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Saturday, December 17, 2016

Profit Angle

I have read that Android's success is a direct result of Apple's iOS being a walled garden. Let's look at this statement now from two different angles. First, is the walled garden really bad? Second, is this the real reason that Google and Microsoft are actively developing their own hardware?

Is the walled garden really bad?

Apple curates the apps that are allowed into the App Store. This has demonstrably reduced malware compared with Android. Recently, a form of malware, called Gooligan, was found to be present in about 100 apps. It is present in about one million phones in the wild, and increasing at a staggering rate of about 13,000 smartphones per day. I would actually say curation is a plus. So, what is it that people prefer about the Android operating system?

Let's look at what makes Google's Android shine over Apple's iOS.

This article points to three main reasons: Android...
  1. can be rooted
  2. uses non-proprietary software formats
  3. interface can be customized
Rooting

Talk about dubious value. Being able to root Android means (in hacker parlance) the phone can be rootkit'd. In plain English, it means that apps can enter superuser mode and obtain administrative privileges on your smartphone. Once that happens, they can reconfigure your device, redirect its output, and install their own choice of apps. In other words, you are exposed to malware that can steal your passwords, the money in your bank accounts, access your email, snapchat photos, microphone, track your location, keep logs of your text messages, listen in on your phone calls, and essentially every bad thing you can imagine. Malware on Android is a critical problem right now.

Your average consumer should never, ever root their phone. It's only for hackers, spies, and criminals to take advantage of you. What this represents is Google not looking out for you.

Now let's look at how pleasant rooting is on Android. Why should you root your phone? This article spells it out perfectly (while detailing how complicated, dangerous, and potentially undesirable the rooting process can be). The main reason that people want to root their phones is to get rid of the bloatware that's typically installed by the manufacturer (Samsung, for instance). Welcome to the same problem we had in the last millennium with PCs: shovelware. This is how they differentiate their phones from each other in the Android ecosystem -- the same way vendors used to differentiate their PCs in the Wintel ecosystem. But, in comparison, it's a fact that Apple now allows you do delete the pre-installed apps you don't want on iOS 10, without rooting your phone.

Many users want to bypass the complexity of using Terminal to obtain superuser mode on the phone's Linux kernel to change various privileges. Hey: what consumer would want to do that? So they buy rooting software to do it. Can you trust that software? No. In July 2016, rooting software was reported to have installed malware on 10 million Android handsets.

And, by the way, each manufacturer's phone has a different rooting process due to the security bloatware they've installed. Joy.

Non-proprietary software formats

This means that, unlike iOS apps, which are available only through Apple's own App Store, Android apps are available from several sources. The Google Play Store is not the only place you can buy and install Android apps. There are many alternatives, including Amazon Appstore for Android, SlideME, 1Mobile Market, Samsung Galaxy Apps, Mobile9, Opera Mobile Store, etc.

Is this a good thing? It does open up multiple sources for Android apps that run on various smartphones.

But what are the downsides of multiple app stores?

The first problem is fragmentation. Each Android smartphone has a different hardware configuration, which turns out to make the app developer's life hell. Each smartphone has a different screen configuration, for instance. Before buying an app with a specialized purpose, like using the GPS, or a game app with high demands, it's important to decide if that app will run properly on your phone. This is precisely why smartphone manufacturers have been building their own app stores -- not all apps in the Android ecosystem run on every phone.

The second problem is trust. Can you trust the app you download to be free of malware? You would like to know that the App Store you are using is checking for malware. Fundamentally, if they do not have access to the app's code, app stores cannot protect you from malware. What happens is this: you download an app, as it runs, it loads and install malware from some server somewhere. This installs Gooligan.

Nowyou find new apps simply appearing on your phone. This happens because ratings are actually steered by app companies through the use of the Gooligan software. Gooligan installs itself, initially, for the purpose of buying apps it wants you to buy, forging your approval to buy them (and possibly spend money on them) and then rating them highly. These apps can be installed because Gooligan can obtain system privileges. Usually this happens because you enter the admin password for your machine. Perhaps it's to give the app privileges to install some fontware or customization feature. These new apps it installs potentially contain the real malware, because you do not have a choice nor can you control where they come from.

