Apple – Page 5 – Naofumi Kagami

Priorities

Recently we saw two reports about bugs in the Chrome browser on Windows.

One bug was about font rendering. It turns out that fonts on Chrome looked bad because Google neglected to update Chrome so that it would take advantage of the new font rendering technology provided by Windows.
Importantly, both Internet Explorer and Firefox had been using this technology for ages, and Chrome was the only major browser that was still using the old, outdated font rendering API.

The other bug is related to battery consumption. Apparently Chrome fails to throttle down its power consumption even when the browser is just running in the background. This bug can be traced back to 2010, which means that Google has knowingly neglected this bug for 4 years.

This eloquently tells us what Chrome’s priorities are not. Chrome does not prioritize beautiful font rendering and it doesn’t prioritize low power consumption.

Interestingly, this is in direct contrast with Apple. Apple prioritized typography and has very good font rendering. The quality of the fonts are also very high. In power consumption, Apple has emphasized this on their mobile devices, their laptops, their operating system, and even specifically on Safari for quite a while.

The Law of Conservation of Attractive Profits And Personal Computing

In a previous post, I wrote about my concerns on how the law of conservation of attractive profits might apply to the next stage of mobile computing, especially in emerging nations.

Here, I would like to describe how the law of conservation of attractive profits helps us to understand the history of personal computing. This is particularly instructive because it strongly suggests that this law will continue to be applicable in the future.

The law of conservation of attractive profits

I quoted a brief description of the law of conservation of attractive profits from Clayton Christensen’s book “Seeing What’s Next” in my previous post.

What it tells us is;

When commoditization occurs at a certain stage in the value chain, an adjacent stage will gain the opportunity to earn attractive profits.
Attractive profits emerge at the stage which solves the most difficult problems in the industry, typically with an integrated approach.
This integration may happen at the product component level, customer interaction level or supplier interface level.

Hence to identify which stage will earn attractive profits, we have to understand what the most difficult problem in the industry is. This is not necessarily a technical problem, but can be any stage in the value chain.

Obviously, different countries, different regions may have different problems in their value chains. In particular, the average spending power is very variable between regions and this will necessitate different approaches to the market. Hence different stages will earn the attractive profits, depending on region.

Application to personal computing history

From the late 1970s to early 1980, Apple and IBM were the powers in personal computing. They took components and assembled them into their respective proprietary personal computer platforms. During this age, the attractive profits were in designing the platform and assembling the computer.
As technology improved however, this shifted. Compaq reverse-engineered the IBM-PC, creating a clean room implementation in the 1980s. This effectively commoditized the platform design of the IBM-PC. Assembling a PC suddenly became very easy to do. When this happened, the power in the industry shifted to adjacent stages, namely Microsoft (in software) and Intel (in CPUs).
In the 2000s, the Internet came and created another layer in the value chain. At the same time, innovation in PCs started to falter partially due to the fact that PCs had become “good enough” for office productivity. The absolute processing power that Intel provided through its new CPUs no longer became important because the old ones or the cheaper ones from AMD were “good enough”. Similarly, the new operating systems that Microsoft released no longer became essential because the old ones had “good enough” features. This created an opportunity for the attractive profits to shift towards Internet service companies (which were in their infancy and not yet “good enough”), and bore behemoths like Google.
Apple then came along in 2007, bringing a totally revolutionary product, the iPhone. This caused the whole evolution cycle to go back to the beginning and once again, the company that assembled the final product commanded the most attractive profits (Apple). The most difficult problem in computing was designing and creating smartphones that were small and light, yet powerful. They also had to contend with the dilemma of very limited battery capacity and full-day battery-life expectations. This was the responsibility of the hardware manufacturers.
Hence similarly in the Android ecosystem, the most profitable company became Samsung, also the company that assembled the device.
As technology progresses and solves the most pressing problems in smartphones, the profits move away from the hardware assemblers to adjacent stages. Hence the predicament that Samsung now finds itself in. At this point however, it is not yet clear which adjacent stages will reap the profits. In particular, it should stress that is no by no means obvious whether Google services will become this stage or not.

