The fab four are going to war in 2012

[SmallCap]

I found this article to be very interesting in its talk of business models and what these companies are doing going forward.

 

http://www.fastcompany.com/magazine/160/tech-wars-2012-amazon-apple-google-facebook

 

I haven't finished it yet but here is an interesting excerpt.

 

Late in 2010, Jobs made a surprise visit to Apple's quarterly earnings call. The purported reason was to celebrate Apple's first $20 billion quarter, but Jobs clearly had something else on his mind: Android. At the time, Google's free mobile operating system was beginning to eclipse the iPhone's market share, and Jobs was miffed. He launched into a prepared rant about Android's shortcomings. "This is going to be a mess for both users and developers," he said, citing the inevitable complications that arise from the fact that Android phones look and work differently from one another. As for the crop of 7-inch Android tablets being developed to take on the iPad? "DOA--dead on arrival," Jobs asserted. (Jeff Bezos, for one, has ignored Jobs's perspective.)

 

What Jobs didn't say in his outburst, though, was how little Android's market share matters to Apple. According to Nielsen, Android now powers about 40% of smartphones; 28% run Apple's iOS. But here's the twist: Android could command even 70% of the smartphone business without having a meaningful impact on Apple's finances. Why? Because Apple makes a profit on iOS devices, while Google and many Android handset makers do not. This is part of a major strategic difference between Apple and the other members of the Fab Four. Apple doesn't need a dominant market share to win. Everyone else does. The more people who use Google search or Facebook, the more revenue those companies can generate from ads. Amazon, too, depends on scale; retail is a low-margin business dependent on volume.

 

Apple, on the other hand, makes a significant profit on every device it sells. Some analysts estimate that it books $368 on each iPhone. You may pay $199 for the phone, but that's after a subsidy that the wireless carriers pay Apple. Google, in contrast, makes less than $10 annually per device for the ads it places on Android phones and tablets. That's because it gives away the OS to phone makers as part of its quest for market share. Google's revenue per phone won't go up after the Motorola purchase closes--Motorola Mobility's consumer-device division has lost money the past few quarters. So despite Google's market-share lead, Apple is making all the money. By some estimates, it's now sucking up half of all the profits in smartphones.

 

 

 

 

[Liberty]

According to Nielsen, Android now powers about 40% of smartphones; 28% run Apple's iOS. But here's the twist: Android could command even 70% of the smartphone business without having a meaningful impact on Apple's finances. Why? Because Apple makes a profit on iOS devices, while Google and many Android handset makers do not. This is part of a major strategic difference between Apple and the other members of the Fab Four. Apple doesn't need a dominant market share to win. Everyone else does. The more people who use Google search or Facebook, the more revenue those companies can generate from ads. Amazon, too, depends on scale; retail is a low-margin business dependent on volume.

 

I'm having trouble seeing the logic here.

 

Many devices that are running Android would probably be iPhones if Android didn't exist. To say that this doesn't matter to Apple is nonsense. Of course they make a lot more money per phone than anyone, so even with a small market share they can have a large fraction of the profits (they're kind of like luxury car makers), but they'd do even better with a larger market share, no doubt about it.

 

As for Google, they probably make about as much from each iPhone as from each Android phone, so the equation is different. A lot of the value that Android has for Google is defensive; they'd rather have all this influence on the smartphone market rather than let Apple and Microsoft take it all and leave them at their mercy.

 

I'm sure Android will be monetized better over time as mobile advertising technologies become better and more advertisers become familiar with geo-targeting and such, but these technologies will no doubt also run on non-android phones since google is the 800lbs gorilla of online advertising.

[Uccmal]

I have trouble with the logic as well.  It only applies if Apple can continue to outdo everyone else with tech, quality, and marketing.  Relying on device sales wont last forever hence the Icloud.