The Challenge of Being a One Trick Pony

The most successful companies in the technology market are often those who are able to develop broad portfolios of products and ideally create ecosystems around their products. By contrast, there are other companies which are heavily reliant on a single product. When the product is highly differentiated, that may be the basis of a decent business over time. But one of the most challenging places to be as a business is a “one trick pony”, especially when the single product or service is relatively undifferentiated.

GoPro, Fitbit, and Dropbox as One Trick Ponies

There are lots of companies we could choose to illustrate this point, but let’s focus on three: GoPro, Fitbit, and Dropbox. The single “trick” for each of these companies is:

  • GoPro: making “capture devices”
  • Fitbit: making “connected health and fitness devices”
  • Dropbox: providing cloud storage services.

Conceiving of a Broader Mission

However, none of these companies describes itself in this way. Rather, each has a broader mission statement:

  • GoPro’s S-1 filing contains the following couplet: ““Versatile capture devices are what we make and sell. Enabling engaging content is what we do””
  • Fitbit’s S-1 filing contains this mission statement: “Fitbit helps people lead healthier, more active lives by empowering them with data, inspiration, and guidance to reach their goals.”
  • Dropbox has in the past described its mission as follows: “The mission of Dropbox is to simplify life for people around the world. Dropbox lets people bring their docs, photos and videos everywhere and share them easily. “

The challenge is each of these companies essentially monetizes solely through its single trick. As GoPro puts it, “To date, we have generated substantially all of our revenue from the sale of our cameras and accessories,” and Fitbit uses very similar language in its SEC filings to talk about how its device sales dominate its business, with other sources making up less than 1% of revenue at the time of its IPO. Meanwhile, Dropbox has essentially no business model other than paid cloud storage. So, even though each of these companies has a broader “mission”, their business models reveal the extent to which they’re really still one trick ponies at their core. GoPro intends to grow its content revenues meaningfully going forward but, as of its most recent filings, revenue from these efforts is still minimal.

The Danger of Commoditization

For each of these three companies, there’s a significant danger of commoditization, requiring a constant effort to improve their differentiation and stave off that threat. Dropbox provides the ultimate commoditized service in the form of cloud storage and attempts to differentiate through the quality of its syncing service and its apps. However, it’s also attempted to differentiate by acquiring or building new apps to act as front ends for new cloud services, notably Carousel for photos and Mailbox for email, both of which it killed off this week. As such, Dropbox’s most high-profile attempts to develop additional “tricks” have both failed, leaving it back where it started. At this point, its differentiation focus seems to be partly on providing tighter integration with third parties, notably Microsoft’s Office applications, and on Dropbox Paper, a collaboration product.

For GoPro, the very real danger is the combination of smartphones and cheap imitations of its capture devices undermine its core market. Its response to this threat is twofold: playing up the advantages of more capable smartphones as controllers for its cameras and doubling down on its branding, retail relationships, and its content strategy as differentiators against more direct competitors. GoPro’s finances actually look really sound, but the market seems to be concerned that this competitive moat is inadequate.

Fitbit, meanwhile, faces new threats from both above and below its current market position. As Ben Bajarin outlined in a piece for Insiders this week, Apple is encroaching on its territory at the high end with the Apple Watch, while Xiaomi and others are capturing the low-end of the fitness device market. Here too, investors seem concerned that Fitbit’s differentiation may be inadequate to protect it against commoditization and an invasion of cheaper Chinese imitators, even though its current financials also look pretty healthy. Though Fitbit’s online and app-based dashboards are far more advanced, they generate very little revenue and it’s not clear that every potential fitness device buyer really sees the value in those.

The Threat of Ecosystems

I started by talking about the power of ecosystems, and it’s some of these very ecosystems that provide some of the greatest threat to these one trick ponies. Apple in particular poses a fairly direct threat to all three companies in different ways, while many others compete with one or more of them. It’s going to be increasingly tough for these companies and others like them to survive and thrive in the face of competition from larger, broader-based competitors. Though focus can be a powerful thing, a singular focus on a relatively undifferentiated product continues to be a poor basis for building a long-term, sustainable business.

Published by

Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

1,179 thoughts on “The Challenge of Being a One Trick Pony”

  1. Interesting, thank you.

    Re: the dangers.