Which layer could reap future smartphone profits?

I won’t try to reach a conclusion here, but simply point out a few things that I think are important.

Things to consider;

A huge problem in the smartphone industry is how to expand customers and how to expand usage in various countries and various market segments. It is increasingly apparent that a one-size-fits-all approach is not going to work.
The problems in the industry will significantly differ according to which market segment we are looking at. For example, high-end smartphone users may have issues with sharing links, customizing the user interface, pure Google-ness, continuity with other devices, notifications, maps, etc. On the other hand, low-end users will have issues with ease-of-use and prices. Similarly, price is much more of an issue for users in emerging countries (regardless of tech literacy) than developed countries.
Whereas hardware and low-level software affect the experience of every user, the service layer is more specialized. For example, not everyone uses a complex social networking service like Facebook and may be content with SMS. Similarly, people who often visit unfamiliar places will make constant use of maps, but there are also many people who simply go to-and-fro from the same few locations most of the time. The same thing can be said for Google Now. People don’t need to be constantly reminded of things that they do every day of the week.
Google actually doesn’t control a lot of the services that are suited to people in emerging nations. For example, their most visited property on mobile devices is YouTube. However, YouTube takes up hideous amounts of bandwidth which will be a problem in these countries. Facebook and WhatsApp either don’t have this issue or have worked hard to fix this.
Because emerging countries do not have too many people on credit cards, billing for software and services is a large issue. Carrier billing is seen as a solution for this. Carriers will be able to extract the attractive profits proportionally to the importance of carrier billing in that country.
The layer that can customize the solutions to match the different markets is in a good position to gain the attractive profits. For hardware, this would be the local vendors who can now easily create custom hardware with the help of the Shenzen ecosystem in China. For the software and services, carriers traditionally have been the gateway.

Google and the Law of Conservation of Attractive Profits

In this blog, I have touched on Clayton Christensen’s “law of conservation of attractive profits” a few times (in Japanese: 1, 2)

The law of conservation of attractive profits is briefly described in Christensen’s book “Seeing What’s Next”. Below is a passage from the book;

We have also called the law of conservation of integration the “law of conservation of attractive profits,” because companies make attractive money when they solve the hardest problems. The hardest technical problems mandate solutions that are tightly coupled integrated systems. When modularity and commoditization cause attractive profits to disappear at one stage in the value chain, conservation of integration means the opportunity to earn attractive profits with propriety products will emerge at an adjacent stage.

Conservation of integration explains why it is not accurate to characterize and industry as integrated or disintegrated. There are numerous types of integration in any given industry. Specialists are integrated, just in different ways. Whereas integrated firms might span an entire industry’s value chain, specialist firms might be integrated to produce a single component that itself is not good enough. Or they could be integrated across whatever interfaces drive customization and convenience, which could be the point of customer interaction or the interface with suppliers.

I find that the law of conservation of attractive profits gives us great insight into how personal computing evolved from computers like the Apple II to the iPhone. This is a long topic, and I hope to touch on it sometime in the future.

For the current discussion, I would like to touch on how Google seems to be trying to manipulate the smartphone value chain and whether it will succeed.

To understand the current situation better, I suggest readers listen to two excellent podcasts which describe the different strategies that Apple and Google are pursuing.

Regarding Google, what is suggested in these podcasts is that Google is trying to commoditize both hardware and software so that their services will reach the widest audience possible, thereby providing Google with data to feed their machine learning project. They do not seem to care about creating an ecosystem in which their hardware OEMs and application developers can sustain profitable businesses.

Viewed from the law of conservation of attractive profits, this can be explained as Google attempting to commoditize hardware and software, so that the service layer will dominate attractive profits.

The question is, will this work?

Listening to Ben Bajarin in the Tech.pinions Podcast, it dawned on me that there is another layer that actually has a bigger chance than Google of gaining the attractive profits. That is the carrier layer.

