Platform Wars: Some Things Will Never Change

Ben Bajarin / May 28th, 2013

Regular readers of Tech.pinions will know that John Kirk’s column last week on Android’s market share being a joke, went massively viral. As I watched the stats of real-time visitors and new hourly spikes of traffic I was truly amazed. Many of you may not know but for about a year and a half I was on the executive team of one of the popular tech and gadget blogs. In my time there I never saw anything do what John’s column did in terms of global attention.

With the wide-spread circulation of John’s 2400 word analysis came a slew of comments. Over 560 and counting to be precise. Many of our regular readers jumped in and what ensued was a pretty healthy dialogue for the most part. But in the course of the large comment thread, I think we saw every major anti-Apple argument come out.1 Which leads me to my point. In regard to these platform wars, some things will never change.

Ultimately, humans are tribal beings. We have a strong urge to associate and affiliate with a tribe. This is perhaps most strongly demonstrated at any major sporting event. We praise the home team but boo the opposing team and all their players. We have a strong desire to win and be on the winning team. So it shouldn’t surprise us when a polarizing situation presents itself that we see tribal behavior.

It doesn’t matter how rational of a conversation we try to have about understanding the complexities of business, like market share statistics for example. Or that business is made up of a complex web of market forces that when isolated do not tell the whole story around the health or viability of a product, company, or market.

So many points in this platform war discussion are based on flawed assumptions that everyone values the same thing. That people are pragmatic, and rational beings. Nothing could be farther from the truth. Humans are diverse and that diversity is reflected in the diversity of products and solutions that exist in the markets we study. It is this profound market diversity that many don’t understand.

So this discussion will continue and we will all try to have an informed dialogue on the complexities of business but some things will never change. Humans are tribal beings. If only we could recognize that there are situations where for one tribe to win the other does not have to lose. If only.

  1. I hope to do a summary of the major points from each side and provide key thoughts on each of them []

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio
  • Flynn

    Nicely said!

  • Rich

    This article comes from wisdom.

  • Joe_Winfield_IL

    You forgot to say which platform is better, and why it should win. I don’t know how to interpret anything which doesn’t (rather transparently) come from inside the foxhole of one army’s front line.

    • benbajarin

      🙂 I suppose its because I have a different definition, which depends on the company, as to what winning means.

      • Joe_Winfield_IL

        I’m sure you’ve covered it before in many forms, but I’d love to see an in-depth breakdown of each company’s definition of success. It would be nice to push a discussion around the differences between the three key players (at least in my mind there are only three today): Apple, Google, and Samsung. My $.02 below:

        It would seem to me that Google “wins” regardless of which handset is sold, so long as the company can convince a significant share of users to log into Google services and web search. An iPhone sale is by no means a “loss” to Google, given that Apple device users are heavy data consumers. Basically anything but Windows Phone is acceptable to Google. Apple Maps is both a threat and an opportunity to Google, as its new (non-system) app is far superior to the previous version. In a way, Apple gave Google what they wanted by punting Google Maps from iOS6. Android is the best and most thorough way to lock in users, but it is far from Google’s only option. The company NEEDS massive share given the low value of each incremental customer. For Google, success is 80% market share using Google services.

        For Apple, things are obviously a lot more parochial. Since Apple’s key services are proprietary, any non-iPhone sale is a non-customer. Worse, it is a user that potentially locks into services which compete with Apple’s own suite. The company may eventually bring this customer into the fold, but he will be less likely to depend on Apple’s secret sauce over the long run. The company also knows that its products are aimed exclusively at the subsidized and/or wealthy markets. Tim Cook doesn’t lose sleep over Apple’s share of the sub-$200 phone market any more than Larry Page loses sleep over iPhone unit sales. Far more troubling are the sales lost to the Galaxy series from Samsung. For Apple, success is selling every phone they can make at the full retail price.

        Samsung is the trickier one to define. It doesn’t have a lot of unique software or services. The “S” brand of whizbang Android features (eyeball tracking, stylus input, etc.) are a start, but they don’t begin to approach what Apple and Google have. I think the company relies heavily on its marketing budget, as it is looking to buy mindshare. It is trying to become the new Sony, making products which are largely the same as its competitors’, but with a reputational price premium. At the same time, Samsung wants to sell every phone on the planet. They are trying to work with virtually every carrier and trying to meet virtually every consumer’s budget and needs. Every non-Samsung device sold is a missed opportunity, since the company makes its money strictly through device sales. The company doesn’t care whether the sale is lost to Nokia, Blackberry, HTC, or Apple; anything but Samsung is a problem. For Samsung, success is selling more phones each year to each customer segment, at the expense of rivals.

        • benbajarin

          I have done this in depth for in our private reports on the industry and certain companies but perhaps a more high level public one would make a good discussion.

          I’m surprised you didn’t include Amazon in the mix. When it comes to tablets they are the only other player moving significant volumes. They may get in phones, and their definition of winnings is certainly different than those above as well.

          I don’t disagree with any of the points you mention above. I think its an accurate picture of the short term, but in the long term, I think things can change very quickly. I’m not worried about Apple, Google, or Amazon really. I have some concerns for the rest.