Customizable interface

Really? Can't you customize the interface of an iPhone? You can customize the wallpaper and the lock screen photo. If you want to go further, you can use customization apps like Pimp Your Screen, Call Screen Maker, iCandy Shelves & Skins, Pimp Your Keyboard, and so forth.

On Android, you should ask yourself how much you want customization. After all, it might come with malware.

Oh, cost!

One of the main reasons that people prefer Android is the cost of the phone. Which really has nothing to do with Android. Actually, cost is normalizing because deals with carriers are being made that pay for the phone up front, in exchange for locking you into the carrier for two years (usually). But this applies to all phones now. So, cost is not as much a reason as it used to be. But the plain fact is that, without a carrier deal, Apple's iPhones do cost more.

Why Google and Microsoft are developing their own hardware

Second, is that even the reason that Google and Microsoft are developing their own hardware? No, it isn't. The real reason is profit envy. The price of software has been dropping quickly since the App Store was created. This means it's harder for software-only companies to keep operating margins high. Think Microsoft, who has gone to subscription software to guarantee upgrade revenues, amidst unpopular OS upgrades, like Vista. The profitable niche, mobile devices, must look pretty good to them. Should they merely license OS to hardware manufacturers, like Windows? Will that work? No. Google gives Android away for free: upgrades don't cost anything. So nobody will buy Windows Phone if it costs money. Also, hardware and software both need to be upgraded.

The real reason is that, given that software is becoming essentially free, to make the profit you must make your own hardware. Also to make the hardware work best, you must develop custom software. In fact, the best features require both hardware and software to make them work.

This tight vertical integration is why Apple reaps well over 90% of the profits in the smartphone industry year after year. They sell their own hardware. That, and their profit margin is about 40%.

Value proposition

So, why are people willing to pay a premium price for iPhones?

As always, the price is paid based on the value perceived. The value of better user experience on iOS, easier installs, significantly better privacy and security, and great design is huge. It leads to unprecedented user satisfaction ratings and loyalty. People pay for this, and enjoy the rewards.

Apple devices, on the whole, are more up to date than Android devices. Here is a chart of Android OS versions as of September 13, 2016 and their share on smartphones. It clearly shows the latest version, Marshmallow, at 18.7% installs. And on iOS? As of November 27, 2016, 63% of iOS devices have upgraded to iOS10, 29% are running iOS 9, and 8% are running earlier versions. Get the latest stats on Apple's App Store page.

Clearly Apple's customer base upgrades significantly faster.

General comparison

Consider this article on iPhone vs. Android as a near-complete analysis of the subject.

19 comments:

  1. I just spent half an hour fighting with Apple DRM ("All that music on the old iPod? *Of course* you want to delete it all!"). Google tells me to buy an app for $40 to pry the music loose.

    On my Samsung phone, I plug it in, and a disk shows up. All my data is my data.

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  2. You know, of course, that just because you have copies of them, those songs don't actually belong to you (really you only own a single copy). DRM is meant to protect the rights of the copyright holder. I am not sympathetic to wholesale free media dissemination, which is illegal, but I am sympathetic to the process of media migration, which certainly should be legal. In the era of CDs, people were led to believe that the media they bought were theirs to copy (making a single copy is legal for personal use, as the courts have ruled) yet the ability to copy without loss of quality led to less scrupulous people burning CDs (to sell for profit) that contained data they knew they didn't have the rights to.

    With Apple devices, I've never lost any media, ever. I'm still using the same iTunes Music Store (iTMS) login I used on my first FireWire iPod. In addition to iTMS media, I also have AIFFs from CDs I bought in the pre-iDevice era, as well as my own compositions I mastered to AIFF, MP4, and other formats using ProTools.

    This kind of media can n to be easily migrated into iCloud, as I understand it — even my own compositions. Though in any reasonable world I own them in their entirety since I own the copyright. As for myself, I keep these kinds of media in an iTunes Music folder (database) on my laptop. You can back this up six ways from Sunday but access to the iTMS media contains DRM and requires authentication to play.

