacturer needs to capture 2.4 points of market share just to increase their market profit by 1%.

Such a low fair share profit index may indicate that Android manufacturers are:

— Having difficulty differentiating their product;
— Sacrificing profits in order to buy market share (the “race to the bottom”);
— Unable to reach economies of scale in the manufacturing process.

(Profit data, source: Canaccord, Market share, source: IDC)

Samsung is doing far, far better than the average Android manufacturer. Samsung’s 2013 Q1 market share was 33% and its profit share was 43%. This means that Samsung reels in 1.3% of the profits for every 1% of the market share it owns (0.43/0.33 = 1.30). Samsung, unlike all other Android manufacturers, is earning, rather than “buying”, market share.

(Profit data, source: Canaccord, Market share, source: IDC)

Apple’s iPhone 2013 Q1 market share was 18% with 57% profit share. This means that Apple’s iPhone took in a lavish 3.12% ((0.57/0.18) of all profits for each 1% percent of market share it controls.

If Android manufacturers needed to sell 2.4 phones just to gain 1% profit share, they would need to sell a staggering 7.5 units just to match the profits that Apple garnered from the sale of a single iPhone.

As Daniel Eran Dilger puts it:

“… Apple could simply have blown through much of its $13.1 billion quarterly profit to “beat” Samsung in market share, rather than allowing Samsung to do that while earning $4.8 billion less than Apple.”

Further, in 2012 Q1, Apple held 23% market share and 74% profit share. This means that each 1% of market share was equal to 3.22% (0.74/0.23) of the sector’s profit share. Apple’s market share to profit share ratio remains almost identical, which means that Apple has maintained its pricing power. Not only that, by focusing on just a few smartphone models, Apple has become the low-cost manufacturer in smartphones as well.

Source: Ben Evans, Mobile is eating the world

Take a good hard look at the chart, above, then go back and re-read the headlines I listed at the start of this article. What each and every one of those headlines is contending is that Android is winning and Apple is losing because Apple doesn’t control the green portion of the chart, above.

I mean, honest to goodness, take a look at the total units sold compared to the paltry profits obtained from those green sales. Who in their right mind would even WANT that market share?

Price Elasticity

What we’re really talking about here is the economic concept of price elasticity. “Price elasticity” seems to be way beyond the pay grade of most pundits and analysts who follow the mobile sector, but what it essentially means is that when the price of something goes down, sales almost always go up, but the rate of that sales increase depends upon the price elasticity of the product. In other words, dropping prices may increase sales but the increased sales may result in disproportionately larger or smaller profits.

Unless we truly understand the price elasticity of the iPhone, we really shouldn’t be calling for Apple to drop its iPhone prices.

Summation

It isn’t what we don’t know that gives us trouble, it’s what we know that ain’t so. – Will Rogers

Not only do the high priests of market share have it wrong, they have it exactly backwards. The company with the lower market share and the higher profits has all of the leverage. The goal is to INCREASE, not decrease, the ratio of profits to market share. Increasing market share at the cost of profits is a recipe for disaster, not a formula for success.

Apple may or may not do well in the future but right now, and contrary to popular belief, they are winning the smartphone wars and winning them handily.

RATIO OF PROFITS TO MARKET SHARE
3.12% Apple
1.30% Samsung
0.41% All Android

Not only is market share not the best way to evaluate the relative positions of competitors but, without context, it is one of the worst. Assuming that market share will always bring you success is like assuming that a bigger truck will always bring you bigger profits. It’s literally a joke.

Next, I’ll talk about how market share affects hardware manufacturing, advertising and the “razors-and-blades” content models. The series will conclude with a discussion of platforms and the network effect.

Read Part Two of John’s column entitled: 4 Mobile Business Models, 4 Ways to Keep Score.

Read Part Three of John’s column entitled: Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

Google’s Android And The Path Not Taken

Yesterday, Google held its I/O keynote address. Ben Thompson of “stratēchery” has written an excellent article entitled: THE ANDROID DETOUR. I highly encourage you to take the time to read it. I’m going to re-state and build upon his thoughts here.

1) In 2007, Apple introduced the iPhone. Google’s then CEO, Eric Schmidt was a member of Apple’s board and an honored guest at the iPhone presentation. It appeared that all was right with the worlds of Apple and Google – Apple was going to do its hardware thing and Google was going to do its services thing and a new era of mutually beneficial cooperation was about to begin.

2) In 2008, Google introduced Android – a direct competitor to Apple’s iOS – and the Apple/Google alliance quickly began to unravel. Schmidt soon left Apple’s board, Steve Jobs later vowed to go “thermonuclear” on Android and the Apple/Google alliance was over almost before it had begun.

3) It’s clear that pre-iPhone, Google was initially aiming Android as a Blackberry and Microsoft Mobile competitor, but as soon as the iPhone appeared on the scene, Google’s Android focus dramatically shifted. Assuming that competing with Apple was the right strategy, Google should be given all the credit in the world for pivoting as rapidly as they did from their original plan to creating a legitimate iPhone competitor.

4) As an aside, I also give Microsoft lots of credit too. When the iPhone initially appeared, Microsoft didn’t foresee the danger it posed. But soon afterwards, they not only recognized the danger but they acted and acted decisively. They took the radical step of abandoning Windows Mobile altogether and initiating their new Windows Phone 7 platform. It was a bold move, but as history as shown, it was one year too late. Windows Phone 7 (now 8) has never gotten any traction and it languishes in third place, just above the rapidly fading Blackberry OS.

5) I think I could make a pretty compelling case that Google should never have made Android a competitor to Apple’s iOS. By doing so, they destroyed a promising alliance and, perhaps, took a long, long, detour down a path that they never should have taken. But that’s all moot now. We’ll never know how that alternative reality would have played out, so there’s little point debating it.

6) What can’t be debated is the effect that Apple’s iOS and Google’s Android have had on the incumbent smartphone competitors. Palm and WebOS were wiped out. Blackberry was devastated. Nokia was humbled. Microsoft Windows was abandoned and replaced by Windows Phone 7.