Carriers have the following advantages;

Carriers are the interface to customers, and importantly, they control the billing, especially in emerging countries.
Carriers own the pipe and can control the flow of content through their networks. For example, they can provide unlimited access to WhatsApp and Facebook, while restricting access to YouTube and other sites.
Carriers are local. This means that they can tailor pricing and promotions to fit the local situation. This is especially important in emerging countries where the spending power of the average citizen is a fraction of that in developed nations.
Before the introduction of the iPhone, carriers had huge power in the ecosystem. So much so that Steve Jobs famously called them “orifices”. It has already been proved that the market structure is such that carriers can command huge profits if the circumstances are right.

Ben Bajarin briefly touched on Cherry Mobile in the Philippines, which is a carrier that is selling its own brand of smartphones.

I am not yet familiar with what Cherry Mobile is actually doing, nor have I spent time thinking about this in more detail. It does appear however, that Google is not the only potential beneficiary from software and hardware commoditization. In fact, it seems totally possible that services will also be commoditized and that the carriers will reap the attractive profits.

This is a theme that I will continue to think and hopefully write about.

Credit Where Credit Due

Following WWDC 2014, there has been a lot of positive commentary about how Apple seems to have opened up and was listening to the requests from developers. There was also a lot of discussion on how wonderful the new “Continuity” focus was as compared to efforts from Microsoft and Google.

Given that Craig Federighi was on stage most of the time to explain these new features, Craig and his personality is getting a lot of attention. However, we have to remind ourselves how and when Craig was promoted to his current position.

It was on the occasion when Scott Forstall was ejected from the head of iOS development. Craig was given control of both OS X and iOS development, and was given the task of improving collaboration. And there is no doubt now that he has done a wonderful job.

But it is also true that this was Tim Cook’s vision all along. Tim Cook valued collaboration over the genius of Scott Forstall. He was the one that made the decision between choosing Craig and Scott. And his wisdom has paid dividends.

As much as WWDC2014 was about the new Apple, it also showed that Tim Cook was spot on in his strategy for the company as a whole. We can expect more fruits as the second half of 2014 unfolds.

Thoughts from WWDC 2014

Some of my random thoughts from the WWDC2014 announcements.

Spotlight search moving away from Google

There has been quite a bit of discussion that Apple may be gradually moving away from Google, even on Search. This is evidenced by Spotlight using Bing for searches instead of Google.

I actually take a different view. I am starting to think that Google search has overshot mainstream demands and is actually vulnerable to low-end disruption. What I mean is that for most of the time, when people are doing Google searches, they don’t really require the full power of Google. Instead, what they want to do is to find the meaning of a word from Wikipedia, a location from Maps, something in the news, restaurant information or information about a song or an application. They don’t really need a search engine that knows everything that is on the net, including random blogs. What they need is information from a handful of distinct services.

Google itself acknowledges this. Search for “sushi” on Google and they will give you a map of sushi restaurants nearby and an entry from Wikipedia. Search for “Masahiro Tanaka” and Google will give you an entry from Wikipedia and a link to news searches. Google realizes that people are not looking for random sushi information, no matter how relevant it may be to the “sushi” keyword. Instead the majority of users are using Google as a gateway to Wikipedia, maps and news.

For these users, a search engine that simply listed Wikipedia entries or directly looked up maps would be more convenient than using the full Google search engine.

Hence my position is that Spotlight is less about replacing Google with Bing, and is much more about directly showing Wikipedia entries, etc. Google is facing the possibility of low-end disruption on search.

iCloud Drive

It is becoming increasingly obvious that some elements of the Cloud are starting to be commoditized. iCloud Drive is a prime example of this. We have DropBox, Box, Google Drive, Microsoft One Drive. We even have open-sourced clones like ownDrive. DropBox, which used to be a prime example of how the cloud is becoming so convenient and important, is now almost completely commoditized. It will be very difficult for even DropBox to differentiate itself from the rest.