    And they're just files. You can keep your iTunes database on a Mac or a PC.

    I know plenty of music artists and I'm pretty sure they would like DRM to be applied to their media to protect their royalty streams. Its not greed. It’s simply how they make their living.

    Just because data is intangable doesn't mean it's free.

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  5. > I would actually say curation is a plus.

    Indeed, but anyone who advocates it be 100% centralized, “flunked” Economics 101 even if they received an A grading.

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    1. We should agree to disagree on this one. It's clear to me that curation is a high-priority security issue. If Android's security travails aren't already making that obvious.

      Curation certainly isn't eating into the profits, is it. Look for other companies to go this way also.

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  6. > The first problem is fragmentation.

    And we all wear the same shoe size. And the Internet was better when Yahoo was the only portal. And the Internet would be better if Facebook was the only website and all others (including all apps) were served via Facebook and Facebook APIs.

    Diversity is antithetical to the physical laws of the universe, because Einstein did not say that the Second Law of Thermodynamics is fundamental. Coasian costs are not a fundamental aspect of the comprehension of economics and free market fitness.

    > Fundamentally, if they do not have access to the app's code, app stores cannot protect you from malware.

    That is why there is this concept that is taking over the world that you might have heard of: “open source”. Users should have the freedom to decide whom they choose to trust for curation, i.e. United Laboratories or Consumer Reports free market fitness. We should be free to decide which curators we trust. And 80+% of the ecosystem has said that freedom is more important than totalitarianism and conflation of business function with political corruption.

    I agree the current Google ecosystem for apps is perhaps a chaotic mess and eventually users will demand more organization of curation, but the alternative need not be 100% totalitarianism subjugation to bankrupting ideology of Cupertino and insane California environmentalists. I gave a very thorough explanation in private of the insanity of the West recently on this issue and I can not repeat all the economic arguments here. Of course nobody wants pollution, but this is complex issue that is not going to be solved with the totalitarianism that is bankrupting the West.

    > But the plain fact is that, without a carrier deal, Apple's iPhones do cost more.

    Which is a huge factor outside the affluent areas of the world, especially where there is prepaid service and you are not locked into a long-term carrier contract (e.g. the Philippines where I am). And the reason Android phones are less expensive and more diverse offerings is because Google is not stifling competition with a walled garden.

    > The real reason is that, given that software is becoming essentially free, to make the profit you must make your own hardware.

    My understanding is that Google is involved not to make a huge profit on short-term on Android but to prevent Apple from stifling the Internet and app ecosystem worldwide so that Google mainline business revenues in advertising can control to grow without retardation by lack of freedom for all parties in the ecosystem.

    > As always, the price is paid based on the value perceived.

    I do not need the best device to achieve some basic things I need a smartphone to do.

    Agreed though that often the Android software stack is derelict. And it really pisses me off that my Samgsung refuses to stop downloading updates to my phone without my permission even I shut off the auto-update. The Bluetooth audio latency was horrendous until just recently and still not at par with iPhone (which I discovered when I tried to use my smartphone as a karaoke sing along with an Bluetooth loudspeaker).

    The smartphone ecosystems are dominated by behemoths which are forcing crap on the users that we do not want!

    This has to stop and I am planning to try to do something about this starting from a common API for apps so we can abstract away the iOS and Android APIs.

    I do not know enough yet about the market and technological forces that are driving this totalitarianism outcome, but I am determined to end it, if possible.

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    1. It's not about shoe size, Shelby. You totally changed the subject. Fragmentation's problem is that it prevents the adoption of more recent builds of the OS, and thus inhibits better security for Android! Its benefit is that it allows multiple vendors to use the Android operating system, while creating their own crappy look. Which differentiates them from their identical competitors.

      Now, to your point, it's great that there's competition. This drives progress, and most likely drives innovation as well. But one thing it doesn't drive is operating system advancements, when it's only Google doing it. The hardware vendors are stuck using whatever Google came up with, and presenting the same advancements as their competitors. Which must totally suck for them. This is why its hard to create a single app that works on all the devices there. They make the UI so different and inconsistency is bad.