Pundits often frame the smartphone/tablet wars as a battle between Apple’s iOS and Google’s Android, but in reality, those two operating systems – with Apple descending from above and Android rising from the below, crushed the existing smartphone competitors between them.

There is little proof that Android has ever made any significant income for Google, but if the destruction of their enemies was Google’s aim, then there is no doubting that the Android strategy was eminently successful.

7) Google’s I/O keynote barely even mentioned Android or any kind of hardware at all. If there was a common theme, it was about service unification between Chrome and Android.

Instead of an updated Nexus 7 tablet or a new Chromebook model, Google spent three hours during Wednesday’s keynote to discuss services and feature upgrades for both Chrome and Android.

If I could describe #io13 in one word it would be “unification”. Same features, services, UI and experiences on Chrome and Android. ~ Kevin C. Tofel

I think that Ben Thompson is spot on with this analysis:

“Services are where Google excels, and it’s where they make their money. It’s why they make the most popular iOS apps, even as their own OS competes for phone market share.

Apple, on the other hand, makes money on hardware. It’s why their services and apps only appear on their own devices; for Apple, services and apps are differentiators, not money-makers.”

“Apple invests in software, apps, and services to the extent necessary to preserve the profit they gain from hardware. To serve another platform would be actively detrimental to their bottom line. Google, on the other hand, spreads their services to as many places as possible – every platform they serve increases their addressable market.”

8) The battle for mobile is over. Apple’s iOS and Google’s Android reign as a duopoly and Microsoft and Blackberry hang on by the skin of their teeth. Google is free to put its web services on Android and iOS and to ignore the Blackberry and Windows 8 operating systems. Android has ensured that Google’s services are freely accessible on the only two operating systems that matter. The Android strategy was a success although, perhaps, at great cost. Google’s I/O keynote is living proof that Google is now re-focusing on their original mission of dominating web services.

Apple Is Playing Chicken With The Mobile Carriers

“The game of chicken, also known as the hawk-dove game or snow-drift game, is an influential model of conflict for two players in game theory. The principle of the game is that while each player prefers not to yield to the other, the worst possible outcome occurs when both players do not yield.” ~ Wikipedia

800 Android Carriers vs. 240 iPhone Carriers

“The narrative has been focused on the consumer demand, and the narrative needs to shift to the operator…” ~ Horace Dediu, former in-house analyst for Nokia

Android sells devices through almost all of the world’s 800 carriers while Apple sells the iPhone through only about 240. (Only about 500 of the world’s global operators have the network capabilities needed to handle the iPhone, but that number is quickly increasing.)

The reason for the discrepancy between the number of carriers supplying Android and the iPhone is that Apple prices their phones above $600 and places sales quotas and other requirements on the carriers before they are permitted to sell the iPhone. Potential partners must determine whether taking on these obligations is worth the benefit of offering the device.

Examples of holdouts are China Mobile Ltd., the world’s biggest phone company, and NTT DoCoMo Inc., Japan’s largest mobile carrier. On the other hand, other companies are succumbing to Apple’s demands. T-Mobile added the iPhone to its lineup in April and they announced that they have sold 500,000 iPhones in just under a month. And U.S. Cellular (USM), had long contended that the iPhone cost too much, yet last week they announced that they had agreed to sell $1.2 billion worth of handsets over three years, after conceding that their failure to carry the iPhone was costing them customers.

Are The Carriers In Control…

Adam Satariano of Bloomburg reviewed the current carrier impasse and concluded:

“Apple Inc. (AAPL) is missing out on a chance to court as many as 2.8 billion new smartphone customers, many of them in Asia, as wireless-service providers balk at conditions imposed by the iPhone maker and drag their heels in signing on as partners.”

“Carriers are starting to question Apple’s pricing strategy and are supporting multiple other platforms,” said Shah at Strategy Analytics. “They no longer need Apple.”

…Or Is Apple In Control?

The unasked question here is: If Apple is losing the opportunity to sell more iPhones because of their onerous conditions, then why does Apple continue to impose those conditions? The unstated answer should be – but apparently isn’t – obvious.

Clearly Apple – unlike the vast majority of tech pundits and Wall Street Analysts – does not see a pressing need to acquire additional operators at any cost. Of course Apple wants more customers, and that’s only going to happen if Apple expands its carrier base. However, unlike most of the rest of the world, Apple feels that they can patiently wait until the carriers come to them and meet their terms. Does that make Apple arrogant and out-of-touch with reality or does that make them master negotiators?

Four Realities That Favor Apple: Capacity, Real Growth, Retention and Profits

First, Apple was at their iPhone manufacturing capacity for much of the holiday quarter. It doesn’t make much sense for Apple to increase the number of addressable customers until and unless they have the capacity to provide those new customers with product.

Second, as you can see from the trajectory of the chart of the iPhone’s cumulative sales, above, Apple is still enjoying significant real growth in the sales of their phones. This truth is often obscured and overshadowed by market share numbers.

Third, as markets approach saturation in the U.S. and Europe, retention and churn become far bigger issues and when it comes to customer satisfaction and retention, Apple has it all over their competitors.

Notice how Apple started with only AT&T in the U.S., and then slowly and methodically ground down the opposition of the other carriers until Verizon, then Sprint, then T-Mobile, then U.S. Cellular and many other small carriers caved in as the churn caused by the iPhone crushed their sales and then caved in their profits.

Fourth, Apple takes in 57% of the profits in the mobile industry with only 8% of the sector’s market share. That is some serious leverage.

Apple is Enigmatic But Still Susceptible To Analysis

I contacted Apple to see what their actual negotiation strategy was but, oddly, they were not very forthcoming. Go figure. Tim Cook has failed to return my several calls (or even had the courtesy to lift the current restraining order against me) and my $605,000 attempt to have coffee with him failed when it was discovered that I had used a stolen credit card. C’est la vie.

