Apple vs Google: vertical integration vs crowd-sourcing

23 July, 2012

I am a big fan of both Apple and Google and from the distance see two very different DNAs that are good at solving a very distinct set of problems. Apple is the epitome of vertical integration owning the end to end supply-chain including the consumer touch point. Google is the epitome of crowd-sourced development: throwing stuff on the walls and letting users vote with their time & money on what sticks and what does not.

In this post I am going to make some predictions on what kinds of products and services each company will win at and what might be tough for them.

APPLE: AWE INSPIRING VERTICAL INTEGRATION

Let me start with Apple. The biggest reason I use Apple products is ease-of-use around consumption of media. From being able to buy content (music, TV shows, movies) easily on an a-la-carte basis, to being able to consume them without ads, or consume them in any place (on the iPhone, TV – through AirPlay or streaming, iPad), I really can just enjoy the media rather than having to stitch together my custom solution. I would go as far as to say that post iPod, Apple has not just given me a music player and an online music store, but what they have really enabled is allowing me to connect with music; something that is challenging in a hectic, internet enabled startup life. They have taken full ownership of the customer experience, simplified it and let anyone in my family (including my kids) easily access the content anywhere. To be fair, I have not tried Google Play or Amazon, but I know that out of the box Apple will work and it makes it that much harder for me to give the other solutions a try. Add to this apps that give access to specific content (NBA.tv was my most recent purchase) and it becomes a killer solution. This requires an unprecedented level of vertical integration: from relationships with content owners, to knowing every detail of the manufacturing supply-chain (going to the extent of locking out certain components from the rest of the market by making investments in its suppliers), to the software and distribution to the consumer. The complexity of what Apple has been able to achieve is awe inspiring. I am personally looking forward to the disruptions Apple will bring to TV viewing.

A lot has been talked about the design aesthetics of Apple products and while there is no question about the elegance of each product, I don’t think without the benefit of the solution this would have mattered as much (anyone remember Vertu?). On the strength of the underlying benefit, IMO, the design takes the solution to another level and builds a strong competitive moat for the core money making activities.

Yet, this strength around vertical integration leaves it vulnerable is some critical areas where it will try and own the customer experience but IMO won’t be able to beat a crowd-sourced model that easily. Three key areas come to mind immediately: Maps, Voice & Browser. I am quite worried about Apple substituting Google Maps because the strength of Google Maps comes from crowd-sourcing content and it will continue to get better each time it is used. I don’t know if Apple’s DNA will allow that kind of continuous improvement by users. The same logic applies to Voice Search. I was never excited by Siri and recent reports that Google Voice Search is better don’t surprise me at all. And then the browser. I knew someday I would have to pay for Apple in a way I will not like. The new Chrome browser for the iPhone/iPad is much better than Safari and I think will continue to get better but Apple has not yet allowed to make it the default on the iPhone or iPad.

GOOGLE: USER KNOWS BEST

I really like GMail & Google Apps. The way GMail has incrementally improved over time has just been amazing. So many little usability issues and features keep getting fixed and with labs there is always something new to try out and vote on. I’d be loath to try a competitive email offering from Apple – I just don’t think they will be able to pull it off. Search of course is the ultimate product that has improved because of crowd sourcing. I am also extremely optimistic about G+. I am really hoping that they will do a much better job than Facebook by first doing what is right for the user. Can you imagine Apple doing a social network – you know Ping?! Social network for music? Whatever. In some ways Apple was smart to just simply integrate tightly with Twitter and Facebook. I was once at a Google office and was surprised to see the person I was visiting with an iPhone. This person was quick to point out that Google encourages use of all competitive products so that employees are aware of everything that is happening. Imagine if this was Apple – the employee would have been fired!

And yet Google’s approach has limitations. I am not surprised by the poor reviews Google TV has received – it is not hosted software that can be incrementally improved behind data. And while Android will most likely be THE most dominant mobile operating system, it will achieve this primarily because of price. It is again no surprise to me that revenue per user is much higher on the Apple App Store than it is on Google Play. Similar arguments apply to the Chromebook – conceptually an interesting model and idea, but tough to pull off until Google is willing to own every detail of the customer experience all the way to the manufacturing of components. In the case of Apple the ownership went all the way to the CEO not a product manager. That is powerful.

YOU WILL BE ASSIMILATED

One thing that I really like about Google is how much it tried to create stickiness primarily by trying to do right by the user. It is commendable. But as the company faces competitive threats it is being forced to take a less idealized view leading to users complaining and in fact some employees leaving. It is a harsh reality of the environment. But yet, there is enough tension in their DNA that they will (hopefully) try to do the right thing.

Apple has always wanted to keep the user in its walled garden and it rubs a lot of people the wrong way. In the pre-iPod world it rubbed me the wrong way too but today the story is quite different because it has out-innovated the market and gave me something I could not refuse. But the tendency is still strong and worrisome.

Truth is that every company tries to create switching costs for the user – some the user is willing to live with, some not. But no company escapes the need to do this. For the user the good news of course is that there are competing choices which do their part in keeping each company honest. As a user I am excited by the choices and I hope that I will continue to have the option to mix and match as I please without too many hindrances.

(Dhiraj Kacker is CEO & Co-founder of Canvera.com, an online Digital Photography company based out of Bangalore.)


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Apple vs Google: vertical integration vs crowd-sourcing

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