          Interestingly, I think Google and Apple are much more symbiotic in terms of the ecosystem than people think. I actually think Google does not want Apple to disappear. Google gets a lot of value from iOS and I’m not convinced the same value they get from iOS is translating universally to Android. This is why year after year, Google makes more money with iOS than they do with all of Android in relations to Googles core mobile services and advertising. In fact there was a time I thought these two companies might merge. Regulations aside of course. When Schmidt was on Apple’s board I believed they were going to tightly partner up. Eric saw the iPhone and iOS very early on and knew it would be expensive and that other hardware companies had no viable competitive alternative. So he bought Android and filled a gap with price and gave hardware OEMs an option. But I think Google has always had their sights on MSFT and MSFT alone in terms of who the take out target was and is.

          They key for all companies mentioned is to have a laser focus on who their customer is. This focus lets you develop solutions for the segment in which you care to compete. Some services will transcend platforms and some will not. All future planning decisions get made on this philosophy so long as it also fits an economically sustainable model.

          Thanks again for the thoughtful comment. I may do a higher level overview of my thoughts on the matter publicly.

          • Joe_Winfield_IL

            Of course Amazon should be included; I’m not sure why I left them out, as they may have the most disruptive model of them all. I would think that they are probably the secondary target of Google (after MSFT) given the threat that Amazon’s core shopping business represents to Google’s core search business.

            I understand that you have to sell private reports to put food on the table, but I’d LOVE to see any additional insight you may have on the topic which you are willing to share with the public. I’m primarily interested as an individual investor. I think there is room for all the key players to succeed by their own definitions (except Samsung, which I think will eat itself alive as it reaches maximum saturation in the not-too-distant future), but each of these companies is receiving wildly different valuations from Mr. Market. My objective is trying to exploit any long term gap between reasonable expectations and valuation. For example, no matter how many ways I look at it, I can’t get myself to believe strongly enough in Amazon to think that profits will ever justify a major premium to the current stock price. But shorting AMZN has been a fool’s errand for a very long time. Meanwhile, Apple has clearly turned over in the last few quarters, but I have a hard time imagining that we’ve seen peak profits or peak unit volumes.

            I’m new to the site, but I like almost everything I’ve read. John Kirk’s article drew me in last week and now I come back every day. Thanks for the good work.

          • benbajarin

            Glad you discovered us. We have a pretty deep archive if you ever have some time to poke through it. Our goal is to focus on publishing quality content over quantity.

            I’ll add this topic to my column ideas list and tackle it soon.

          • I’m surprised you only just found out this site. Check out all of John’s previous articles here. You should know John from his many posts at sites you post regularly.

          • Joe_Winfield_IL

            I didn’t even realize John was writing regularly until last week! I guess I’m just a creature of habit, and don’t stray too far. I read PED every day because he covers everything and because his Fortune credentials get him a lot of access. Everything else I follow stems from articles he has linked – it probably took 3 Horace Dediu stories before I ventured over to Asymco. When he mentioned Falkirk last week, I was shocked. I thought John was someone like me who comments recreationally, but with a little more thought and care.

        • Mark Jones

          The question is when the various companies’ markets/business models collide, who will succeed (i.e., take revenue/profits from the others even in a growing pie)? For example, when Apple collided with the recorded music industry, Apple took revenue and profits from that industry. Some believe that if Apple had been more ambitious, they could’ve taken over that business completely and eliminated the middleman. But Apple wasn’t interested (and still isn’t per Cook at D11).

          So if and when Apple, Samsung, Google, Amazon, Facebook, and Microsoft collide, who will succeed or even survive? We think Apple and Samsung are directly competing today in the device business. Although Apple has created its own platform/ecosystem (and Samsung has taken multiple little steps as if they really are going to), do they intend to leverage that into something more than just selling devices? Do they have bigger goals in mind that move them beyond the device business? Is Google’s dominant search/services–>ad business just a stepping stone to something much much bigger? (Will they use YouTube, Play, Fiber, etc to attack other businesses?) We think we know Amazon’s business well so what ambitions, if any, do they have with selling devices? Facebook’s social network/ad business must lead to something more, right? And does Microsoft really intend to be compete outside of the enterprise portions of various markets?

          So when these different business models/markets collide (and they will), who is so ambitious that they will seek to wipe out another (rather than coexist or partner)? And if by choosing to dominate rather than coexist/partner, do they overreach and become unsustainable?

  • Ben, the problem with your analysis is that the loudest positions in these arguments tend to be predetermined opinions (Apple/Google/Microsoft/Intel/Samsung/Whomever is an evil liar) with selected arguments chosen specifically to defend the predetermined opinion. This is the same approach fundamentalist religionists use to defend not their faith and their opinions about their faith. When someone disagrees with their religion, this is also interpreted as an attack upon the individual and his or her opinions. It must be defended at all costs!

    What you’re doing is defending logic and reason as coming BEFORE opinions and beliefs are established, the antithesis of what the loudest defenders of the faith actually do. You’re attacking their religion and them personally.

    How dare you!

    • benbajarin

      I know, I know. And there is almost no chance of convincing those with pre-determined opinions. People are predictably irrational, to quote Dan Ariely’s excellent book.

      I don’t know if you saw it but I did the same thing with my TIME column. Shockingly decent discussion. But those who can hold multiple opposing ideas in mind and still function are in the minority 🙂

      http://techland.time.com/2012/10/01/i-chose-the-iphone-you-chose-an-android-phone-so-what/

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