So we’re going to have to use analysis (i.e., guesswork) instead. My best guess is that Apple’s strategy is to go after the whales and ignore the minnows. (The minnows will fall all over themselves to jump on board once the whales are lined up, anyway.) Apple only has so much capacity to manufacture phones as it is and they’d prefer to expand first in those markets that count and count the most.

Further, Apple is a damn patient negotiator. While the rest of the world is screaming at the top of their lungs that Apple has to “DO SOMETHING”, Apple is patiently waiting for the carriers to realize that they can’t compete without the iPhone in their mobile portfolio. And based upon the capitulation of Sprint, T-Mobile and U.S. Cellular, Apple may just be right.

So who will win this game of Chicken? Right now, Wall Street and a whole lot of investors are betting against Apple. But if you look at the history of Apple’s negotiations with the music labels, with AT&T and with all of Apple’s recent carrier acquisitions, you can see that Apple has played – and won – this game before.

Only time will tell us which side will blink first. But me – I’m not betting against Apple.

Are Google Apps On iOS A Trojan Horse Or A Concession to Apple’s Dominance?

Grin And Bear It

Aside from Google Maps and Google Now, many users would sooner tap on Gmail, Google Chrome, and Google Drive than the apps Apple would much rather you use, and the result is completely antithetical to Apple’s insistence of a controlled ecosystem and specific apps within a walled garden.

Google apps are besting the iPhone’s default software, and Apple has to grin and bear it. ~ Mike Schuster, USA Today

Apple has to grin and bear it? Do they? Or is it actually the other way round and Google is the one who has to grin and bear it?

App Revenue

Apple’s iOS ecosystem is crushing Google’s Android in dollars generated from App sales.

“Cumulative app downloads have surpassed 45 billion and app developers have made over $9 billion for their sales through the App Store, including $4.5 billion in the most recent four quarters alone. Canalys estimate the sales from our App Store accounted for 74% of all app sales worldwide in the March quarter.” ~ Apple Earnings Call

According to a new report from app analytics firm App Annie, the iOS App Store has maintained its lead in terms of monetization, earning around 2.6 times more revenue in the last quarter. During the holiday season – when users are receiving, activating and then filling new smartphones and tablets with apps – that lead was even higher, with iOS generating roughly four times more revenue.

Ad Revenue

Whenever it’s pointed out that Apple developers make far more income than do Google developers, Android advocates quickly point out that Google is an advertising company and that they and their developers make their money through advertising rather than through the sale of Apps. Only here’s the thing…

… 75 cents of every dollar spent on mobile advertising is spent on iOS, not Android.

“…iPhone, iPad, and yes, even iPod touch ad rates are much higher. While Android smartphones draw $.50 CPMs (cost per thousand impressions), iPhones pull in $.65 to $.88 CPMs, iPod Touches do $.74 to $.98, and iPads do between $.82 and $1.16.” ~ Venturebeat

As you can see from the chart, below, what’s utterly amazing is that the iPad alone makes almost as much advertising revenue as all of Android put together.

Convoluted Logic

I have heard it said that Google’s excellent iOS software is a Trojan Horse that will make it easier for iOS users to switch from iOS to Android. But I fail to see how Google’s efforts to improve their iOS software – and therefore improve the iOS experience – either harms the iOS platform or makes it more likely that iOS users will leave the platform.

Google is not creating iOS Apps out of the goodness of their hearts. They make money when people use their apps and consume their advertising. And right now, the bulk of the app money and the bulk of the mobile advertising revenue is being made on iOS. If Google wants to stay in the game, then they’ve got to deign to play on Apple’s turf. It’s as simple as that.

Apple In Perspective

Apple has been taking a real beating on Wall Street and in the press lately. But are we losing our long-term perspective by focusing so intently on quarterly results?

Stock Market

The Stock Market is a predictor of future growth, but it is hardly infallible. Seven months ago the market was predicting spectacular growth for Apple. Today it’s predicting almost no growth at all, worse than Dell and HP. Was the market wrong seven months ago or is it wrong today? Or both?

Growing Markets

Take a broader look at the computing markets. We are transitioning from notebook and desktop computers to mobile phones and tablets. No one is in a better position to benefit from this changeover than Apple. They were first-movers in both phones and tablets and they continue to devour the bulk of those sector’s profits. Apple’s path is not unimpeded, but they still have the inside track.

iPhone & iPad Sales

Last quarter, Apple sold 37.4 million iPhones for 7% growth and 19.5 million iPads for 65% growth.

Remember all that talk about suppliers cutting orders and how it meant that Apple wasn’t selling as many phones and tablets as before? Yeah, not so very much.

China

“iPad experienced very strong year-over-year growth in every operating segment, particularly in Greater China and Japan where sales more than doubled year over year.”

The highlights for the quarter in China were that iPads grew 138% year-on-year, and we set new records for sell-through both for iPhone and iPad during the quarter.” ~ Peter Oppenheimer

Remember all that talk about Apple not doing well in China? Yeah, not so very much.

Business

“…the Good Technology’s data that says that iOS accounted for 77% of all their activations by their corporate customers. Now that would not include BlackBerry, but it would include all the other guys. and so we seem to be doing really well and honestly, I don’t see the recent announcements changing that at all. I’ve seen more and more people developing more and more custom apps for their businesses on iOS to be used on iPad and we’re very, very bullish on it. As a matter of fact, just to quote you some numbers, iPad now is being used in 95% of the Fortune 500 and what’s even more impressive probably is on the global 500 companies, we’re now in 89%.” ~ Peter Oppenheimer

Remember all that talk about Apple’s iPhone and iPad not doing well in business? Yeah, not so very much.

