Everybody Wants a Bite of iOS, Apple remains Mostly Self-Contained
A few hours after publishing this column, Google could be announcing that Google Assistant is going to iOS. Last week, Microsoft announced several new features for Windows 10 Fall Creator Edition, such as Pick Up Where You Left Off and OneDrive Files on Demand, will be available on iOS.
Everybody wants a piece of iOS or better, everybody wants to get to the most valuable consumers out there. You’ve heard this before — Apple customers are very valuable. You only have to look at what they spend on hardware and the growing revenue they drive at the App Store and subscription services to get an idea as to why other ecosystem owners might want to get to them.
Not Having a Horse in the Race makes You Free
When your main source of revenue is not hardware to be device, and, to some extent, platform agnostic, becomes so much easier. For Microsoft and Google, the core business revolves around cloud and advertizing respectively and, while they sell their own devices as well as monetize from their operating systems, they have made the decision to engage with consumers on iOS.
For Microsoft having Office, OneDrive and Cortana available on iOS and partly on Android allows them to reach more users than they would through their PCs alone. Of course, Microsoft has nothing to lose in mobile, as Windows Phone has never been able to get more than single digit market share in the US. Yet, this tactic is not limited to phones. These apps and services are also available on iPad and Mac, segments where Microsoft and its Windows partners have a very strong interest.
Microsoft’s long-term play was described very well at their Build Conference Keynote with the slogan “Windows 10 PCs heart all devices.” I would have gone a step further and said, “Windows 10 heart all devices” but that would not have been very politically correct towards their partners. Whichever slogan you prefer, the idea behind it is spot on. Let users pick what phone they want to use (or tablet, or wearable) but make sure that, if they have one Windows 10 device, their experience across devices is the best one they could have. By getting the best experience as a consumer, you want to continue to stay engaged and you choose services and apps delivered by Microsoft over what comes pre-installed on the phone.
Google has always had a pretty agnostic platform approach when it came to its apps and services. The experience is often better on Android but it does not mean consumers do not get benefits from using apps and services on other platforms and devices. Google Maps and Chrome might be the best example thus far but soon it might well be Google Assistant. While other platforms might limit how deep of an integration assistants such as Google and Cortana might have, they are still delivering some value to the user and they collect valuable information for the provider.
As we move from a mobile-first to a cloud-first and AI-first world, knowing your users so you can better serve them will be key. Google hoped to do that with Android but, unfortunately, despite million and millions of users owning Android-based devices, it did not provide the return Google was hoping for. Users of Android simply do not equate to users of Google services. So, making sure to get to the valuable users is key for this next phase, especially as the bond with the user will be so much tighter than any hardware or single service has been able to provide before.
Hardware as a Means to an End
Selling hardware can be a great source of revenue, as Apple can tell you. For Amazon, Google and, to some extent Microsoft, however, hardware is more a means to an end than a source of revenue any of these companies will ever be able to depend on.
Being able to personify or, in this case, objectify, the vision they have for their services and apps is key. Whether it is a home for Alexa and Google Assistant or a TV for Prime Video or an in-car experience for Google Maps, it is important users experience the best implementation of that end to end vision.
Yet, if your business stability does not depend on it, you are not spending marketing dollars to convince buyers to switch their devices or upgrade them. You are instead focusing on delivering the best value wherever you can. As you move to other hardware, however, you take value away. When there is no value left, the hardware itself will look much less appealing to the most demanding users, increasing the risk of churn. Ben Thomson recently made this very point about Apple in China where iPhone users are so engaged with services from local players the value of Apple is reduced compared to what we could experience here in the US where we might subscribe to Apple Music, use Apple Pay and so on.
Follow the Money
So where does this leave Apple and its hardware-centric business model? Well, if you have been paying attention to recent earnings calls, this leaves Apple pivoting from hardware to services, with revenues reaching their highest value yet at $7 billion. App Store revenue is growing 40% year over year with an installed base of subscribers at 165 million customers and Apple Pay transactions are up 450% over 2016.
For now, it does not look like Apple has much to worry about. Not only are the most valuable customers on iOS and macOS but they are engaged with the services and apps on offer. As the offensive from other players intensifies, however, Apple should look at playing a similar game, even if this means opening up some of its services and apps to other platforms.
Microsoft proudly announced last week that iTunes will be coming to the Windows 10 Store. Many were quick to point out that nobody really uses iTunes anymore but that seems to me a very iOS-centric view. There are still many PC users that use iTunes and they represent an untapped opportunity for Apple Music, a service they might not consider using on their phones but, as part of iTunes on their PC, could look very appealing.
There are stickier services like iMessage or Apple Pay and Siri that could drive engagement through other devices. Think about the ability to iMessage on a PC instead of using Skype. Or the option to create an Apple Pay account that works in other browsers. Or Siri that speaks to you through your appliances.
Finding the right balance between too closed or too open is not easy. We know how open can hurt interoperability but we also know how closed can limit growth. This is not about defending. That can be done by making sure to deliver a superior experience on Apple hardware so that, no matter what other apps and services are available, users will never consider anything but what is pre-installed. It’s rather about making sure no opportunity is left untapped which means to go and get the money to be had.