    – Commodization is a risk when innovation stops. Well, the leaders just have to keep being better than the rest, we’ve got a very onerous IP protection system that’s not supposed to be solely for patent trolls. I don’t do fitness trackers nor action cams, but on the Dropbox side, I could give you a handful of features I spent a few hours looking for in vain. Starting with: force local storage of a whole folder from a central interface, not just individual files form each device, so that my “live” work docs are always on my desktop, my laptops, my tablets and my phones, w/o me having to manually set the option for every file on every device. Only Bittorent Sync does that, but it introduces several other issues.

    -Re: Ecosystems. I wouldn’t say Ecosystems so much as lock-in is the issue. A fair and open ecosystem such as Android lets independent players do whatever: Fitbit and non-aWear smartwatches for example are the most full-featured on Android, even though they’re fully independent from it. In this case, Android’s ecosystem is a great opportunity to get a wide potential market and show off the best features. iOS, on the other hand, is locked-own and unfair; non-i Smartwatches are severely hobbled, you can’t innovate because APIs and HW interfaces are locked down, and if there ever is movement on that front there will probably be some form of MFI tax. Lock-in, not ecosystem, issue.

    As for the opportunities and pitfalls of diversification… maybe that’s another discussion. Or ten.

    1. Yes, let’s blame Apple and IOS with their closed ecosystem and lock in as the issue. It’s because of their unfair practices of not allowing everyone to do what they want that is the cause of this. My question is how can a company (Apple) with its puny marketshares of 16%-18% compare to Android hold so much power? I am sure it has nothing to do with those companies building their houses on someone else land.

      That is basically what happens to every business, who build their business or business model dependent on someone else ecosystem. You do not have full control of your destiny when you tie yourself to someone else. Essentially what happened to all the pc makers and android vendors (Samsung).

      1. I’m still not seeing how that tired comparison between land and ecosystem can be construed to remotely make sense.
        Should the Android OEMs have gone the way of Nokia, Palm and Blackberry instead ?
        How is the comparison between a physical good (land) and a virtual ecosystem (code, even more than that *open-source* code which you can tweak, complete, fork… plugged into an open ecosystem which you can…) valid ?
        Aren’t houses plugged into sewers, power, garbage, telephony, services ecosystems, and dependent on those for most of their value ?
        And so on, and so forth.

        1. Not saying that they should have gone away, just simply using it as an example of what happens to businesses who hitch their wagon to someone else and to bring balance to your blame game (Apple) as the problem here instead of looking at the root of the problem.

          Android last time I checked was around 80% of the market, you of all people likes to point that out around here, so why do we really need Apple here, with is puny 15%?

          1. I’m not saying Apple should be fair and open, they seem to find plenty of customers as they are right now. I’m just saying that what the author dubs an “ecosystem” issue, is really Apple lock-in specific, and doesn’t apply to other ecosystems. Let’s call a spade a spade, or at least identify that the issue is not so much ecosystems as *locked* ecosystems, of which there is only one.

            Also, what are wearables makers supposed to do ? All come up with their own complete Mobile and IT ecosystems ? Mobile OEMs have proved unable to do so, I highly doubt Fitbit and Garmin could do any better, especially since that’d mean I’d need a Garmin “phone-like device” for my Garmin GPS and its companion apps, then a Fitbit phone for my Fitbit tracker and its companions apps, etc for banking, health, payments, … This makes no sense. Wait, isn’t Facebook relinquishing way too much control by running on others’ phones ?

          2. Facebook is big enough and their business model (free) to the end users (users pay with their data) makes it almost an exception to this rule. Even with so much clout, they tried to wrestle control away from the platform holders (hence the failed facebook “ONE” phone) a few years ago. Those executives know the deal, it’s a matter of whether they can pull it off.

            You make it sound like it’s Apple’s responsibility to make sure those guy succeed on their platform. I am still having a hard time understanding why some folks think Apple is the problem in a lot of those cases. How can a platform with 15% hold so much power over everyone else. I will continue to ask, what happened to android with it’s 80% market shares. Apple should not even be in this conversation if we are to go by market shares.

          3. The Apple issue is they’re extremelly good at seducing the rich and the spendy, so they wield unproportional power. Even simple app sales only saw Android pulling ahead of iOS this year, services and devices probably not yet.

