Apple News, Analysis and Podcasts

It's no secret people move in packs. Whether populations migrate to new continents or flocking to malls on Black Friday, it makes no difference, the masses will follow each other over cliffs if the herd moves that way.

Technologies that win the day are not lost on human behavior either. VHS vs Betamax, Windows versus Mac OS or the air-popper vs the superior oven roasted Whirly-pop popcorn, the masses consistently find themselves settling for the lowest common denominator as "good enough" often defeats better or best.

But Apple changed the game with iPod, offering a vertically integrated solution which married hardware, software and content into one seamless ecosystem. Apple's iPod caused a major disruption in the marketplace. Microsoft's business model of licensing software to hardware vendors was bug-ridden and a poor experience compared to Apple's seamless solution. Making matters worse for Microsoft, the iPod's competition was at (or barely below) that of Apple's iPod pricing. The game of "good enough" had lost.

Apple leveraged what they had learned from the iPod, enabling them to move into the smart phone space. But iPhone has not destroyed the competition from stem to stern as did Apple's iPod massacre. Costly data-plans, carrier exclusivity and long-term contracts have not allowed iPhone to divide and conquer. The control carriers hold over the mobile industry bought Google time to play catchup. and Android is beginning to march past iOS.

Some critics believe Android is the new Windows, believing Google has tapped into the consumer herd, destined to repeat Windows victory over the Mac in the mobile space. Like Microsoft's PC conquest, Android is making that familiar push to the lowest common denominator, bolted on everything from cheap phones, eBook readers, to lousy resistive touch tablets. Its banter that sounds good, but this shallow and dated analysis isn't accurate. Whirly-pop-Apple isn't going anywhere, not this time around, and there are three major factors as to why:

1. Pricing: Android device prices are rapidly falling as hardware vendors are desperate to differentiate. But gone are the days where the consumer must choose between a $1,000 PC and a $2,500 Mac. The delta between a $99 Android phone and a $199 iPhone may be larger than that of a PC versus a Mac of the 90's, but it's no longer a several thousand dollar decision either. The need to pay an extra $50 - $100 for an iOS device vs something else is not a deal breaker for most (and in many cases there is no price differentiator between an Android device vs an Apple iOS solution). If the consumer finds an iOS solution desirable, they can dive in without fear their wallet will require emergency care.
    
2. Microsoft: Windows Phone 7 has landed and it's going to keep coming, and coming and coming, and... Win Phone 7 is Microsoft's last stand, and it either wins a piece of the mobile space, or watches the entire mobile revolution from the sidelines. If Microsoft fails now, the company risks their entire Windows and Office franchise futures. Windows Phone 7 is going to gain some ground, and Google's Android will be it's main target as they both deploy their OS's to hardware vendors, where price winds up being the major decision factor for the masses.
    
3. Noise: Google, Microsoft, RIM, Nokia, perhaps HP? There are too many players, too many choices for the consumer herd to solidify behind, and the quality of product will only deteriorate as price becomes king. Google's Andy Rubin seems to believe this type of competition leads to greater choice across the spectrum. In truth, Andy stopped short of explaining the entire cycle as this leads to mediocre or poor solutions to choose from. Why would the masses consolidate behind these products when it's no longer financially painful to enter into a higher quality ecosystem with iOS devices? Apple will not dive into the free hardware game and give away their value, when they can watch a host of mobile platforms beat each other silly, causing consumers to move erratically with no set mobile hardware or OS direction.

As Google and Microsoft begin their race to the bottom, Apple can do what they do best, float above the chaos with superior product and marketing skill, capturing a large share of the market by doing so. It may not be the 70% MP3 market share Apple holds onto with iPod, but with an ASP of $608 an iPhone, I think Apple can live with a slightly smaller majority choosing iOS solutions.

