Eric Wiesen
This post has been rattling around in my head for a while, but Chris Dixon’s always excellent blog inspired me to put this down and get my thoughts organized. Chris talks about whether or not the “open vs. closed” question about app store environments is as simple as it seems. I’ve been thinking about two things in this general vein over the past few weeks (really ever since the Nexus One came out).
- “iPhone vs. Android” is not really like Mac vs. PC
- Why Mac vs. PC played out the way it did is badly misunderstood.
I’m actually going to take them in reverse order, because the second sets up the first.
Everyone knows that for most of the lifecycle of personal computing (let’s just call it 1980 to 2010) Apple and its Macintosh platform got its ass kicked by a collection of offerings known as “the PC”. The PC was an assembly of interoperable parts with an Intel CPU (and compatible system chipset) running a Microsoft OS. Apple’s market share typically fluctuated from bad to worse and generally declined the first two thirds of this period.
These days most people talk about how Apple lost because it was “closed”, while PCs were “open”. I think that’s simplistic. There are a bunch of reasons why Apple lost for most of this period.
1. The “PC” had several important applications in the 80s and 90s. They were used in homes, in schools, in government and in business. One of these markets (business) was dramatically larger than the others. Which company had a vendor relationship with essentially every company in the US who bought technology? IBM. Which company was the original vendor of Wintel PCs? IBM. In the early 1980s when the “PC Wars” began IBM was the largest technology company in the world and Apple was a startup. The PC won the early rounds because their distribution into business accounts wasn’t just better, it was several orders of magnitude better.
2. Apple arguably gave up its best weapon in 1985 when Steve Jobs was fired. Chris notes this by looking at Apple’s market cap in 1985 and then in 1997 when Steve returned and finally today and illustrates just how little value was created at Apple without Jobs. Apple was phenomenally innovative in the early days, then released a decade’s worth of boring products (with a few exceptions, like the original PowerBooks) and then started innovating again in the late 90s (the original iMac, the iPod, iTunes, etc…). Apple lost in the middle rounds b/c it was poorly run.
3. When people consider the Mac vs. PC question today it’s largely a question of a premium product versus an ordinary product. You can get better specs for less money on the PC side, but most people agree at this point that Macs run better, are more secure and are more enjoyable to use. A point that gets (badly) forgotten is that for a long stretch of time (let’s say 1990 to 2000 just to use round numbers) Macs were awful. They were 2x the price of equivalently powerful PCs, ran buggy operating systems and had essentially no software available unless you were in the graphic arts business. Apple lost because the product sucked.
4. And yes, Apple lost because they had implemented a proprietary set of choices. Apple had their own bus for cards. They used SCSI hard drives instead of IDE. They rolled out Firewire while others were rolling out USB. Their peripherals all used Apple Desktop Bus instead of commodity PS2 ports. And this meant that Apple’s hardware was more expensive. True. I list this 4th out of 4 because I think this only hurt them so badly for the other reasons listed here. Apple was a company that produced products that were simply priced as premium products but didn’t perform. If NuBus, Apple’s proprietary (not really, but no one else used it) 32-bit bus really was better than PC’s ISA cards (it was for a variety of reasons) users would have been fine with it. And they were, for a while. But then Apple stopped innovating and all of sudden PCs had PCI which was just as good. So the price difference wasn’t justifiable anymore. SCSI hard drives actually were much better than IDE for a long while, until they weren’t. The PC “organ bank” followed exactly the Christiansen-like progression that Chris alludes to: it undershot customer use cases, then improved faster than their needs. Today the collection of standards that make up the PC are fine for virtually all needs. And it should be noted that for the last several generations of this, Apple has also recognized the reality of it and no longer uses many differentiated hardware standards. Note also that it took Steve Jobs’ return to effect this change.
Looked at today, Apple isn’t losing the “Mac vs. PC” war anymore. Apple has been gaining market share for years and does so with greater profitability than any PC vendor. Last time I checked, Apple was around 9% of new PC shipments. That’s a great market share for a premium products company (compare to Mercedes-Benz. Or Gray Goose. Or All-Clad.) Its market cap dwarfs most PC companies and is on the same plane as Intel and Microsoft, both of whom are in what should be inherently more profitable businesses.
Apple lost the first 10 or 11 rounds of the PC Wars because they had an inferior starting position, were poorly run and produced mediocre products for most of the war. Once they fixed management and started producing great products again they immediately began gaining share and making a lot of money. And yes, they also began to use commodity hardware, so there is an “open vs. closed” coda to this story, but I don’t think anyone really argues that the resurgence of the Mac is primarily the result of using Intel processors or SATA disks.
The second big piece of what is turning out to be a very long post is the question of whether iPhone vs. Android is going to follow the same playbook. I’ve said at the outset that I don’t think it does, and the rationale maps pretty closely to the reasoning above. I don’t think the same set of conditions are at all present here. Apple isn’t starting from a weak position. They aren’t poorly managed and they are producing excellent (although certainly not perfect) products in the iPhone, iTunes, the App Store and now the iPad (about which I’m generally unenthusiastic, but that’s not the purpose of this piece). So the dynamic that remains is – will they lose because they are “closed”?
There are two ways one can make this argument. The first is that Apple will lose because the App Store itself is “closed” insofar as Apple approves their apps. I think this is a relatively poor argument. Good apps will get approved. Is it a pain in the ass? Yes, definitely. Do consumers look at the iPhone and say, “I’m not sure I want to buy that because developers have to go through an annoying approval process”? No. Definitely not. Are developers going to refused to develop for the iPhone/iPad platform with it’s fifty million and growing users because the approval process is obnoxious? I seriously doubt it. On the flip side – are there going to be a bunch of crappy apps and security problems on Android because no one is curating which apps get in and which don’t? I’ll bet there will be.
The second piece of this is that Apple will lose because the iPhoneOS itself only runs on Apple hardware rather than on an ever-growing range of Android devices. I think this is the far stronger argument. Android is going to have a lot of different form factors and markets as different hardware vendors integrate it. And so from that perspective I do think there’s a pretty good chance that it winds up in all kinds of interesting places that Apple won’t ever go, like cars or CE devices or other single-purpose personal gadgets. What I also think is that each of these will have little “quirks” as each Android environment is a little bit different and as people find different ways to expose it. And so some apps will work well on some devices or poorly on others. And generally speaking users will have lots of choices but it will also be work and will require research and customer service involvement. In fact it will look a lot like … a PC.
What I think iPhone vs. Android really looks like is Mac vs. PC TODAY rather than ten years ago. Today Apple produces high-functioning tightly-integrated products that people really like. But you are limited to those devices Apple chooses to produce. If you want a netbook, you can’t buy one from Apple. You want a phone with a physical Keyboard? Apple isn’t going to help you. And if I’m Apple, I’m perfectly fine with this. I’m perfectly fine if I sell 30 million iPhones a year and tons of 30% margin media and apps. Who cares if Google is giving away Android on 100 million cars? Apple can be a big profitable company by releasing terrific products for those who care to have the simplicity, style and curation Apple brings to the table. I’d argue that’s what they’re doing now and it’s working pretty well.
I think ten years from now there are more Android devices than iPhoneOS devices. Probably a lot more. But I don’t think that means that Apple will have “lost”.
Five Years Too Late 