      So app developers just develop for one "predominant" hardware vendor, like Samsung or LG. Which defeats the model.

      Google doesn't have to stifle the app developer. Their "ecosystem" of many hardware vendors does this automatically. And the subsequent fear generated by malware app developers.

      Google is not out there to prevent Apple from stifling competition. They are out there for the money pure and simple. Their "collect all data on their customer and sell it to anybody" model. It's not a coincidence that this is becoming illegal in some countries.

      You are missing the forest for the trees. Google pwns you. It doesn't respect your privacy any more than Uber respects their drivers or their female employees.

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    2. I agree Google’s business model is ultimately the most evil. Eric Schmidt is a globalist wolf who has no problem with collecting data on all us sheep. As I recall, he violated Steve Jobs’ trust when he was on the Apple board. But Apple instead of putting up a serious challenge that might subsume Google’s forthcoming evil victory is throwing it all way in order to maximize profits within a smaller (but lucrative sector) of the market. I do not blame Apple for doing this as it makes the most sense for its investors over the near-term. And I am not sure if there is any other business model Apple could have pursued which would have made sense at its market capitalization (and I presume that capitalization is probably necessary to provide the resources to do the work that Apple does, although I have not analyzed it in detail). So we are sort of stuck with the reality of the economics of it all.

      I am not as well studied on the specifics of the hardware and OS integration as I presume you (and surely your colleagues) are, but I do know that some basic stuff on Android did not work correctly the last time I tried to program an app, such as there was no standard API handling dual SIMM cards.

      I also loathe low quality software, low quality integration, and low quality QA (on all those engineering aspects not just on hardware manufacturing). I am 100% on board with you guys/gals at Apple on that point. I actually am very similar to Steve Jobs in that I admire perfectionist holistic design integration. But I draw the line where degrees-of-freedom of more important priorities are sacrificed. As I am sure you know also, it is a balance of factors that must be weighed.

      It has been argued by Eric S. Raymond that Google got into mobile in order to prevent Apple from stifling the growth of the Internet on mobile with an Apple monopoly. I can also see your point is valid as well, that Eric Schmidt realized they had to be in mobile to make sure they could data mine everyone. Both of those motives seem to be very plausible.

      > Google doesn't have to stifle the app developer. Their "ecosystem" of many hardware vendors does this automatically. And the subsequent fear generated by malware app developers.

      Well I can see that eventually it is possible that for example Samsung phones and OS might eventually blacklist certain apps, but afaik that is not the case today. So for the moment, your retort moves the goal posts, because my point is about being able to blacklist software that competes with the vendor who controls the blacklist. So far Android developers do not face this as severely as iPhone developers do. I realize this does not impact most developers, but it will for example impact severely if I launch an OS on top of an OS and then Apple will surely not allow it into their Appstore. Google might also not let it into their Playstore, but there are many Android appstores.

      The issue of hardware + OS integration variation and how to program efficiently for it, seems to me to an separate/orthogonal concern. Google may suck at organizing this. Apple may be somewhat better, but partially because they have less variation.

      This sounds like an engineering opportunity to me. But I do not know the details of how difficult it would be to improve on those current two choices. But if I did into a common API for apps abstracting away both iOS and Android, then eventually I will probably be getting into that sort of engineering. But initially I would begin much more high-level where the low hanging fruit is. There are many apps that do not need the lower-level or more detailed APIs.

      It is not valid to talk about how bad Google is, as a justification/obfuscation of the lesser evil that Apple is. All of that evil must be overcome.

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    3. You miss Google's motives entirely. They believed they could leapfrog Apple by offering the Windows of the smartphone world. Then they would let the smartphone makers slug it out just like Microsoft did in the 90s.

      And this is consistent with what actually happened. Schmidt's position on the Apple board gave him the data to think about, and his old-school mentality just decided that Microsoft had the better model: software only - because it's pure profit. Their actions got Schmidt kicked off the board (the right thing to do - just not soon enough).

      But, in the mobile revolution, the Microsoft model has been out-thought by Apple.

      And how is this? Simple.

