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Mobile Competition Part 2: Great Artists Steal

Posted: , by Michael H.

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Mobile Competition Part 2: Great Artists Steal
In all likelihood, this piece of the Mobile Competition series won't be the same kind of opus as Part 1, because this time around we don't need to explain the pros and cons of each system. In part one, we laid out and organized the pieces of the puzzle, this time around we're putting the puzzle together and seeing how it all fits. We've explained the first point we wanted to make, which was that there is no "best" mobile OS, there is just what's best for you. This time around, we're going to expand on that, because in the fervor to crown a king of the hill, we tend to forget that all of the players are pushing each other up that hill. As we said in Part 1: quality becomes ubiquitous by the nature of competition.

The name of the game

To start this off, we need to reiterate something that we've tried to explain in the past: while the mobile space is a competition, not everyone is playing the same game. This is a very important distinction to make, because often we like to point to numbers as the ultimate indicator of performance, and therefore the ultimate indicator of who "wins." Unfortunately, it's hard to name a winner when companies aren't playing for the same numbers. So, who is playing for what?

Mobile Competition Part 2: Great Artists Steal
Apple is playing for revenue, not market share. Apple is a unique hardware company in that it keeps tight control over its hardware along with a closed software platform. Because of this, Apple's best way to make money is on the sales margins, because it's a much safer long-term strategy than aiming for market share, which can be very fickle (just ask RIM about that.) Apple's path to success is built on its exceptional marketing/media buzz, its exceptional design, and its exceptional content stores. Apple was happy to tout its market share as a sign of dominance when it suited the marketing campaign, but market share was never the game for Apple, and so when market share fell, the advertising shifted focus to its content stores. Right from the first release of the iPhone, it was clear that Apple was pushing for revenue over market share. If Apple wanted market share, it would have released the iPhone on every carrier a long time ago. Instead, Apple created false scarcity through its exclusivity deals with various carriers. This false scarcity drove demand with the help of the marketing and media frenzy around the device, which helped Apple to get unprecedented subsidy margins on iPhone hardware from carriers. And, of course, those margins lead to huge revenues and profits. As of Q2 2011, Apple's iPhone made up just 5.6% of the global mobile phone market (not just smartphones, but all phones,) yet accounted for 66% of the profit of the top 8 mobile manufacturers, where the next closest was Samsung at just 15%. That is the power of Apple's margins, and that is the game that Apple is playing, not market share. That has always been Apple's game, and likely always will be. 

On the other hand, Google and Microsoft are both software companies; and, the path to profits as a software company is through market share. Of course, even though both are playing for market share, they still aren't playing the same game, because Google had a 3 year head start in the modern smartphone race (for which Windows Mobile was a non-entity), and Microsoft is still playing catch up, both in OS features and market visibility. Beyond that, Google doesn't charge any licensing fees for the use of Android. Google only makes money through the Android Market (which devices aren't required to use), and ads, both in-app and through the browser. Google wants Android on every device because the vast majority of those devices will keep Google search as the default, which means all searches will lead to Google ads. The trouble that Google is running into, as we've explained, is that more and more a content library is a necessity in pushing a mobile platform, especially when expanding into the tablet side of things. This is why we've seen Google pushing to get into the TV space through Google TV deals with content providers, as well a continuing to bid for Hulu and its video library. Although Android is expanding its lead in market share right now, Google understands how fickle market share can be, and needs to keep evolving its product.

Mobile Competition Part 2: Great Artists Steal
Microsoft does charge a license fee, and while it may be relatively low (somewhere around $8-15 per phone,) it amounts to some income. For instance, in Q1 of 2011 HTC sold about 800,000 WP7 devices, which means it had to manufacture at bare minimum 1 million handsets. That manufacturing alone represents $8 to $15 million in license fees for Microsoft, regardless of if HTC's sales figures. It's not a huge sum for a company like Microsoft, but it's some income as Microsoft slowly builds up the WP7 base in order to compete more aggressively for market share. The real push from Microsoft is likely to come with Windows 8, which is rumored to run the same kernel on both mobile and traditional PCs, allowing for cross platform apps and better integration. Windows 8 is also rumored to have new technology allowing it to scale to any number of cores in the processors, which should allow the hardware to start iterating much faster.