          4. Again with the Apple blame game instead of dealing with the root of the issue. So it’s Apple’s fault their users support their problem instead of the reverse. It is common knowledge all those platforms and businesses have saturated their most profitable users at this point. There is a huge drop off in user earnings once you go past North America and Europe, with China not too far behind.

            I keep hearing about the next billion+ users and I don’t see how all those businesses will be able to survive with so little earnings to go around compared to the previous billion. Google, Apple, Facebook and others have a dilemma reconciling the huge growth with little to no earning/buying power. Those who are successful at addressing and dealing with this will benefit the most.

          5. Sorry, I was imprecise. I should have written “the reason Apple gets mentionned”, nto the shortcut “the Apple issue”. You were asking why Apple are mentioned even though their market share is low. The answer is, because this is business: people look at revenue and profits not share, and Apple’s share of those 2 is huge. And wearables makers are running up against them alot.

            As for monetizing the next billion, it is indeed going to be less straightforward than having them pay an arm and a leg to OEMs and carriers like we did; on the other hand, others services (payments, health, shopping, commerce/distribution…) might générate revenues for the mobile ecosystem. Also, costs have plunged (the $10 smartphone actually… works ^^ http://arstechnica.com/gadgets/2015/12/a-review-of-the-10-walmart-phone-better-than-nothing-but-not-by-much/ ), so margins in % might not be *that* bad.

          6. “The answer is, because this is business: people look at revenue and profits not share”

            Fascinating how business works 🙂

          7. What’s more fascinating is how, when you take solely the Business point of view, you end up with the US health and education systems, one might even argue the internal and external politics too.
            Granted, IT and Mobile are more business-y than those; but business might not be the only useful perspective in discussing them either.
            Just a thought.

            Edits: several.

          8. Careful, you’re in danger of expanding your myopic analysis of Apple. Many pundits (including you) focus far too much on share. Here’s a quote from you in 2011:

            “Historically, all Apple products have been progressively marginalized: Apple II, Macs, even iPhone is losing share already.”

            I would think with almost five years of decline since you provided this analysis in 2011 Apple must have dropped the iPhone as a product. Do you have any info on whether the iPhone is still a viable product line? Surely Apple’s strategy of targeting specific segments rather than the entire market couldn’t possibly work 🙂

          9. Well, Android app sales have pulled ahead of Apple’s… that’s one step.
            Also, market share is trending down, but more slowly than I expected. 15-20% share is still a bit above their PC share.See graph. You can read graphs can you ?

            So, I guess I was right. Which I probablky explaisn your goign off the rails with your senseless ad-libbing of stuff I never said, but… I guess you wish I had ? “viable” “segmenting couldn’t possibly work” ? that’s in your fantasy, not on me. .. when you don’t have arguments, make them up ? Works for Apple, but you’re not quite as talented, just a shareholder trying hard, nowhere near management quality.

          10. Sorry bub, the quote I attributed to you is authentic. Google it, it’s the first result, from an article on Asymco in 2011. Spin it however you like.

          11. Sorry… bub ? the facts do bear it out. Again, look at the chart, and try to comprehend it.

          12. “Again, look at the chart, and try to comprehend it.”

            Again, your fascination with marketshare was commented upon, and you duly trot out a marketshare chart. But it’s what the chart doesn’t show that is more interesting.

            For example, as many have commented dozens of times, “smartphone” is a fluid category. It is growing, simply because ALL mobile phones are soon to be “smartphones”.

            Just looking at the chart, Apple’s trend is a pretty even 15% (any slow downward trend is probably covered by the growth of the “smartphone” category overall). Samsung seems to be the only one showing a real decline.

            Looking at the chart, Samsung sells the most phones of any single player. Most of those phones are dubbed “smartphones”. What’s interesting is how Samsung’s ASP per unit is GOING DOWN! Try to comprehend that.

            What’s interesting is that Samsung’s flagship phones are increasingly sitting on shelves. What’s interesting is that Apple barely has two or three weeks of inventory at any one time, and is able to keep it’s ASP consistent year over year.

            This chart seems to be your answer in defence of your previous assertion that “Historically, all Apple products have been progressively marginalized: Apple II, Macs, even iPhone is losing share already.”