      First, users prefer simplicity over complexity, security over vulnerability, and good design over "good enough for government work" crap. Second, by targeting consumers and not the vocal minority of Ars Technica readers (I am one myself, by the way), Jobs was preternaturally brilliant.

      This led to a situation where both the hardware and the software could be controlled in concert. In a time where people (like Efi Arazi) were warning me that a company should be either a software or a hardware company but not both. Conventional wisdom failed because it was disrupted, just as fabless design markets disrupted chip production. But in reverse! This was a vertical integration success.

      Steve Jobs was also smart enough to invest in encryption technology. Remember when the iPhone came out and Jobs decided to omit Flash? Security was already part of the company's decision chain. As privacy increasingly became an issue, that became part of it as well.

      Google went the other way, and now they must Alphabetically boil the ocean for new innovative technologies to survive. Their moonshots are considerably less daring than Elon Musk's, though. And that's literally obvious. We need more like him. And where did he make his billions? PayPal.

      You can't launch an OS on top of an OS - nobody will want that. It's already so tough for Amazon to sidestep the Android OS in their devices. They will have to build their own OS soon.

      You could make something a security shell, but that won't have a market because my sense is that OS vendors will eventually cooperate to solve the security problem. This will be necessary to their survival - more than just a competitive advantage.

      Consider hardware vs software integration. Each hardware vendor needs to outshine the other. Which means some cool hardware feature. This creates an environment that defocuses the OS maximally because, well, for the consumer focus and simplicity always wins over defocus and complexity.

      You could be God and still not get the OS right for all Android devices.

      You should have a look at Apple's App approval processes. They are fast and clean now. You are misinformed.

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    4. > You miss Google's motives entirely. They believed they could leapfrog Apple by offering the Windows of the smartphone world. Then they would let the smartphone makers slug it out just like Microsoft did in the 90s.

      I did not miss any motives entirely.

      That potential motive you describe is consistent with the desire to protect their ad revenue business model by not allowing Apple to have a monopoly on mobile. Surely you know that Google makes most of the revenue on ads, not Android.

      > But, in the mobile revolution, the Microsoft model has been out-thought by Apple.

      And caused them to lose 80+% market share to Google. So apparently Steve Jobs was wrong yet again. And Apple is losing yet again, for the same reason they always lose, which is they think of the world as their own walled garden.

      > First, users prefer simplicity over complexity

      Very simple to buy an Android phone for $50 here in the Philippines. And simple to use. And nearly no one is paying $600 for iPhone.

      > security over vulnerability

      Nobody here really cares.

      Frankly I do not care that much about it. I should not be doing security sensitive activities on a mobile phone. A mobile phone is a communications device. All the data should be automatically backed up on a blockchain. The mobile device should be a disposable thing I can throw in the garbage and buy a new one for $50 when it gets a virus. And that is where we are headed.

      > This led to a situation where both the hardware and the software could be controlled in concert.

      Repeating the same mistake he made on the Mac and destined for disruption by commodization again eventually (well already for the most part in terms of unit sales, but not yet in terms of revenue).

      > just as fabless design markets disrupted chip production. But in reverse! This was a vertical integration success

      Disagree. The vertical integration is a short-lived delusion that will be disrupted from below.

      > Jobs decided to omit Flash?

      Flash was a resource hog not compatible battery operated devices.

      > We need more like him. And where did he make his billions? PayPal.

      Mircea Popescu is doing it at a much faster rate than Elon did and without government subsidies.

      > You can't launch an OS on top of an OS - nobody will want that.

      The consumer does not care as long as it looks & feels good.

      The app developer cares. Already there are frameworks for programming iOS and Android with a common API.

      The browser was an amazingly successful OS on top of an OS on the desktop.

      > They will have to build their own OS soon.

      Commodization on the way …

      Jeff Bezos will disrupt yet another industry.

      > my sense is that OS vendors will eventually cooperate to solve the security problem

      Like they do not do on my desktop OS?

      A better sandbox for apps (aka a browser) is a likely solution, yet you think I can not build an OS on top of an OS.

      > Each hardware vendor needs to outshine the other.

      Disagree. They can just sell on price and look & feel of the hardware. Moving towards $50 - $200 smart phones and commoditization. Disruption from below. Yeah some will still pay $600 for a smart phone, but that will be a smaller segment of the market.