Unique Advantages

Critics dismiss Apple as un-innovative, passé and niche. But Apple retains distinctive differences that give it unique advantages in the the newly emerging mobile markets:

— App Stores in 155 countries

— iTunes in 119 countries

“Today, our iTunes store offer the broadest combination of geographic reach in content depth in the industry, and they surpassed quarterly billings of $4 billion for the first time ever in the March quarter, that’s a $16 billion annual run rate making our digital content stores the largest in the world. The quarter’s iTunes billings translated to record quarterly iTunes revenue of $2.4 billion, up 28% from the year ago March quarter with new quarterly revenue records for music, movies, and apps. ~ Peter Oppenheimer

— 300 million iCloud users

— Highest loyalty and customers satisfaction rates in the business

“A recent study by Kantar measured 95% loyalty rate among iPhone owners, substantially higher than the competition, and iPhone remains top in customer experience. Last month, we were very pleased to receive the number one ranking in smartphone customer satisfaction from J.D. Power and Associates for the ninth consecutive time.” ~ Peter Oppenheimer

“The most recent survey published by ChangeWave indicated a 96% satisfaction rate among iPad customers.” ~ Peter Oppenheimer

— Developers

…(W)ith App Stores in 155 countries that encompass almost 90% of the world’s population, our developers have created more than 850,000 iOS apps, including 350,000 apps made for iPad.”

“Cumulative app downloads have surpassed 45 billion and app developers have made over $9 billion for their sales through the App Store, including $4.5 billion in the most recent four quarters alone. Canalys estimate the sales from our App Store accounted for 74% of all app sales worldwide in the March quarter.”

“…(W)e are now paying very happily our developers more than $1 billion every quarter.” ~ Peter Oppenheimer

Revenues, Profits And Margins

Apple had $43.6 billion in revenue. What other company had comparable revenues?

Apple had $9.5 billion in profits. What other company had comparable profits?

Apple had 37.5% margins which is astonishing for a hardware company and compares quite favorably to the margins of both Google and Microsoft, which are primarily software shops.

Courtesy of Asymco

It seems that Apple compares favorably to every other company in the world other than the Apple of 12 months ago.

iPhone 4

“Now, that said, we see an enormous number of first time smartphone buyers coming to market, particularly, in certain countries around the world. And so what we’ve done with that is and we started last quarter is we’ve made the iPhone 4 even more affordable and which has made it more attractive to first time buyers and we caught up on the – our supply – demand towards the late in the quarter last quarter and we are continuing to do that in other markets. And we believe that the phone or the price point that we are offering is an incredible value for people, that allows them to get into the ecosystem with a really, really, phenomenal product.”

One thing that hasn’t been getting enough attention, or rather hasn’t been getting the right kind of attention, is the continued sales of the iPhone 4. The iPhone 4 is now over two and a half years old but it continues to sell well in developed markets like the United States and Europe and in developing markets like China, India and Brazil. How can this be? Is there any other phone manufacturer who could successfully sell a phone that is two generations and two years out of vogue?

The iPhone 4 is proof that buyers are buying Apple’s ecosystem, not just their hardware. So long as Apple maintains a lead in integrating hardware, software and services, they will maintain an edge in mobile computing.

And as an added bonus, while the iPhone 4 may be bring the iPhone’s average sale price down, the sale of this older technology should be bringing the iPhone’s margins up.

Apple’s Long-Term Outlook

“We are managing the business for the long-term and are willing to trade off short-term profit where we see long-term potential. The iPod is a great example of this. When we launched it in 2001, its margins were significantly below the margins of Apple at that time.

Four years later, the iPod and the iTunes Music Store comprised half of Apple’s revenues and inspired us to build the iPhone. The iPad mini is another great example. We have priced it aggressively and its margins are significantly below the corporate average. However, we believe deeply in the long-term potential of the tablet market and think that we’ve made a great strategic decision. We’ll only make great products and this precludes us from making cheap products that don’t deliver a great experience.”

If you look at Apple’s numbers for this quarter and the next, you might think you see a company in decline. But if you look at Apple’s numbers over the fiscal or annual year, you see anything but decline. Let’s put this in perspective: Would you rather have Apple’s profits or those of Google, Amazon, Microsoft or Samsung? Once you put it that way, the answer as to how Apple is doing becomes clear.

Apple dominates the most dominant tech sectors of our times. And unless I’m gravely mistaken, that’s a good thing. A very good thing.

Touch Computing Is Touching Every Part Of Our Lives

We Live In Amazing Times

We live in amazing times. The modern smartphone (really, a portable pocket computer) is only 6 years old. The modern tablet is only 3 years old. Yet the combination of the internet, simplified touch computing, wireless data downloads and the availability of cheap, innumerable applications on demand, has wholly revolutionized what computing is and will become.

Affecting Our Lives

Touch computers are already a pervasive part of our lives:

— 49% of the entire U.S. population uses a smartphone. By 2017, the percent of smartphone users is expected to reach 68%.

— Tablet ownership increased 177 percent over the past year.

— Already, 23% of teens own a tablet.

Affecting Our Lifestyles

The effect on our lifestyles has been even greater:

— Four out of five smartphone users check their phones within the first 15 minutes of waking up. 80% of those say it’s the first thing they do in the morning.

— 79% of smartphone users have their phone on or near them for all but two hours of their waking day; 63% keep it with them for all but one hour. A full quarter of of smartphone owners couldn’t recall a single time of the day when their phone wasn’t in the same room as them.

— Mobile users can’t leave their phone alone for six minutes and check it up to 150 times a day.

— 25% of those aged 12-17 access the Internet “primarily” via a cell phone or smartphone. Among teens with a smartphone, however, 50% access the Internet primarily via the mobile device. Girls are more likely than boys to rely on their smartphone as their primary Internet access device.

— More than 80 percent of consumers are multitasking while watching TV.

— More people now watch TV and movies on tablets in their bedrooms than they watch them on TVs.

Dissolving The Digital Divide

Surprisingly – at least to me – black and hispanic teens are more likely to own a smartphone than their white counterparts. Some feel that the smartphone could be the tool that eradicates the digital divide. In any case, phones are now the new personal computers of our age, allowing the poor and the isolated to enjoy computing power that was formerly unavailable to them.

Multiple Screens

If, in 2006, you had predicted that individuals would own, not one, but three computers, you would have been laughed at. First, few needed three separate computing devices and second, even fewer could afford them. Yet today, twenty-six percent of consumers in the United States own a laptop, smartphone and tablet.