            Question is, given the fluid nature of the smartphone category, given different companies’ ASP’s, and given the sales figures that we do know, etc. is it really the iPhone that is being “marginalised”, or is it a brand like the Galaxy or Note that is being marginalised (as they get hit both from above and below)?

            But, you may be right, Samsung is benefitting the world with its altruism (BOGOF deals), while Apple is merely “seducing the rich” (which like “smartphones” must be a growing category to explain the phenomenon of the iPhone being the best selling single phone brand on the planet).

            “15-20% share is still a bit above their PC share”
            Interesting thing about that of course, is that Apple’s PC share was in single digits for decades. It is perhaps just now getting to 15-20%. So, the Mac’s marketshare is growing; it is not losing it.

          13. I already commented on that. If a market category is growing by, for example, 6% a year, a three percent downward trend over several years within that growing market is not loss of marketshare; while a more rapid downward trend of 15% (Samsung), or anything greater than the growth of the market, is a loss of marketshare.

          14. Kizedek, you poor soul.

            Thou hast taken upon thyself a Sisyphean Task. Thine seeds of wisdom shall find no purchase in such barren soil.

          15. The problem for all these folks and analysts is they can’t fit Apple into a box. No business school theory have been able to effectively address how Apple have been able to defy the ads of what is taught in business school. It is the main reason why so many have issues with Apple.

          16. Mmmm… Tim Cook’s main diploma is an MBA. Are you saying he doesn’t “understand Apple” ?

          17. I guess you missed the fact that he was an engineer by trade first. Getting an MBA is the common route you take when you want to move up the management ranks.

          18. Also, you and “Informed” are just trolling these days. If either of you have facts, analysis or opinions to contribute on the topics, please do so. If not, Reddit is probably more suited to trolls ?

          19. I’m trolling?

            I make a humorous observation about how stupid/invasive a business that tracks television viewing habits would be, and YOU, uninvited accuse me of being a jerk.

            And in this thread, YOU try to bend your pet Apple obsession into a discussion of one trick ponies. The very definition of trolling.

            The reason I go off on you is because you are a humorless, thick-headed troll.

          20. The reason you’re going off on me is because you’ve got nothing to contribute. The article’s author himself singled out Apple. RTFA. Or is he a troll too, according to you ?

          21. Don’t feed the troll. The Black Knight has ‘Apple Lock-In’ Tourette’s Syndrome.

            Over 5100 posts and he still believes he has some kind of profound insight worth sharing.

            It’s tragic, really.

  2. Fair comments. I don’t think any of the companies that you mention have been able to establish the moat required to keep competitors out. They may iterate their core product, but it is easy enough for competitors to keep up and undercut them (i.e. the core problem is not really being a one trick pony, it is more that the one trick cannot be protected).

    Absent some form of economies of scale or strong copyright protection, it is hard for any of these companies to remain very profitable in the long run. It also suggest that the “open” software/hardware world systematically leads to low consumer prices and little surplus profits that can fund technological progress.

    1. I agree that the core problem is not being a one trick pony and that the issue is how to protect it.

      I wonder though if we can blame the “open” software/hardware world. The challenge for us as observers is to see if we can find companies that are actually successful under similar circumstances.

      In that light, it will probably be very interesting to see how well Box fares against DropBox. Their CEO, Aaron Levie recently did an interview with Re/code’s Kara Swisher, and what he said about his company’s enterprise focus was very insightful.

      http://recode.net/podcasts/aaron-levie-box-ceo-android-vs-ios-2/

      The way I see it, when you have a premium product, it is often easier to sell to customers who have previously paid much more for similar services, on the condition that your product is at least as good as what they had before in some important features. It is much easier to escape commoditisation.

      Similarly, GoPro could escape commoditisation if they focused on the “Pro”. FitBit could do the same if it focused on more medical applications or hard-core athlete requirements. Smaller market in terms of units, but more profitable and more defendable.

      1. Point taken.

        The difference between Box and Dropbox is really the difference in business model. The former focuses on paying corporates, while the latter spends too much time on consumers who will never pay. A new business model is worth “x” times as much as a new product.

        I was probably a bit rash in my condemnation of the “open” model, my point was really that in a world with frictionless migration to other companies’ products, the profits slip through your fingers all the time.