To round out the competition space, we have the various manufacturers, which choose the best platforms to serve their needs and occasionally create in house platforms in an attempt to replicate the models of Apple or Microsoft. But, try as they might, right now the mobile OS space is a two-horse race between Apple and Google. That can certainly change and likely will, but it will be a relatively gradual change. However, the mobile space is not just the software, but the hardware as well, and in that regard every company contributes to the circle of competition.

The article continues on Page 2.

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posted on 30 Sep 2011, 11:06 6

1. gallitoking (Posts: 4720; Member since: 17 May 2011)

great follow up story... great job Michael...

posted on 30 Sep 2011, 22:03 1

59. Steal (unregistered)

Must watch :



posted on 01 Oct 2011, 00:30 1

61. biophone (Posts: 1976; Member since: 15 Jun 2011)

I already posted this buddy.

posted on 03 Oct 2011, 22:40

125. Steal (unregistered)

It was a steal!

posted on 30 Sep 2011, 11:07 2

2. Bob (unregistered)

Well all these 'Phone operating system wars' will settle down one day and finally there will be only one 'market leader'. Almost 6.5 billion people in the world, these 'wars' are concerned to a fraction of people. Windows phone could be the winner.

posted on 01 Oct 2011, 09:50 2

74. ayephoner (Posts: 850; Member since: 09 Jun 2009)

like there is only one car manufacturer?

like there is only one computer OS?

what on earth makes you say this?

posted on 01 Oct 2011, 12:19

79. MichaelHeller (Posts: 2705; Member since: 26 May 2011)

Admittedly, there may be more than one computer OS, but it's not like it's much of a competition there. Windows is still at 86% of the market.

Still, I doubt there will be one market leader mobile OS any time soon. And, even if there is, it's not like iOS or Android fans would be quiet. I mean we all see how quiet OSX advocates are, and that's barely 6% of the market.

posted on 30 Sep 2011, 11:07 6

3. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)

Good article, but I disagree on one point. I think ip should be protected because in the tech business that's how you make money. Ideas.

That's why Apple has been so successful.

posted on 30 Sep 2011, 11:12

5. Muhannad (Posts: 455; Member since: 20 Sep 2011)

What is IP?

posted on 30 Sep 2011, 11:17

7. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)

Intellectual property

posted on 30 Sep 2011, 11:29

9. Mark (unregistered)

intellectual property

posted on 03 Oct 2011, 15:01

115. 530gemini (Posts: 2198; Member since: 09 Sep 2010)

International Police, hahahahaha

posted on 30 Sep 2011, 11:37

11. Commentator (Posts: 3709; Member since: 16 Aug 2011)

That's how you make money in any business. I agree that Samsung should be sued over the similarities of the TouchWiz UI, which is a blatant copy, but I'm not convinced that their Galaxy S/Tab form-factors are similar enough to iPhones and iPads to warrant legal action. TouchWiz is useless (IMO) anyways, so Samsung should just take it off their phones.

posted on 30 Sep 2011, 11:38 5

12. MichaelHeller (Posts: 2705; Member since: 26 May 2011)

If that were true, how would any open-source products like Firefox, Linux, Android, etc. ever make money?

In tech, as in all business, you make money on execution. You make money on marketing IP correctly, and that's why Apple has been so successful. Apple knows how to build beautiful and accessible devices, and market them so that the general public understands why they should buy it.

HP and Palm have proven that having a good, protected IP doesn't mean anything if it isn't executed right.

posted on 30 Sep 2011, 12:12 1

18. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)

They'd have to come up with original ways to implement functionality.

posted on 30 Sep 2011, 13:11 9

22. MichaelHeller (Posts: 2705; Member since: 26 May 2011)

There is no such thing as "original ways". That's the point, everything is built upon what came before it. Because of that, there's no real intellectual "property". You can't own an idea, because that idea has roots in everything you've learned from others. Nothing is original, but many things are innovative.

posted on 30 Sep 2011, 15:14

37. Droid_X_Doug (Posts: 5993; Member since: 22 Dec 2010)

Whether original or innovative, the concept behind patent law is that the 'inventor' gets a period of exclusivity to encourage them to expend the effort and $ to invent. The exclusivity is something that investors will invest in if they think they can make a return on their investment.