      > They are fast and clean now. You are misinformed.

      How can you conclude I am misinformed? What did I say? My only point has been that Apple can censor what ever it decides to. And that is totalitarianism.

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    5. The whole issue is profit. Their ad revenues became small compared with Apple's hardware revenues. Their motive is, as always, profit, and they craved that profit model.

      Ad revenue is truly the cash cow they milk at Google, but both Google and Microsoft have definite plans to be in the same hardware plus software model as Apple, because they envy the huge profits in that model. Microsoft is burning away their hardware vendors in such a move, which is gutsy, though the hardware vendors seem to be outpacing Microsoft, which is predictable.

      Google is in danger of having a single predominant hardware manufacturer, Samsung, take over their platform.

      I'd say Google protecting their ad revenues was initially a good motive, but it was when they saw how fast Apple was growing (and they had a front row seat with Schmidt in their presence) that they decided that there were faster growing methods to make profit.

      Their plans were huge, larger than just an OS. That's why Schmidt left the board.

      Apple didn't start to replace Google for searches, nor build their own Maps App until after Schmidt's duplicity was recognized. That's the hole in your theory.

      Your contention that market share is important is dumb. Steve never said we wanted to own the smartphone market. We don't want to build the cheapest phone - that leads to no profit. We wanted to build the best phone - the one people wanted to buy and would pay more for. This strategy worked, and it's continuing to work. People that don't work for Apple who have tried both OSs often tell me that they prefer iOS, and have moved to iOS because it's a much better user experience. No, consumers don't want to be able to rootkit their phones! They are dismayed at how insecure rootkit'ing is! Or they don't care about the hard-to-use useless bloatware.

      But, hey, if you want to buy the cheapest, then why did you buy a Samsung?

      Samsung's numbers are not looking so good in China, BTW.

      You don't care about smartphone security? Then you, my friend, are not a 99% consumer. The smartphone is like the center of the consumer's life. Not a laptop, which is only for coders basically. You surely couldn't have missed that mobile is taking over and that smaller fits in your pocket. This is what consumers want. And thus security is the linchpin. Privacy is of utmost importance to everybody.

      Bezos hasn't been successful in disruption even the tablet market, which is in decline, much less smartphones. He is, however, providing Musk with a decent competitor in cheap space flight. Though Musk, it appears, is on a mission. The Alexa product is great, as long as it doesn't hear every word I say and become something the feds want to subpoena.

      People have been saying commoditization is supreme ever since Google created Android. But that model of just building software while hardware developers slug it out to make the cheapest model, is just not the way to make money in mobile. Besides, let the other hardware vendors slug it out for the last bitcoin while Apple sells fewer and reaps all the margins. We will see which company lasts longer. How much cash does Samsung have? or Xiaomi? How many options will they have at the end of the day?

      You can build an OS on top of an OS, but it won't succeed because the vendor will build it on their own, or Google. And then they'll be eating your lunch.

      If you want to take advantage of crowdsourcing software, build an App Store on a popular device and let the developer profit directly from it. That's the model that's worked so far. Look for Microsoft to directly copy that model too.

      How do people profit from open source? It's a long game, for sure.

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    6. Hardware vendors do need differentiation, whether it's price, style, or performance. This has always been true in the PC market. Those that can't differentiate, die.

      Hey, you're a big critic, Shelby. If your futurist acumen is so great, then lets see you profit from it.

      BTW the consumer couldn't care less about the App Store policy of acceptance. They just see great apps. What they do care about is the rate at which sinister malware slinks through and infects their devices. Or ransoms their smartphone data. Remember, it's the center of their universe.

      Submit an app for approval and let's see how you fare. I don't see how you have been hurt.

      Or are you simply operating from self-interest in trying to sell your next-gen model of payments and software project building?

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  7. > Fragmentation's problem is that it prevents the adoption of more recent builds of the OS, and thus inhibits better security for Android!

    Massive changeover to these rapid-fire OS fixes can cause more harm than they prevent. The fixes have not been in the wild a long time and thus can create new problems that did not exist before.

