Foundations for Apple and Google

For the time being, there are two developer and ecosystem events which set the tone for the consumer tech industry at large — Google I/O and Apple’s World Wide Developer Conference. For the much of the past 4-5 years as these events have gained steam, Apple and Google seemed to be on similar paths. On the surface, it looks as though Google and Apple are laying the same foundations. They seem to both be laying the groundwork — offering solutions in similar areas like mobile OS, TV, automotive, health, payments, and the smart home. However, now I believe their paths will diverge. Whether by choice or force, only time will tell.

At a high level, we recognize both Google and Apple have entirely different business models. It is within a business model analysis framework where I am more optimistic of Apple’s success than Google’s, at least from a revenue perspective. Ideally, both foundations being laid create value and revenue for others as well. If it does not, then its chances for success are slim. Whatever Apple is building in TV, automotive, smart home, payments and anything else, must add value to third parties and the same is true for Google. This is why the framework of recognizing Apple has a near monopoly, greater than 65% share of the most profitable customers of computing products (smartphones, PCs, tablets, cars, etc.) makes it easier to believe Apple’s customers are the ones who can and will spend more money on TV content services, automotive features, smart home technology, health and fitness services, and using Apple Pay to buy online and offline. However, because Android runs on over a billion and a half devices, ((smartphones and tablets, and Google’s Android on 1.2-1.3 billion devices and Open Source Android in 500-600m devices)) it is important Google offer these basic and similar foundations to the market place for areas where Android is the dominant mobile and tablet OS — the greater Asia market, LatAm, and Europe. If this foundation battle was limited only to the US market, I’d be even more skeptical of Google’s efforts. But Android is a global enabler and is deeply relevant in this regard.

However, the issue and concern for Google is I sense they are taking a very US-centric view to their foundation. On the surface, this makes sense since the US is by far the most valuable market Google competes in. China is arguably more valuable but moot since Google doesn’t, and will not, be able to compete in China. What I’m watching for, as both Google and Apple lay their foundations, is how they both cater to regional differences and nuances while still adding proprietary ecosystem value. As I have been articulating, the global playing field is actually more regional than global and both companies need their foundations to be flexible to cater to local needs. This is particularly true of payments where, if both Apple and Google try to compete, it will be fascinating to watch, due to their difference in customer base.

How both companies begin to diverge based on the difference of customers, regional needs, and even new experiences and products based on those regional differences and customer bases is one of the core things I watch as both companies do their groundwork for the years to come.