Windows compatibility

iCloud Drive will be available for Windows but not for Android. This clearly show what Apple thinks of Android. Apple views Windows as a necessary evil. They realize they cannot ignore Windows because it is so dominant in both the consumer and corporate spaces.

On the other hand, Apple considers Android users as people who made the wrong choice by mistake. Apple thinks that if Android users regain their sanity, they will move towards iPhone.

Seriously, if you consider the few most likely multi-OS situations and think through how Apple would like each consumer to behave in the future, you can see the rationale behind Apple’s decision.

For example, Windows PC and iPhone/iPad users are completely covered by Apple’s commitment to iTunes on Windows and iCloud Drive. There is clear multi-device support there, although limited because Apple can not directly modify Windows.

Also, you won’t find many Mac users who decided to use Android smartphones, so it’s meaningless to cater to these users.

There will be many Windows PC users who also have Android phones. Apple isn’t able to target these users with iCloud until they buy at least one Apple device, but that’s another strategy.

Now the main issue is with Windows PC users who own an iPad and an Android phone. Given the market share of each device category, there are quite a lot of users in this segment. Now iPad and Windows will work well together, at least as well as how Windows and Android will work. Given the rapid replacement cycle of smartphones and the dominance of Windows, it makes sense for Apple to try to convert the Android phone to iPhone rather than to convert the Windows PC to a Mac. To achieve this, Apple should work on getting the iPad to work better with Windows, at least better how Android. They should try to make Android the odd-man-out. This isn’t a difficult task given how Google doesn’t like collaborating with Microsoft.

So my view is that Apple is being very sensible in supporting Windows in their multi-device strategy and not supporting Android.

Design And The Lack Of Intent

I read a great post today by John Moran about Intent within Apple’s designs.

Overarching intent is easy. The hard part is driving that conscious decision-making throughout every little choice in the creative process. Good designers have a clear sense of the overall purpose of their creation; great designers can say, “This is why we made that decision” about a thousand details.

When Jony Ive, Apple’s newly titled SVP of Design, criticizes a material selection or feature decision, “he’s known to use ‘arbitrary’ as a term of abuse.”

John goes to outline the “Three Design Evasions”; what most companies do instead of employing Intent.

Preserving the past.
Copy first without making the Intent your own.
Delegating design decisions to your customers.

The question is, what is holding good design back? Do we lack good designers or are corporations ruining them?

I don’t know the answer. I’m quite sure that a lot of designers are aware of Intent and consciously try hard. The problem is, I tend to find most of the celebrated designers lacking it the most. Instead, I often find good Intent and good design in kitchen utensils and other everyday tools that are not “appearance” driven.

For example, architecture. Widely acclaimed architecture is more often praised based on its appearance. Of course critics will note Intent and usability benefits. However, as an actual user of these buildings, I have never found myself appreciating the designers’ decisions. In fact, we more often tend to loath the strangely designed rooftops that invariable leak rain, and the unconventional hallway orientations that make you feel lost.

On the other hand, I marvel at the curves of my kitchen cutting knife or scissors which are truly designed to fit your hand. I wonder at the small details on the metal knife embedded in the box of my food wrap which allow me to efficiently cut the film with the minimum of strength and without it tearing in unwanted places.

Even Jony Ive’s designs used to have annoying flaws. I hated the trackpad buttons on the Powerbook G3s which looked nice, but had a very badly designed clicking mechanism. The flimsy hinge on the Titanium Powerbook easily fractured and came off. And it’s really hard to justify the design of the “toilet-seat” iBooks. There was very little Intent in those designs.

In my opinion, it was only after the aluminum Powerbooks which had very minimal ornamentation that Jony’s designs started to blend form and function.

Designing with Intent is probably really really hard. Even for Apple and Jony Ive.