Let me re-remind you that the modern tablet has only been in existence for a mere THREE YEARS. If 26% of consumers in the United States already own the trio of smartphone, tablet and notebook, then the explosive growth of multiple screen computing ownership is only just beginning.

Touch Computing Is Only Just Beginning

Most technology observers look at phones, and even tablets, as maturing markets. I feel otherwise.

— Phones are just beginning to invade our lives. People who formerly didn’t need a phone – the young, the old, the technologically uninterested – are all adopting smartphones as their go-to computing device.

— People who formerly didn’t have any access to computers – the poor and citizens of third world countries – are also adopting smartphones as their first – and perhaps only – computing device.

— Where we used to own a single family computer, now every member of the family will want to possess their own personal tablet.

— Most people who own a tablet will own a smartphone too, and perhaps a notebook as well.

Our Lives Will Never Be The Same

Most technology observers seem to have a very poor grasp of economics and consumer behavior. They speak in terms of limited resources and assume that technological growth is limited. The truth is that we don’t buy what we need, we buy what we want. And a further truth is that when we want and value something highly enough, we shift our limited resources in order to find a way to obtain it.

In 2006, we only needed a single, cheap desktop or notebook computer. Today we expect and demand access to multiple mobile computing devices.

We don’t NEED tablets, but we WANT them and we’re going to find a way to buy and possess them. And smartphones are rapidly moving from the category of a WANT to something that we both WANT AND NEED in order to merely function in modern society.

Sales of mobile touch computers are about to explode and our lifestyles and our lives will never be the same.

Google “Plays” With Android Activation Numbers

“…there are now 1.5 million Android devices being activated every day, Google Chairman Eric Schmidt said Tuesday. That’s led to more than 750 million Android phones currently in use.” ~ Erica Ogg, Gigaom

Google changed their methodology to only count user visits to the Google Play store when determining which versions of Android are in use. So exactly how many of those 1.5 million daily activations and 750 million overall activated units have actually connected to the Google play store?

Google isn’t saying.

Now why do you suppose that is?

Google’s New Android Math Doesn’t Add Up

According to Gartner, Android sold 144,720,300 units in the fourth quarter of 2012. But let me ask you this:

Who cares?

Does Samsung care how many “Android” units were sold? No, they do not. They only care about how many of their devices they sold.

Do the various Android manufacturers in China care how many “Android” units were sold? No, they do not. They only care about how many of their respective devices they sold.

Does Amazon care how many “Android” units were sold? No, they do not. They only care about how many Amazon devices are being used to direct traffic to their web site.

Do Android developers care how many “Android” units were sold? No, they do not. They only care about those Android units that their software can address and, even more specifically, they only care about that portion of the addressable market that is interested in purchasing their product or downloading their product and consuming their advertising.

Does the Google Play store care how many “Android” units were sold? No, they do not. They only care about how much is purchased from the store.

Why Do We Count Android As A Single Entity?

“Android” is not a single entity. So why do we add all of the “Android” numbers together? We do it because we assume that higher numbers mean a stronger platform. We use it as a proxy for the strength of the platform. But it just ain’t so. Total numbers mean nothing. The only numbers that matter are those that strengthen the platform.

And do you know who agrees with me? Google.

Android’s New Math

Google reported that the number of Android units using Android versions 4.1 to 4.2 jumped from 16 percent a month ago to 25 percent this month. Impressive, no?

No.

The reason for the big jump was that Google changed the way they count the numbers. Previously, devices were counted when they checked in to Google’s servers. But Google is now only counting user vistits to the Google Play Store. Google argues that the data more accurately reflects users “who are most engaged in the Android and Google Play ecosystem.”

I agree. This is a better way to count the meaningful numbers rather than just the gross number of Android activations. However, did you notice the inconsistency in Google’s new math?

One Of These Is Not Like The Other

Google hasn’t recalculated and lowered the total number of Android activations.

In other words, when it comes to telling you how many activations they have, Google uses devices that check in to their servers. But when Google wants to tell you which versions of their operating system are in use, they only count user visit’s to the Google Play store.

Hmm. So we now know that versions of the Android pie are divided into different sized slices but what we don’t know is just how big that pie is. Exactly how many of the 144,720,300 units sold in the fourth quarter of 2012 are actually accessing the Google Play store?

We don’t know. Because Google isn’t saying. And until they do, those total unit sales and activation numbers have little meaning in determining the overall strength of Google’s portion of the Android platform.

Android’s Total Numbers Conceal Rather Than Reveal

“Android” shouldn’t be counted as a single operating system any more than Europe should be counted as a single country. Heck, Android doesn’t even have a “common market“.

If we’re going to use numbers as a proxy for determining the strength of various operating systems, then we have to use meaningful numbers. Perhaps we should be comparing the units running the latest version of iOS with the latest version of Android. Perhaps we should be counting the Amazon, Google, and the various Chinese portions of Android as distinct and separate entities. Perhaps we should even be counting that portion of the Android phones that run Facebook Home separately too.

What we most certainly should NOT be doing is lumping all Android sales and activations together and pretending that they’re one and the same and that their total numbers are advantageous to all of Android’s separate participants, such as Samsung, HTC, Amazon, Google, developers, etc. If an activation or a unit sale doesn’t count towards the strength of the whole operating system, then it shouldn’t be totaled. Totaling Android’s numbers together doesn’t make sense because there isn’t a single, unified Android platform.

Numbers should be used to reveal, not conceal. And Android’s numbers aren’t revealing its strengths, they’re concealing its weakness.

3 Years Of iPad Schadenfreude and Lessons Learned

On April 3, 2013, the iPad turned three. Jay Yarrow over at Business Insider has put together a great summary of How The iPad Totally Changed The World In Just Three Years. A couple of highlights:

— Apple has sold some 140 million iPads for around $75 billion in sales.
— The iPad is one of the fastest growing consumer products ever.
— iPad inspired tablets have virtually destroyed the netbook market, are expected to exceed notebook sales this year and expected to exceed notebook and desktop sales by the end of 2014
— iPad revenue alone is bigger than all Windows revenue
— Traditional software houses like Amazon, Google and Microsoft are all making their own versions of the iPad
— The iPad is popping up everywhere, including airplane cockpits, restaurants and as cash registers. I would add that almost one third of doctors in the U.K. now own tablets and tablets are rapidly spreading into education at every level.