    It is folly to think a mobile phone is a secure device.

    I do not want the vendor forcing me to upgrade the OS when I am not ready to. I am very conservative and upgrade to new OS after it has stabilized for a while.

    Apple is creating a strawman Hegelian dialectic to justify its totalitarianism so that it holds all the control over its ecosystem. But this has strangled its market share.

    Google is moving more of its OS into Google Play services in order to make most apps incompatible with the AOSP.

    Apple and Google are two faces of the same totalitarianism monster. We the people are being squeezed between two variants of evil.

    A colleague mentioned to me that with an enterprise signing certificate, one can ship apps that are not on the AppStore. But I retorted that Apple probably retains the control to turn off the certificate. He said they must be renewed annually.

    > The hardware vendors are stuck using whatever Google came up with, and presenting the same advancements as their competitors. Which must totally suck for them. This is why its hard to create a single app that works on all the devices there. They make the UI so different and inconsistency is bad.

    This was not the case for Windows (and now Linux) on PCs because all the parts of the PC were commoditized and the OS was standard and installed separately after building a system with standard components.

    But Google does not want to create an ecosystem where we can choose to install our own OS on hardware.

    Consumers benefit from commoditization because then the manufacturers do not attempt to monopolize the ecosystem.

    Seems we need to commoditize the mobile hardware + OS ecosystem.

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    1. You are wrong about massive changes to the OS. Apple has no problem putting out releases, and seeing them accepted by a huge majority of their devices. The problem is fragmentation. In this form, it's the inability of the old phones from actually upgrading to the new Android OS that counts. That's why the latest OS has 7% uptake in the Android world compared with 93% in the iOS world.

      You should know this!

      BTW, no vendor forces upgrades. It's always opt-in.

      Market share is not really the most important aspect of a product segment. Though the iPhone and iPad enjoy much larger market share fractions than the Mac does, that's for sure! What is important is shipping the best product you can. So people will become surprised and delighted. So they will feel like they are holding the future in heir hands. So the product can enable them to do more. So their lives can be improved. This is why consumers like Apple's products. Their experience is so much better. Any service they need is provided and the service gets very high marks.

      It's the whole product that is important. The lifecycle, from creation through use, through upgrades, through recycling.

      Where's the beauty and desirability in your crowdsourced code factory bag-on-the-side-of-the-OS plan? Who's going to buy it? Who wants it? I'm serious. These are marketing decisions you should make before proceeding.

      It's dangerous to say "people don't know what they want". You really have to be a 1 in 100 visionary to succeed with a plan like that.

      The people are not being squeezed out by totalitarianism. The people are being provided with products they can choose between. Competition is very important to progress.

      When you say we the people, you are referring to coders. My friend, coding is important to our future but we are simply in the minority. We will become the mathematicians of this millennium. And a few of us will become great designers and succeed. I used to have a friend that called coding "bit-pushing" like he was pushing a broom across a messy factory floor.

      The plain and simple fact is thaat, if you want to build your own OS, you will have to start your own smartphone company like Andy Rubin.


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  8. > Apple is a tough one, I have a Mac Book Pro, and I much prefer it to a windows laptop, but there is no walled garden for the laptops. I have an Android phone, I think most people can't really tell the difference between Android and iOS, its why Android is selling well - but Apple make all the profits.

    Agreed. But the killer point is that Apple does not take most of the profits from the economy of computing. Just as PC hardware manufacturers do not. Software and services take vast majority of profits, e.g. Paypal. Apple will lose control over the software business revenues because of numerous competitors who are going to dilute what they are able to capture via the Appstore fees. For example, with my idea for Bitnet, they will not be using Apple Pay but rather a blockchain to pay for in app upgrades and upsells. Jeff Bezos will do something similar routing around Google and Apple in terms of revenue sharing of software and services. Ditto China will clone iPhone hardware and either clone iOS and/or target something like my app-browser OS on top of an OS (which will be more secure because it will have better sandbox, e.g. ridiculous that computer programming languages do not use brackets for string delimitation to avoid scripting attacks).