Thoughts on Premium

A lot of people use the work “Premium” to explain Apples iPhone strategy, and/or their strategy in general. Apple’s products tend to be priced at the high-end of the market. On the other hand, Apple tends not to sell products priced at the lowest-end of the market. This tendency is strongest for the iPhone lineup, which constitutes only of phones in the high-end; Apple does not introduce new models targeted at the lower-end, although they do sell previous-year’s models at lower prices.

Some people have suggested that Apple has a broader product range for their iPods and their Macs, and hence they are not idealistically opposed to selling products at a range of price points, going from maybe the mid-range to the high-range. My opinion is that this is not the case. My understanding is that Apple produces the absolute best product they can for a specific customer, and only provides some minor configuration options (like RAM, HDD).

Take the iMac and the PowerMac for example. It is tempting to say that the PowerMac is the high-end model whereas the iMac is the mid-range model. However, this is not the case. For the vast majority of people who buy iMacs, the PowerMac is not only an overkill. It is actually less suited for the required jobs-to-be-done. The PowerMac is designed for creative professionals who require the very best in computing power, and who will also add extra hardware to the core PowerMac. The iMac is for normal people who do not need so much power, but instead value convenience of setup and ease-of-use. The iMac and the PowerMac are not high-end and mid-range models; they are two different products targeted towards two different markets with very different needs. Hence this is not an example of Apple selling a premium product.

The same goes for the MacBook product line up. The current retina display MacBook Pro is great for creative professionals but sacrifices portability. For people who want to carry their laptops with them, the MacBook Pro is actually a worse fit than a MacBook Air. Hence the MacBook Air is not a lower-end model of the MacBook Pro, but a different product for a different segment of the market.

The exact same goes for the iPod lineup. There was never two products in the iPod line-up that targeted the same use-case with one being the premium product and the other being an entry level one. The only “premium”-ness of a product in the lineup were products with maxed-out storage.

Now let’s apply this to the iPhone. Smartphones tend to have the same jobs-to-be-done for almost every person (except those who use smartphones as a feature phone replacement). Smartphones are used for communication, taking photos, playing some games, viewing maps and sometimes watching movies or listening to music. There is no segment like the creative professionals using PCs, who use their smartphones for very different purposes that require much higher processing power and/or expandability. On the other hand, there are no smartphone users who would be content with a device without a display, like the iPod shuffle. It’s even very difficult to make the argument that the variation between the MacBook Pro and MacBook Air is necessary for smartphones, because everybody highly values portability and because retina displays are necessity even for mid-range phones.

Regarding the iPhone, the only segmentation that would make any sense is a small variation in screen size. This would be similar to the 11-inch and 13-inch MacBook Airs. The current 11-inch an 13-inch model only have $100 price difference and choosing either is more about personal preference than premium/mid-range targeting.

Looking at what Apple actually sells and the markets that it’s targeting, selling a mid-range iPhone and a premium iPhone in parallel appears to be very uncharacteristic of Apple, and I doubt that it will ever happen. I sense that Apple doesn’t ever segment markets by “low-end”, “mid-range” or “premium”. More likely, they simply segment by “junk” and “best”. Any product variation in their lineup is a result of simply targeting different jobs-to-be-done.

If you believe that this is how Apple thinks, then the evolution of the iPhone lineup is pretty obvious. They may introduce a slightly larger (or maybe slightly smaller) iPhone in the same way that they have 11-inch and 13-inch MacBook Air models. That is, specs other than the screen size will remain mostly the same. The price difference would be small and choosing either would be totally a matter of personal preference.

For the lower-end, selling previous-year’s models at discounted prices seems to be a working in developing countries.

In fact, it’s a shame that there are very few companies that take the same approach as Apple. That is, market segmentation by “junk” and “best”.

Hints on Apple’s Wearable Strategy From Nike

According to CNET, Nike plans to exit Fuelband hardware, their wearable technology for tracking exercise throughout the day.

What does this suggest?

