Mobile Competition Part 2: Great Artists Steal

Mobile Competition Part 2: The circle of competition
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?

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.

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.

"Good artists copy, great artists steal."

As we mentioned before, quality becomes ubiquitous by the nature of competition. Because of this, one of the most pointless arguments we see going around the forums and comments is that "company X stole this idea from company Y". The absurdly broken patent system in America has been perverted and lost its way, and the path it has taken has fundamentally warped our view of what an idea is. The original point of the patent system was to force inventors to make their methods public, because ultimately, information wants to be free. The idea was that with processes in the public record it would be easier for other inventors to build upon that design and fuel more innovation. You may notice that while our current patent system tends to stifle innovation by asserting that ideas are not free, but are the property of whomever filed a piece of paper with that idea on it. On the other hand, the open-source system has continued in the spirit by which the patent system was first conceived: information is free, and innovation is driven by sharing. 

It is in this spirit that we would like to call upon the wisdom of Pablo Picasso when he said, "Good artists copy, great artists steal." This idea fits our purposes, because a great idea doesn't belong to the company that first put it to market. All great ideas have been built upon ideas that came before, and in the field of technology, when you trace that line back far enough, you often hit science fiction. The point is that a "good artist" would be a company like Samsung, which has blatantly copied Apple design and found a good amount of success in that. But, Samsung also has moments as a "great artist" in "stealing" Apple's ideals of making mobile devices constantly thinner and lighter. This isn't really "stealing" though, rather it is recognizing that someone else has understood a basic truth, and possibly come up with an elegant solution to a problem. Apple understood, just as Motorola had before it, that mobile devices need to be as thin and light as possible. The great artists, Apple, Google, and Microsoft, all "steal" from each other and anyone else around, because they understand that it doesn't matter who comes up with a great idea, just that all great ideas should be shared, because they are almost always rooted in basic truths. 

It will often feel as though Apple is "stealing" more features from Google, but really that is just an illusion of the two company's development method, which we touched on in Part 1. Google is in love with the public beta. Every service and product it releases begins life as a beta, because Google wants to have the users to be a part of the building process. With this in mind, Google releases features and products much faster, but also less fully developed. Apple uses the successes and failures of other companies to inform its choices, and makes sure that when it launches a new product, it is full featured, matured and ready for prime time. This means that Apple spends more time working on a product or feature and often releases later, making it seem as though it took the idea from Google. The difference is just that Google likes to improve its products with the help of consumers, and Apple wants to cultivate an auteur air about its products as if they all came straight from Steve Jobs himself. Neither approach is better than the other as consumers often fall into the two camps of early adopters and those who prefer matured products, but they do lead to this common misconception. 

There are those who will claim that Apple stole many of the new features of iOS 5 from Android, including the voice commands, notification center, and wireless syncing and OTA updates. But, Apple didn't really steal the ideas, Google simply reached some basic truths faster, namely: touch typing is not a metaphor that translates well to small touchscreens so better input methods are needed; notifications should not be intrusive; and wires must be abolished. These are not ideas that Google invented, just ideas that Google implemented in a better way than Apple. And, what was Apple to do?  Offer a lesser experience to customers just because another company did it better first? No, the point of competition is for everyone to push each other forward. 

Apple kickstarted the modern smartphone boom and set the original trends. Google took stock of Apple's best ideas and used them to improve Android. Steve Jobs accused Google of stealing the "look and feel" of the iPhone (regardless of whether Apple may have stolen that look and feel from Samsung or Palm or some other company). Google then improved upon the iPhone features with its own innovations. Now, we're swinging back the other way where both Android and WP7 have far better notification systems. So, Apple is taking that and other better ideas, incorporating them to make its product better, and likely improving upon those ideas as well as some of the shortfalls of Android and WP7. We certainly wouldn't be surprised if iOS 6 includes some variation on widgets/Live Tiles that includes some ideas Google and Microsoft wish they'd thought of, because that's the circle of competition. We really hope that when that happens, Google and Microsoft take those ideas and make their products better. This is a virtuous cycle that only serves to make all of the products available for consumers better - the best ideas spread and cause the whole system to evolve. It doesn't matter who comes up with an idea first as long as the best ideas become the standard, because ideas strive to be free and to be shared. The greatest artists may "steal" from one another, but when everyone benefits from it seems far better to say that great artists "share" with one another and build upon each other's works. The evolution image above shows a direct line ending with Android, but in reality the iPhone and Android will be trading that top spot back and forth until a competitor comes along and evolves past both. 


Just as each hardware manufacturer in the Android ecosystem pushes the others to make better handsets, so too do Android handsets and other devices push Apple to make better iPhones, and Apple pushes Android manufacturers, Google, Microsoft and others to make better products. Each company has its own business plan which guides decisions and pathways. Each company is striving for a different result, or attempting to reach those goals through different means, making it impossible to say whether one is better than another. At this moment, both Apple and Google are winning, because each is succeeding in the goals they have set: Apple is making huge profits, and Google's Android is running away with market share. Everyone is taking ideas from each other, because that's what needs to happen with the best ideas. The best ideas become ubiquitous because competition dictates its necessity in order to continue the evolution of technology. Once the best ideas spread and become standards, the market has no choice but to innovate; and, regardless of a broken patent system, innovation is still occurring on all sides. All sides are making great products, striving for separate goals, and competing in an unwinnable game. It's a game that can't have a winner, because it's a game with no end, and you can only have a winner when you've finished the game. Quality begets quality, great ideas become ubiquitous, and the entire ecosystem evolves. When that happens, it can be nothing but a good thing for consumers.

Addendum: There have also been many of you who have commented to the point that Apple tends to use unfair practices. The general complaints are that Apple acts like a bully in the market, taking ideas from others, but complaining and being overly-litigious when it feels that others have taken its ideas, and also that Apple ignores its customer's demands and routinely delays or doesn't bring certain features like copy/paste, or widgets. While these may not seem like the best business practices as far as keeping customer loyalty, they are in no way illegal, and ultimately are the choice of Apple to make. If Apple believes it can bring a device to market that doesn't have feature parity with competing devices, but still sell as well as it projects, that is Apple's decision. As much as we may want it to be different, Apple has no real responsibility to its customers, only to its shareholders. So, if we keep buying, Apple will keep doing the same things. As far as the lawsuits, we aren't sure why Apple would do that. Perhaps, it's a matter of making more noise about someone potentially stealing from Apple, so Apple devices continue to look unique. Or, it may be a tactic to slow down the market in order to control the pace of innovation, which would be beneficial to Apple because of its strict yearly update cycle. Whatever the reasons, they are Apple's choice to make and up to consumers to determine if Apple should be rewarded for them. As it stands, many people don't seem to care about Apple's business practices as long as it keeps putting out great devices. 

image via MacRumors 

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