Schadenfreude

I think it’s an understatement to say that the iPad has been an overwhelming success – the biggest technology shift of our generation – which is why it’s all the more delicious to put on our 20/20 hindsight glasses and mock those who got the iPad oh-so-very-wrong those three years ago. However, rather than dwelling on how wrong the iPad’s critics were, let’s focus instead on why they were wrong and see if we can learn from their mistakes.

Screen Size Matters

“You might want to tell me the difference between a large phone and a tablet.” ~ Eric Schmidt, Google, 10 January 2010

Turns out that size really does matter. Some things are better done on a larger screen. Further, a larger screen demands that apps be re-written to accommodate their larger size. Apple recognized this and now they have over 300,000 apps specifically optimized for the iPad. Google has been slow to recognize this fact and their tablet sales have suffered for it.

Focusing On What It Isn’t

Things the iPad can’t do:

1. No Camera, that’s right, you can’t take pics and e-mail them.
2. No Web Cam, that’s right, no iChat or Skype Video chatting.
3. No Flash, that’s right, you can’t watch NBC, CBS, ABC, FOX or HULU.
4. No External Ports, such as Volume, Mic, DVI, USB, Firewire, SD card or HDMI
5. No Multitasking, which means only one App can be running at a time. Think iPhone = Failure.
6. No Software installs except Apps. Again think iPhone = Failure.
7. No SMS, MMS or Phone.
8. Only supports iTunes movies, music and Books, meaning Money, Money, Money for Apple.
9. WAY, WAY, WAY over priced.
10. They will Accessorize you to death if you want to do anything at all with it and you can bet these Accessories will cost $29.99 for each of them.
11. No Full GPS*
12. No Native Widescreen*
13. No 1080P Playback*
14. No File Management*

What an utter disappointment and abysmal failure of an Apple product. How can Steve Jobs stand up on that stage and hype this product up and not see everything this thing is not and everything this thing is lacking?

~ Orange County Web Design Blog, 27 January 2010

There are dozens upon dozens of these lists and their particulars don’t really matter. The truth is that we often tend to focus on what a new product or service DOES NOT do instead of focusing on what it does really well. The iPad made for a terrible phone and a terrible notebook computer. And that’s as far as most people could see. The netbook did a lot of things but it didn’t do any of them well. The iPad did far fewer things than the notebook or even the netbook, but it did some of those things extraordinarily well. In most instances it’s what something does, not what it doesn’t do, that matters most.

Tradeoffs

“Why is the iPad a disappointment? Because it doesn’t allow us to do anything we couldn’t do before. Sure, it is a neat form factor, but it comes with significant trade-offs, too. No 16:9 widescreen, for example.” ~ David Coursey, PC World, 28 January 2010

“I don’t get it. It costs $500 for the basic model, when you could get a laptop with a lot more functionality for about the same price. The iPad hype machine has been in full effect this week, and I still think it’s just that—hype. If I turn out to be wrong, I’ll gladly eat my words, but I’m pretty sure that I’m not wrong ” ~ Alex Cook, Seeking Alpha, 3 April 2010

EVERYTHING has tradeoffs. The key is to get asymmetrical tradeoffs that give more than they take away. The iPad gave people mobility, simplicity, ease of use and seamless integration with a virtually endless number of applications. It gave up power, size and complexity. Turns out, for most people, that was a trade that was well worth making.

It’s Not The Consumer’s Job To Predict The Future

“Before Jan 20th, only 26 percent of people said they were not at all interested in buying an Apple tablet. That number jumped to 52 percent after the announcement. Before Jan 20th, 49 percent of people said they didn’t think they needed an Apple Tablet. That number jumped to 61 percent after the announcement. Fifty-nine percent of buyers wouldn’t pay extra for 3G coverage. Whether this device becomes a big hit is anyone’s guess but based on this study it sure looks doubtful.” ~ Retrevo, 5 February 2010

“We of course build plastic mock-ups that we show (to customers)…we had a slate form factor. The feedback was that for (our) customers it will not work because of the need to have (a physical) keyboard. These were 14-year-old kids, who, I thought, would be most willing to try a virtual keyboard but they said no, we want the physical keyboard.” ~ Mika Majapuro, Worldwide Sr. Product Marketing Manager, Lenovo, 22 February 2010

“The recent launch of Apple, the iPad tablet, has won the award for the second edition of Fiasco Awards delivered this Thursday in Barcelona. From the more than 7,000 people who voted via the website www.fiascoawards.com, 4,325 have considered it the fiasco of the year. Voters through the web have decided that they want the iPad to follow a path similar to the U.S. President Obama with his Nobel Prize, receiving an award before its career starts. However, if within a year the market’s response to the iPad is not the predicted fiasco, the organization will present the 2010 edition of the Fiasco Awards as a finalist to receive the same award next year.” ~ Fiasco Awards, 2010, 11 March 2010

Can we just stop pretending that consumer polls and questionaries have any validity when it comes to predicting future behavior? How is the consumer supposed to evaluate a wholly hypothetical product – especially a revolutionary product – before they’ve even had a chance to use it? Heck, the brightest minds in tech got the iPad wrong even AFTER Apple showed it to them. Why then do we constantly put stock in the opinion of consumers with regard to products that do not yet exist?

Sizzle vs. Subtle

“Yet for some of us who sat in the audience watching Steve Jobs introduce the device, the whole thing felt like a letdown.” ~ Daniel Lyons, BusinessWeek, 28 January 2010

“I think this will appeal to the Apple acolytes, but this is essentially just a really big iPod Touch.” ~ Charles Golvin, Forreter Research, 27 January 2011

Turns out that being a big iPad Touch was all that it needed to be.