    Apple makes great laptops, but afaik that it not a large enough growth market to sustain their market cap growth.

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    1. Apple's services division is their fastest growth segment. Probably you missed that.

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  9. > They believed they could leapfrog Apple by offering the Windows of the smartphone world. Then they would let the smartphone makers slug it out just like Microsoft did in the 90s.

    And they did leapfrog Apple in just a few years in units shipped and diversity of manufacturing/ecosystem. I believe parity (or better?) was also attained on usage such as Internet activity, apps installed, etc.. Also kept pace proportionally with a ~third of Apple’s profits.

    Microsoft’s mistake with Windows wasn’t the commodification of the hardware, but that the OS also becomes commoditized. Microsoft based their revenues on licensing the OS. A commoditized computing ecosystem maximizes the growth in Google’s revenue which is primarily from ads. Google seems to want to diversify their revenues and is dabbling in hardware (competing with Apple’s strengths with its presumably? better integrated Pixel XL smartphone) and services such as their cloud storage/services (competing with Jeff Bezos).

    Apple is going to face competition with fitness advantages from every direction within various market segments, because Google has created a more open ecosystem with more degrees-of-freedom and thus superior network effects. For example, Jeff Bezos’ Android-based devices.

    Afaics, Apple has been able to forestall the inevitable with excellent execution on vertical integration (Apple Pay probably being a cornerstone that I think will eventually be obliterated by blockchain payments but that may take a while yet) and racing into markets where their vertical integration advantages that remain had not yet saturated the market for them, e.g. China. Clever marketing leveraging security and environmentalism theatre (grabbing the actuarially bankrupt debt-driven fat of socialism before it collapses).

    Apple probably needs to begin to transition to a pivot asap because Google is not only disrupting them on market share but also now going to compete on the integration with hardware and software with the Pixel XL. I will comment more specifically on technical comparisons of iPhone and Android in a separate comment (maybe on one of your other blogs).

    But I do not see a way Apple can pivot. It looks like an eventual checkmate but with several more years of fat revenues for Apple yet. Similar to Microsoft they will have more cash than they can spend well, yet unable to find a strategy that can compete far into the future.

    > Their "collect all data on their customer and sell it to anybody" model.

    Apple owns the customer. Google sells the customer. At least with Google we get a move towards commodification of the hardware and OS, which means in the future we the people can take control.

    For example, on iOS an app can not multi-thread (multi-tasking on iOS is a tightly controlled jail which is why we can not run Youtube in the background or download something in background while doing another task on iPhone but we can on Android). While tightly controlling the sandbox has some benefits, for the long-run strategy of network effects it is better to put it into a browser that sits on top off (and is optional) to the OS. In economics, separation-of-concerns is critically important for avoiding Coasian traps (which over the short-run can be highly profitable).

    So this means if I developed an OS on top of an OS (and I could explain why I think this will be so successful but I’ve alluded to the key themes already), I could not make it work well on iPhone with requiring users to jailbreak their iPhones. My son said he used to prefer iPhone until he wanted to run the Gameboy Advance emulator and had to jailbreak the iPhone.

    > First, users prefer simplicity over complexity, security over vulnerability, and good design

    Agreed. But users prefer many different things in addition to those things.

    Innovation will be coming against Apple from every network effects direction that Apple stifled with their walled garden.

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    1. It's clear the walled garden doesn't stifle innovation. Just have a look at the App Store to see what I mean.

      Don't build an OS on top of an OS - that's doomed to failure. Build a new OS. You cannot make your model work on virtually any smartphone out there today. Consumers won't see why it's valuable to rootkit their phones. So many dangers lie down that road. Nothing that's relied on jailbreak has ever succeeded.

      You mistake market dynamics for innovation. The only reason Apple is in their current position is (1) innovation and (2) supply chain genius.

      When a company controlls the whole product, and does it right, the result is something the consumers want. It's a rare thing. This approach will always be better. This is why Google wants to build their own hardware, and Microsoft as well (though they are too little too late and mobile is really eating their lunch).

      All you have to do is watch them and you will see that what Apple does is clearly enviable.

      Your arguments are Byzantine. Simplify your approach, Shelby.

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