11 Comments

1. chano ~ December 13, 2010 17:32
   When you're right.... you're right.
2. Chris ~ December 13, 2010 17:42
   In your first point you state "The need to pay an extra $50 - $100 for an iOS device vs something else is not a deal breaker for most", then you go on in your next point to state "...price winds up being the major decision factor for the masses." Which is it?
3. Codino ~ December 13, 2010 18:03
   Look into why Apple's XServe is discontinued. Variety of hardware and software companies' work in one platform makes the real change here. Windows or Android are supported by too many companies. Those companies rely deeply on these platforms and would support them endlessly. Apple will always lead in the multimedia market but, it won't last more than 3 years as a leading company in the smartphone business. It is losing market share to Android year after year. And now with Windows Phone 7 in the scene, Apple's race is going to be only with RIM for the third spot.
4. Barbara ~ December 13, 2010 18:45
   Couldn't help noticing your throw away line about Windows massacring Mac, but that's not going to stay that way for long. If you take a look at Mac ownership among college students, you'll notice it's 58% Mac. When these kids graduate and move into the business world, they're taking their Macs with them. And then percentages will reverse.
5. Alan Smith ~ December 13, 2010 20:28
   Funny, how the Google fanboys (Codino) keep screaming that Apple will lose market share while the Google/Android fragmented market (where 2nd phones cost one cent) will dominate. Not. The latest Fortune article demonstrates Google/Andriod/verizon losing sales after the iPhone 4 was launched. And wait until the Verizon iPhone comes out.
6. PXLated ~ December 13, 2010 20:38
   Cordino...Take a look at this - http://bit.ly/gXTi09 - Is it or is it not overtaking iPhone?
7. CrimsonIdol ~ December 13, 2010 22:20
   @Barbara, it's funny how people defend M$, it's kinda like defending cigarettes, "everyone else is doing it" argument. Does anyone have a running pc that is 10 yrs old? Running as good as the day they brought it home? I've seen some old Macs, still running and functioning just as good as brand new, what other computer can boast about that? As the adage goes "once you go Mac you never go back".
8. Dan Brantley ~ December 13, 2010 23:35
   Who knows what the future will bring but I think it pays to look at one statistic: Whenever you look at sales figures... EVERY iPhone is bought and paid for... if people vote with their wallets, that is a telling statistic. How big would Android's "lead" be if there weren't "Buy One, Get One" promotions all the time (Or in the case of a recent Sprint promotion "Buy One, Get Three.") If Verizon does get the iPhone next month, let's revisit this topic in six months.
9. Spock ~ December 14, 2010 05:26
   @ Chris: In your first point you state "The need to pay an extra $50 - $100 for an iOS device vs something else is not a deal breaker for most", then you go on in your next point to state "...price winds up being the major decision factor for the masses." Which is it? Mark's point is that the consumer does not mind paying $50 extra when it allows him to step up from a crappy Android device to a sophisticated iOS device. But when a consumer decides to stay with a non-iOS device and has to chose between a Android phone and a Win7 phone, price becomes the deciding factor.
10. Rabih ~ December 14, 2010 13:27
    I've tried my fair range of phones, but nothing hit me like the quality of the iPhones. RIM make really solid-but eternally dull mobiles. Androids changes quicker than Paris Hilton's switching bfs. I honestly think that once iPhone go on Verison then Apple will have the market by the neck. So far Apple has the market WITHOUT being on the biggest carrier. One wonders what will happen when iPhones hit Version. Scary, eh?
11. jmmx ~ December 15, 2010 02:19
    It has been a long struggle for Apple. They suffered through the dark days when their Mac market share dwindled to the miniscule. Still, however, they held true to their vision: Elegant, easy to use, design quality (both physically and aesthetically) from the board layout to the computer housing, from software to packaging. In spite of everyone else rushing to the cheapest possible, they held to their principles. No wonder their stronghold was the artist community! (Also, BTW, they always had a strong set of supporter in the programming community. Many who worked with Wintel machines had Macs at home.) All this time they had their aficionados who appreciated the quality and in vain tried to convince others who just blindly followed the MS herd. As Apple began their struggle back with Jobs presenting the iMac, suddenly, they had a stroke of luck. It was the point in history when state of technology allowed the MP3 player to become a reality. As others crudely tried to make a device that would capture the imagination of the masses, they were unable to crate a refined product that was simple and intuitive to use. The rest is history. I am sure that Apple's leadership is as surprised as how things turned out as the rest of us. The iPod began the halo effect as users began to think "Gee, if they can make something a beautiful as this, maybe I should try a Mac." The statistics on user satisfaction tell the tale there. Even if you are an iHater, you cannot deny the fact that all the studies put Apple products way at the top of the list of customer satisfaction. They must be doing something right! Eventually, many businesses will learn that total cost of ownership is much more important than purchase price. Some will never learn that, just as some individuals will never care about it. So there will always be a place for other systems. This is good as I am not a fan of monopolies. Still, as a long time Mac aficionado, I finally feel vindicated. Apple may never have a majority share in any of their markets. But they are the undisputed leader of the high tech companies.

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