The tech press always wants fireworks and is immediately bored by nearly everything not new or different. However, that’s not how people in the real world respond to products. Sometimes subtle is more powerful than sizzle and sometimes subtle is more sublime as well.

Tech is no longer the province of an elite. Tech is now a mass market product that is used and mastered by the majority of humankind. We need to stop thinking about how things affect us personally and start thinking about how they affect the majority of their intended users instead.

Niche

“Thus, a reasoned analysis is that the iPad is to the iPhone & iPod Touch as the MacBook Air is to the MacBook. In other words, a cool product with a devoted base of happy customers, but in relative terms, a niche product in Apple’s arsenal of rainmakers.” ~ Mark Sigal, O’Reilly Radar, 28 January 2011

That’s pretty much how I saw it too. I thought that the iPad would be a successful niche, like the MacBook Air. I was very wrong about the iPad…and I was wrong about the MacBook Air, too. Sheesh, 20/20 hindsight is a cruel mistress.

Schadenfreude Redux

“Anyone who believes (the Ipad) is a game changer is a tool.” ~ Paul Thurrott, Paul Thurrott’s Supersite for Windows, 5 April 2010

What the heck. Not everything has to be a life lesson. A little Schadenfreude can be a good thing too.

Tablet Trifurcation

Yesterday, Tech.pinions columnist, Patrick Moorhead, discussed the implications of the growing popularity of the 7 inch tablet form factor.

Schism

I think that Patrick’s analysis of the schism between Apple’s iOS tablets and Android tablets was spot on. While Apple encouraged their developers to create apps that were optimized for the larger 10 inch tablet form factor, Android eschewed optimization and encouraged a one-size-fits-all approach. The resulting “stretched” Android phone apps worked poorly on the larger tablet form factor. However, “stretched” phone apps seem to work well, or at least adequately, on the slightly smaller 7 inch screens.

This divide in approach between iOS and Android tablets has at least two major implications. First, Apple’s iOS tablets will most likely continue to dominate the 10 inch tablet form factor. In fact, Android has all but ceded the 10 inch form factor to Apple.

Second, because both Apple’s 10 inch iPad and their 7.9 inch iPad Mini run optimized tablet apps, the iPad will most likely become the “go to” tablet for high end users. This means that professionals, businesses, government entities and educators will gravitate towards the iPad. And as the virtuous cycle of developer/app/consumer continues the spiral upwards, the high-end iOS applications will make iOS optimized tablets even more appealing to high-end consumers and even less approachable to Apple’s competitors.

Trifurcation

It seems to me that the tablet market is trifurcating. Apple’s iOS is taking the larger 10 inch form factor and the up-scale markets. Google’s Android may command market share in the mid-level markets. And forked or non-Google Android tablets will take the low end of the market. All can survive, but only Apple has proven that it can profitably thrive in such a setting.

Android’s Penetration Vs. Apple’s Skimming Marketing Strategies

Technology pundits and press, alike, seem obsessed with market share. But obtaining large market share is just one of many successful business strategies. Android follows a penetration pricing strategy. Apple uses a skimming strategy. Neither is inherently superior to the other. Like any strategy, each has advantages and disadvantages and their ultimate success often depends upon both circumstances and execution.

Penetration Pricing

Penetration pricing occurs when a company launches a low-priced product with the goal of securing market share. For example, a sponge manufacturer might use a penetration pricing strategy to lure customers from current competitors and to discourage new competitors from entering the industry. If the sponge’s price is low enough, consumers will flock to the new product. Competitors who can’t produce and promote sponges for such a small profit will avoid the market, freeing the sponge company to maximize brand recognition and goodwill. ~ Stan Mack, Demand Media

Price Skimming

A price skimming strategy focuses on maximizing profits by charging a high price for early adopters of a new product, then gradually lowering the price to attract thriftier consumers. For example, a cell phone company might launch a new product with an initial high price, capitalizing on some people’s willingness to pay a premium for cutting-edge technology. When sales to that group slow or competitors emerge, the company progressively lowers its price, skimming each layer of the market until the low price wins over even frugal buyers. ~ Stan Mack, Demand Media

Apple has added a twist to the skimming strategy. Rather than introducing their products at a high price and then lowering their prices later, Apple stakes out a price and then maintains and defends that price by significantly increasing the value of their products in future iterations.

For example, over the past six years, the average sales price of the iPhone has remained remarkably stable with the subsidized price remaining at ~$200 and the unsubsidized price hovering around $650.

Advantages and Disadvantages Of Price Skimming

Price skimming offers four major advantages…. It can offer insight into what consumers are willing to pay. It can create an aura of prestige around your product. If the initial price is too high, you can lower it easily. Finally, late adopters might be pleased to get your prestigious product at a bargain price, which creates goodwill for your company. A major disadvantage, however, is that large profits attract competitors, so this price strategy only works well for businesses that have a significant competitive advantage, such as proprietary technology.

The argument against Apple’s price skimming strategy is that the competition has caught up with the iPhone and Apple is no longer able to compete unless they lower their prices. But do the facts support this argument?

First, the iPhone has received 8 (EDIT: make that 9, as of March 21, 2013) straight J.D. Power and Associates awards for customer satisfaction and Apple reported that four times as many iPhone users switched from an Android phone than to an Android phone in the fourth quarter of 2012. Clearly Apple’s cachet is not on the wane, at least not in the minds of phone buying consumers.

Second, in 2012, Apple garnered 69% of all mobile phone profits. Further, they did it with only 8% of the total market share. That means that the remaining 92% of the market provided only 31% of the sector’s total profits. That’s price skimming at its finest.

Conclusion

The current meme is that Apple MUST abandon their skimming strategy and pursue a price penetration strategy instead. However, the facts simply do not support this contention. Apple could, of course, “buy” more market share simply by lowering their prices, but this has two major disadvantages. First, the market share that they would be buying is worth far less than the market share that they already own. Second, a lower price would lead to lower profits as well. It is obvious – or rather it SHOULD be obvious – that this could be counter-productive.