I wonder if Apple would have gotten into the phone business if they didn't think they had an angle from a patent perspective.

posted on 03 Oct 2011, 13:01

112. waveydavey (unregistered)

To piggy back, part of the idea of patents is to also encourage inventors to share new technologies and still reap rewards through licensing. I guess this might still be what you call shared exclusivity: "pay me, and you can join the club too".

posted on 30 Sep 2011, 16:01 2

45. wassup (Posts: 565; Member since: 23 Jun 2011)

oohh taco got hosed :)

posted on 30 Sep 2011, 20:02 2

55. AppleFUD (unregistered)

well put. . . taco50 can't grasp that idea. that all of apple's "IP" is nothing more than tweaks to existing tech. . . maybe he's just one of those simpletons that is easily hypnotized by marketing and whatnot. . . and just believes it all. You know, like the old lady that thinks a soap opera is real.

posted on 02 Oct 2011, 10:42

93. taz89 (Posts: 2014; Member since: 03 May 2011)

theres no point trying to explain...in tacos eyes everything apple has ever done is nothing but original even if the facts state the so called original idea existed before apple came up with it...your article explained everything perfectly...

posted on 30 Sep 2011, 17:31

51. biophone (Posts: 1976; Member since: 15 Jun 2011)

Mike great article you changed my opinion on IP.http://www.youtube.com/watch?v=CW0DUg63lqU
Steve jobs would be proud of you mike. However I don't like blatant copies they should add your own innovations especially in design but for features I am ok with "stealing."

posted on 30 Sep 2011, 11:41 2

14. where IP is concerned (unregistered)

I think IP should be recognised more, but not so much as overly-protected patents to be used to sue and keep ideas to oneself.. I agree with what Michael H has brought up in the article in that ideas are meant to be shared and made ubiquitous, so that as new ideas become standard, everyone benefits, and the system and manufacturers are forced to continue to innovate.. by protecting IP with so many patents, the system is effectively restricting innovation, because new ideas are generally built upon existing technology and and implemented in a way that's appealing to everyone.. just like how the iPhone revolutionised the touchscreen smartphone era, it wasn't that the tech did not exist, or Apple invented the tech behind it, they simply got the headstart and ideas to implement it in the best possible way then..

likewise, it only stands that consumers are allowed to enjoy the innovations and ideas that are shared and spread around into our everyday lives.. if you think about it, how much would it suck if everyone had to buy a Ford Model T because every other car company back in the days were prevented from building a car that was as good, or better, based on the tech that was in the original Ford.. if the patent war existed back then, effectively, no other car companies would be allowed to build a car with 4 wheels, using a combustion engine, gear systems to vary speeds and other innovations back then..

posted on 30 Sep 2011, 11:56

16. vu2ikl (Posts: 11; Member since: 22 Sep 2011)

well.. that's because as Michael said. all the "innovative" ideas have roots in some old ideas. so that is not actually a complete new idea as such.

posted on 30 Sep 2011, 13:33

27. remixfa (Posts: 14255; Member since: 19 Dec 2008)

And as soon as apple has a patent for icon colors and a menu grid, I will agree with you.

Apple is the king of stealing, which is why they have to share their gargantuan profits with everyone else. They keep losing patent infringement lawsuits.

posted on 30 Sep 2011, 17:34

52. biophone (Posts: 1976; Member since: 15 Jun 2011)

Steve would agree with you

posted on 03 Oct 2011, 15:09

116. 530gemini (Posts: 2198; Member since: 09 Sep 2010)

That line has been taken out of context by people with simple minds. First of all, that was Picasso's line, not Steve's. 2ndly, what Steve meant by what he said, is to LEGALLY own ideas from people that they hire, not literally from anyone. But of course, readers with low IQ will take what he said literally. Oh well.

Use common sense. If all that Apple have are stolen IP's, they would've been shut down a long time ago.

posted on 03 Oct 2011, 19:18

119. s (unregistered)

In that case apple should be sued for making any 4' or bigger phone screens since they sued samsun for coping the shape square from their products

posted on 30 Sep 2011, 11:11

4. Muhannad (Posts: 455; Member since: 20 Sep 2011)

Basically, technology is never-ending.

posted on 30 Sep 2011, 11:16

6. surya_020 (unregistered)

Very good article...nice work phonearena....appreciated..finally the winners will be consumers who will get better products for what they are paying :)....

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