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Google reminds me of Microsoft

December 7, 2012 2 comments

I recently upgraded my iPhone to a Samsung Galaxy Note II because I believe Android will prevail in the smartphone/tablet market, much like Windows prevailed in the desktop/laptop market, and for many of the same reasons. I’ve been to this movie, and I know how it ends.

Computing SOM

Source: Marry Meeker’s 2012 Internet Trends

The Cathedral And The Bazaar
In the 80’s & 90’s, “Cathedral and Bazaar” market dynamics propelled Microsoft to the dominant position in the personal computing market. IBM & Apple believed their walled gardens would create a better customer experience, broader revenue streams and better margins. They controlled the operating system and the hardware (Cathedral). Conversely, Microsoft licensed MS-DOS and then Windows to many hardware manufacturers (Bazaar) and benefitted from market dynamics that reduced cost and increased innovation. The Bazaar completely dominated the Cathedral, and here’s why:

  • Microsoft commoditized the hardware manufacturers (Dell, Compaq, Sony…). Faced with cutthroat competition, they operated on razor-thin margins and relentlessly decreased cost.
  • Microsoft grew a large ecosystem of small, innovative development partners. IBM and Apple cultivated a small group of large, slow development partners. A developer license for OS/2 cost $10K! Windows developer licenses were practically free by comparison.

Quantity has a quality all its own
Today, Google and Apple are competing for leadership of the new frontier: mobile computing. Though Apple is now better positioned in terms of products, cachet and cash, their approach really hasn’t changed from 1992 – classic Cathedral. Google, on the other hand is pursuing the Bazaar, with Android. How is that working out?

  • Android devices already cost less than Apple devices, pound-for-pound. Expect that price/performance gap to widen because Android has many device manufacturers focused on hardware and competing vigorously for customers.
  • Android already holds the technical high ground. The iPhone5 loses on screen size, resolution, CPU cores (2 vs. 4), battery life and more (e.g. Pen) when compared to Samsung’s Note II. Customer reviews from CNET and Amazon rate the Note II about 1 full star ahead of the iPhone, on a 5 star scale. And Android device release cycles swamp Apple, which only does about one release per year. So expect that gap to widen too.
  • Android already matches Apple’s iOS on table stakes features and leads in the most important emerging area: making your device smart. Apple’s Siri invokes software functions from voice commands and has some interesting conversational parlor tricks. But Android’s Google Now can invoke functions from voice AND anticipate what you want to do! I’ll cover that difference in a separate post, because it’s HUGE.

Of course, this isn’t exactly the same movie…
Here are some important facts specific to today’s situation worth considering:

  • Android has a fragmentation problem. Most Android phones never get an OS upgrade because device manufacturers have more incentive to sell new phones. But Apple successfully upgrades in-market phones to the most recent version of iOS.
  • Apple has a dominant share of market. Although Android enjoys a clear lead in smartphones (Samsung alone sells 2X more than Apple), Apple still dominates tablets and their users generate more mobile web traffic than Android.
  • The Android ecosystem may splinter. Samsung, LG, HTC, … don’t want an uber-dominant Google leaving razor-thin margins for them. They want to create a differentiable user experience on their devices and may create their own platforms or jump to a new one (e.g. Firefox OS).
  • The iPhone is a great product. I wouldn’t recommend Android to everyone today because the iPhone is easier to use. Apple provides an amazing customer experience and has tremendous customer loyalty.

Summary
Despite the challenges listed above, I still like Google’s chances. They are well positioned to dominate the next era of computing, just like Microsoft dominated the last. I believe fragmentation is largely a growing pain. Android is moving so fast and people are upgrading phones so quickly that it really isn’t critical today. And Apple’s SOM is declining. If the Android ecosystem does splinter, it will likely be due to the emergence of a more “bazaar-like” alternative (e.g. Firefox OS). And yes, the iPhone and iPad ARE great products. But so was the Macintosh. It just couldn’t beat the market dynamics of the Bazaar.

Categories: Mobile, Technology Trends
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