There’s nothing wrong with market share and I’m quite certain that Apple would be more than happy to expand their market share – but not at any price. For example, Apple has some 70% market share in iPods and around 50% market share in iPads. Yet they are doing this while still maintaining their price skimming strategy.

Price skimming is neither the only strategy nor is it the only superior strategy. It is just one of many marketing strategies. However, Apple is executing the strategy of price skimming brilliantly…even if Wall Street and the pundits stubbornly refuse to acknowledge it.

Andy Rubin And The Curious Failure Of The Nexus Tablet

On Wednesday, Andy Rubin suddenly stepped down as the head of Android. The reason for this move is obscure. The most telling statement I’ve read on this, so far, comes from Ina Fried, at AllThingsD:

It was certainly a sudden move. Rubin had been confirmed to speak at our D11 conference in May; you don’t do that when you’re easing your way out. In the time between giving wide-ranging comments on Google’s plans two weeks ago and dropping out of a speaking slot at SXSW this past weekend, something changed.

The Trouble With Tablets

I do not know what suddenly changed, but one contributing factor in the change may have been Andy Rubin’s inability to translate Google’s success with handsets into an equivalent success with tablets. This must be particularly painful to Google since studies have conclusively shown that it is tablets, not phones, that best support Google’s advertising business model.

This past summer, I predicted that the introduction of the Google Nexus tablet would eviscerate the market for all other Android tablets. After all, the Nexus tablet was made by Google itself, was sold at cost, and would be competing on the basis of the sale of content, app and advertising revenue that was not available to the likes of Samsung and other Android manufacturers.

So far, my prediction has not come to pass, as Samsung has made modest gains in tablet sales over the past six months. But my failure to accurately foresee the future may have been more due to a failure on the part of the Google Nexus tablets, than it was of my analysis.

Low Tablet Sales

Google does not reveal their Nexus tablet sales numbers which is revealing in and of itself. However, Google cannot hide entirely behind a cloak of secrecy.

Source: The Yankee Group

The Yankee Group recently surveyed consumers, asking them which brand of tablet they intended to buy. The iPad dominated the discussion but the Google Nexus tablets garnered only 1% interest from the survey participants. ONE PERCENT.

How is that even possible? Remember, this is a tablet that is being given away for COST. And it is being given away for cost by the largest, most successful advertising company in the world. One percent interest in future sales is not just bad, it’s dreadful.

And it must be all the more galling to Google that Amazon – which is using a forked version of Android and an almost identical business model – has 7% interest. To put it in colloquial terms, “that just ain’t right.”

Low Tablet Usage

Source: Chitika

And if the unreported sales numbers weren’t bad enough, the usage numbers – 1.7% for all Google Nexus Tablets combined – are equally depressing. That’s just barely better than the rapidly failing Barnes & Noble Nook. It’s less than a quarter of the usage enjoyed by all Amazon tablets. And it’s barely 2% of the usage garnered by Apple’s iPads.

Remember, Google makes no income from the sale of their tablets. If Google tablets are not used, then they are useless to Google.

Conclusion

I doubt that tablet sales were THE factor that made Google suddenly change the head of their Android program. I think that the merger with Chrome was far more significant. However, I also have no doubt that Android’s lack of progress in tablets was A factor in the change…and a significant one at that.

Microsoft’s Core Beliefs

Strategy

Microsoft’s Windows 8 Campaign

Conclusion

Let Me Count The Ways

1) PCs Are In Decline

2) Mobile is ascendant

3) Windows Phone 8 sales have been disappointing

4) Windows RT sales have been disappointing

5) Microsoft Surface sales have been disappointing

6) Third-party Windows 8 tablet sales have been disappointing

7) Ultrabook sales have been disappointing

8) Windows 8 adoption has been disappointing

9) Microsoft App Store growth has been disappointing

10) Business and Enterprise are moving on without Microsoft’s products or services

11) Microsoft has lost its monopoly and its monopoly powers

12) Microsoft is dependent upon legacy products – Windows and Office – for the bulk of its profits

Next Week

The Questions One Asks Inform The Answers One Receives

This Is Our Design

Design Is How It Works

What Makes Apple Different?

Appendix

Apple Desperately Needs To Enter A New Product Category

(But It’s Already Too Late Because) Apple Can’t Innovate Anymore

The Wide Lens

The Critics Have Gotten It All Wrong

Categories

First

Apple Is Surfing The Innovation Wave (Like Mavericks)

Rainbows & Innovations

A Rising Tide Lifts All Tablets

Total iOS Sales vs. Total Android Activations

The Math

Analysis & Commentary

Do Versions Really Matter?

Discounting

Appendix

Venn Diagrams

The Folly Inherent In Comparing Android Phones to iPhones Instead Of Comparing Android To iOS

Legitimate Reasons Vs. Bogus Reasoning

Introduction

Apple’s Philosophy

Developers, Developers, Developers, Developers

OS X: Mavericks

iCloud Keychain

Apple’s Technology Philosophy

MacBook Air

Mac Pro

Designed in California, Assembled in USA

The Mac Is Back

iWork In The iCloud

Is iOS Both The Best AND The Most Popular OS?

Apple’s Design Philosophy

Tim Cook And Company Relish The Challenge

iOS 7’s Icons

Gestures For Moving In And Out…

Control Center

Multi-Tasking

Siri

iOS In The Car

Automatic System And App Updates

Music Match And iTunes Radio Integration

Activation Lock

1,500 New APIs

“Biggest Change To iOS Since The Introduction Of The iPhone”

Apple’s Signature

The Platform Business Model

The Mostly Misunderstood Network Effect

Phone Networks Are Not The Same As Computer Networks

How Do You REALLY Measure The Success Of A Platform Business Model?

The Health Of A Platform

Open Trade-Offs

The Wealth Of A Platform

The Stealth Of A Platform

Apple Is Like DisneyWorld And Android Is Like A Chain Of Amusement Parks

Where Do We Go From Here?

And The Gold Goes To…

APPENDIX

Hardware Manufacturing