For all those that can’t read the WSJ (because they charge for subscriber content…) and because the article is just an excellent, if foreboding, piece of journalism in itself…
“Don’t look now but this may be the year when Apple’s market cap does the unthinkable and surpasses Microsoft’s. Congratulations will be in order but so will condolences. For a company preoccupied with products is in danger of becoming a company preoccupied with strategy. And by “strategy,” we mean zero-sum maneuvering versus hated rivals.
Oh well, it’s a fallen world we live in.
Take the iPad, which instantly shed the moniker “Jesus tablet” once it saw the light of day. It’s a blown-up iPod Touch, rolled out not to be insanely great but to give Apple an entry in the netbook derby. The iPad may not be the best Web-browsing machine simply because Apple refuses to support Flash, which delivers 75% of the video on the Web. But the iPad (an anagram for paid) looks like a good device for consuming the e-books, music and video sold through Apple’s online service. In fact, let’s not mince words: The iPad looks like a device optimized to patronize the iTunes store.
And what about Apple’s decision to exclude Flash? Apple and its supporters stake out aesthetic and philosophical grounds: Flash is buggy. Flash is a power hog. Flash is “proprietary” (horrors). Flash is used to create those annoying Web ads (never mind that advertising is what pays for most of the Web).
Uh huh. Flash would also allow iPhone and iPad users to consume video and other entertainment without going through iTunes. Flash would let users freely obtain the kinds of features they can only get now at the Apple App Store.
We hasten to add, before the net-neut crazies and antitrusters seek to perp-walk Steve Jobs, that Apple is perfectly within its rights to do so. But the thing to notice is that Apple is making a strategic choice to cut off its users from a huge amount of Web content. We’ll leave Flash’s acolytes to defend it against charges of bugginess, etc. Flash has been amazingly successful in crowding out other video players and amazingly successful in getting perhaps a billion PC users to download regular updates. If you want to watch TV shows at Hulu.com or baseball at MLB.com or play games at Facebook, you need Flash.
For now, Adobe, owner of Flash, says it’s issuing tools to allow Flash programmers at least to offer their creations through the App Store (provided Apple gives its blessing). Apple insists a forthcoming Web standard will replace the proprietary Flash anyway. We’ll see. Flash is installed on 95% of PCs, so its displacement won’t happen overnight. And not all browser makers (e.g., Firefox) are on-board with the new standard.
Here’s the bigger worry. Apple may be succumbing to the seductive temptations of “network effects,” in which the all-consuming goal becomes getting its mobile devices into more and more hands simply for the purpose of locking more and more users into iTunes. Enter nemesis in the form of Google, a company with which Apple was recently allied.
Widely circulated have been remarks by Mr. Jobs at a meeting with Apple employees late last month in which he unceremoniously dumped on Google’s “don’t be evil” mantra. Apple had played nice, he reportedly said, steering clear of competing with Google in search, while Google traitorously plotted to launch its own mobile devices in order to “kill the iPhone.”
Google won’t kill the iPhone. The market is plenty big enough to support lots of mobile devices. What’s really threatened is Apple’s ability to keep convincing tens of millions of consumers to lock themselves into iTunes., the App Store, etc. Not for nothing Google flaunted a mockup of its own slate-like device a few days before the iPad unveiling. And Google’s mobile devices support Flash—i.e., they allow users to patronize the video and other Web goodies that Apple users can’t.
Rumors abound that Apple is considering a deal with Microsoft’s search engine Bing to displace Google on the iPhone. Rumors abound that Apple will get into the advertising business, that it will expand its cloud services to compete with Google’s. Who is this beginning to sound like?
Network effects can be a path to power and riches, but (as Microsoft has shown) much of the proceeds can also end up being squandered on defensive and paranoid attempts to secure the privileged position. Pundits have wondered what might become of Apple once its chief aesthete and perfectionist is no longer calling the shots. An Apple that rolls out increasingly junky devices merely to lock more and more customers into the iTunes-App Store mall is one gloomy possibility.”
I decided to paste this article in full because of its relevance to the current flurry of expectations surrounding Apple’s iPad release and also the future of the iPhone. It’s very interesting, particularly with regard to the strategy surrounding the iTunes and App Store specifically related to these devices. Apple’s model has always been essentially to get people to buy the software first so they can then buy the hardware… I think I’m right on that, but its just fascinating to look at it from this angle, where it almost seems like the strategy has a strong possibility of getting in the way of the hardware, which Apple has been renowned for. Why exactly to Apple and Google have to be industry competitors? Can’t Apple make the hardware, and some of the software, while Google provides the modes and methods of communication and information transmission? More on this later.