Apple CEO Tim Cook sits on Nike’s board. It is likely that there is a secret collaboration between Nike and Apple that led to this decision.
This decision would make sense if Apple is planning to release a wearable which makes the Fuelband obsolete. Such a device should be both cheaper, smaller and more wearable than the Fuelband. Otherwise, it is simply not a better fitness tracker.

Key points;

Nike is not abandoning fitness tracking. Instead it is focusing on software.
Nike is releasing a public API for Nike+ so third party trackers can plug into it.

Some thoughts;

Although smartphones, especially the iPhone 5s with the M7 chip, are getting better at tracking movement throughout the day, not everybody carries the device on their body at all times. Phablets for example, are often carried around in purses in Asia, even by men. This limits their usage as fitness trackers.
Carrying your expensive smartphone with you when you exercise is not the best experience.
If we want to make our smartphones better fitness trackers, we would want a smaller device, not a larger one.
I doubt that Nike is abandoning the Fuelband in favor of devices that people are less likely to use while exercising.
Nike obviously thinks that third parties can create better fitness tracking hardware then what they are currently capable of. What product do they have in mind? Is it the Jawbone? Is it the Samsung Gear? Is it Android Wear? I don’t think that they are too compelling and think that Nike is looking more at future devices.
Keep in mind that Nike has not released Fuelband software for Android devices. Their Fuelband app is iOS only.
The Nike brand is totally capable of selling at premium prices without being drawn into a price war. Their main business is selling shoes at high prices. Cheap rivals are not likely their main concern.

日本人のiPhone好きは特殊か、それとも普通か？

なぜ日本人はiPhoneが好きか？

2014年1月15日にカンター・ジャパンが日本のiPhoneのシェアが69.1%で、Androidの30%を圧倒していることが紹介されました。そしてどうして日本人はこんなにもiPhoneが好きなのかということがネット上で話題になりました（例えばJ-Cast「日本人はなぜこんなにiPhoneが好きなのかユーザのITリテラシーが低いから？」）。

理由ははっきりしていました。それは日本ではiPhoneの価格を補填していて、Android端末と価格差がなかったからです。場合によってはiPhoneの方がAndroidを買うよりも割安という状態でした。

「同じ価格なら、大多数の人はiPhoneを買うでしょう？」

というわけです。

もちろん他の要因を考えることはできます。理屈としてはかなり無理がありますが、例えば上記のJ-Castの記事では以下のような要因も挙げられています。

角川アスキー総合研究所主席研究員の遠藤諭氏に聞くと、考えられる要因を挙げた。まず、欧米と比べて日本のユーザーはITリテラシーが低いとの指摘だ。欧米の学校におけるIT教育の素地は、日本とは比べ物にならないという。そのため、スマホ入門者にとっては比較的操作がしやすいiPhoneに流れるのではないか、と推測した。

まぁ、どう考えてもこじつけとしか言えない、とんでもない理屈ではあります。

他にもいろいろなことが言われていますが、同程度に穴だらけの理屈がまかり通っています。

実は中国人も日本人と同程度にiPhoneが好き

つい先日、Umengという中国に強みのあるアプリ・アナリティックス企業がスマートフォンやタブレットの利用動向のレポートを出しました。その中でこう述べています。

High-end smart phones (pricing above 500US$) have a significant market share in China, contributing 27% of total devices.

… 80% of these are iPhone.

つまり500 US$よりも高価なスマートフォンを購入できるだけの豊かな中国人の間では、80%の人がiPhoneを購入しています。一言で言うと

「買うことさえできれば、大多数の人はiPhoneを買うでしょう？」

というわけです。

日本ではiPhoneが実質0円なので、「買うことさえできれば」というのはスマートフォンユーザの全員が満たしている基準になります。

ということで日本のiPhoneのシェア 69.1%と、中国のハイエンド・スマートフォン・ユーザのシェア80%というのは同じものを見ていると言えます。

結論として中国でも日本でも、

「買うことさえできれば、7-8割の人はiPhoneを買う」

と結論できます。

なかなかデータは手に入りませんが、日本と中国に見られるこの数字はおそらく世界の大多数の国でも同じだろうと私は推測しています。つまり日本人のiPhone好きは特殊な現象はなく、ましてやガラパゴスでもなく、普遍的なことだと思います。

What Are “Services”

There is a lot of discussion on the Internet about how “services” are essential to tech companies.

Ben Bajarin recently raised the point that even though Google is using their services as a weapon to fend off the proliferation of AOSP (Android Open Source Project) devices, Google’s services are actually only relevant in markets like the US and UK, but much less so in other regions.

What you see with regard to the Google Play services availability is the biggest issue facing Google. It is one that is forcing, in a good way, local companies in those regions to create and bring to market services of their own to support their region. China is the best example of this do date. Granted China’s Android ecosystem is a bit messy with over 100 different app stores but the region is quickly fixing these issues and consolidating.

The fact that Android is being used as an open source platform is not necessarily a bad thing for Google. What is challenging is that they are not making the impact with their services the way they need to be in many of these regions. Their competition in this case is not from the likes of Apple or Microsoft necessarily but from savvy startups looking to solve a problem in their region and doing it better than Google can thus keeping Google out of regions they may wish to compete.

I totally agree with Ben’s argument, but I would also suggest that what we are simply calling “services” should be broken down into certain sub-categories. For example, looking at the Wikipedia table on Google Play availability, we see that “paid apps and games” are available in the majority of countries, whereas books, movies and music are not. Compared to the same chart for Apple’s iTunes store,, Google Play is extremely lacking in books, movies and music but not very different in apps. This suggests that digital distribution of apps is a very different business compared to that of books, movies and music.

The reason why there is a large difference is rather obvious. In the case of apps, Apple and Google are the gatekeepers. They do not have to negotiate with the content owners over whether they can distribute the content in a certain country and at what prices. They make the decisions or the developers make the decision when they submit the app.

For books, movies and music, the rights to distribute content are much more complicated. The content owners have much stronger bargaining power and they often have different agreements in each country. Each country may have their own distributor network which may have exclusive rights for distributing content in that country. Furthermore these distributors might have plans for their own digital distribution which would compete with what Google and Apple are planning to offer.

Hence the difference between Apple and Google Play is most likely the difference in negotiating power, skill and previous relationships with the content owners. Essentially, it boils down to the ability to make deals.

With this in mind, I propose that we break down “services” into the following;

self-owned services: These are the services where the provider has ownership of the content. Examples are search, social network services and web-based services (Google Apps, etc.).
self-controlled services: These are the services where the provider can distribute without negotiating with a strong content owner. The prime example is apps. App vendors are generally quite small and have little bargaining power relative to the service provider.
third-party owned services: These are the services where you are selling content that is owned by a third-party, and that third-party has strong negotiating power over distribution (unlike in the case of apps). Examples are music, books, movies, etc. Distribution of this content was historically done physically through retail networks and this resulted in complex networks and agreements, which are often different in each country. Also this content tends to be much more expensive to create than “self-owned service” content, thus requiring large companies to fund production. These large companies obviously have strong negotiating power.

When we map companies like Google, Apple, Amazon, Twitter, Facebook, Spotify, and Pandora to these categories, we find that no company is strong in all three. Twitter and Facebook are exclusively in the “self-owned services”. Amazon, Spotify and Pandora are exclusively in the “third-party owned services”. Google is mostly in the “self-owned services” and to some extent in the “self-controlled services”. They are however very weak in “third-party owned services”. Apple is strong in “third-partly owned services” and strong in “self-controlled services”. They are however weak in “self-owned services”.

From an international perspective, “self-owned services” and “self-controlled services” are relatively easy for the service provider to provide in many different countries. However, “third-party owned services” are very difficult. Amazon for example has very limited international reach. The fact that Apple has in fact been able to provide their services in a large number of countries is very much the exception.

These three categories will probably have very different dynamics and I sense that it will be very difficult for any single company to excel in all of them. At least that seems to be the case so far.