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Pedro Côrte-Real

Thanks for writing this. I was the one pushing you on this point at Stanford and your analysis is very convincing.

The only doubt I have left is about one thing you mentioned. (roughly paraphrasing) How Microsoft was successful by generating a bunch of 100M companies around its platform and that Apple was doing the same, maybe with 10M dollar companies.

I'd be very weary to invest in or build a business based on a platform where there is a gatekeeper that has the power to yank away all my revenue without notice. Microsoft had a fully open platform and was very careful not to step into too many markets and eliminate competition so as to keep the platform attractive. Apple has been intervening way too much on the App Store for people not to be worried and the value of businesses based on the platform not to be affected.

Mark Sigal

Hey Pedro,

Perception is reality, but I don't see the distinction between Microsoft and Apple that you do. Microsoft essentially carved out OS, desktop productivity and server software layers for themselves, and were legendary for playing the embrace, extend extinguish hand when segments looked particularly juicy to them. You don't get Antitrust busted for being a great partner. As to Apple, they have quirks, but I still think:

A) The numbers don't lie. Plenty of developers, lots of Apps and a growing economy.

B) As discussed at the presentation, the real arbiter of the platform's success for developer's selfish interests in whether they grow real businesses, or mom/pop businesses (i.e., the $5-10M v. $100M+).

Relative to B), it's hard to argue that the AdWords/AdSense model of Google's is a more compelling proposition.

Yet, we don't look at Google with a discerning eye; and, unlike Apple, they don't even provide visibility on the spread they are making!

Cheers,

Mark

Pedro Côrte-Real

I'm the last to defend Microsoft's business practices. What I think is that when it comes to building out Win32 as a platform they seemed quite happy to let everyone have access to the API. What's at stake here isn't even if they competed in market segments previously occupied by users of their API, its that they never had the power to say that a given piece of software using their API was unfit to be used. Win32 and their other APIs are like this, the Web is like this, the App Store is not.

On A) we both agree. And I think we also both agree that it is too early to call a winner.

On B) I also agree and my argument is one of risk management. As an investor are you really comfortable knowing that your 10M company that you hope to grow to 100+ can be reduced to 0 instantly if Apple so decides? Really? Returns have to be adjusted for risk.

I'm not sure what you mean by the AdWords/AdSense model applied to the platform. Android has a market, with paid apps and everything. Aren't the mechanics of the business model for an app developer the same in both platforms?

When it comes to the devices I don't think Google's business model is really a factor in this discussions because when it comes to Android I don't think they really have one. They just want to make sure the web browser is a commodity hence Chrome/ChromeOS/Android. Google just wants to make sure that Apple/Microsoft aren't able to shut their revenue off by blocking ads or sending people to Bing.

The big clash I see here is that Google wants the mobile platform to be a commodity and for the value to be in web services. Apple wants precisely the opposite. Google is also perfectly happy with winning against open competition in the service market, as changing search engine is trivial. While Apple wants to win the mobile platform war and lock it up.

Given all this I'd much rather have Google win and mobile be a similar competitive environment to the desktop than have Apple as a gatekeeper between me and the customer. But that's just why I hope Android/WebOS/Meego win, not any argument for why that will actually happen.

Mark Sigal

My only point specific to Microsoft is that they were known to hobble APIs to block unfavored developers, use undocumented APIs to benefit their apps over others. I don't think Apple has played this type of scorched earth. We can quibble on the multi-tasking and their decision to deliver a best of breed user experience, but I think that that is different than the way Microsoft played.

My point specific to Google is that their whole model is predicated on owning search traffic and monetizing via advertising. That's why it's a misnomer to say they have no business model with Android. Their model is the same as it is on desktop. Give something away for free so that they can monetize the eyeballs contextually.

As a user, I assess that value proposition on what it's lead to in the way of web models, which I see as a poor, LCD experience. It's the price we pay for FREE. As a developer, I look at Google's value proposition, and I see a faustian bargain. No one gets even remotely rich in the Google model -- just look at how media has been decimated and how only a small handful of high traffic web properties make money by directly leveraging the google model. Plus, OPEN google is completely non-transparent when it comes to sharing their index, let alone sharing the revenue spread they make.

Personally, I am tired of a LCD web experience, don't believe that Google gets user experience, sweats the details in product iteration (that's why they have so many immature products) so I favor the Apple model.

Also, I think that it's worth noting that Apple has driven far more innovation in embracing mobile web in TANDEM with native than Google has.

The success of WebKit, the embrace of HTML 5 and the breaking of the carrier log jam is Apple.

That said, I favor a good, strong competitor to keep apple in check, as absolute power corrupts absolutely, right?

Mark

Pedro Côrte-Real

"My point specific to Google is that their whole model is predicated on owning search traffic and monetizing via advertising."

Yep, and this is the same on every platform and not a characteristic of mobile. They do a lot of giving stuff away and monetizing with advertising in their web offerings. I don't necessarily think that is the best model but I don't mind it since Web apps without network effects (e.g., Gmail) have very low switching costs.

"That's why it's a misnomer to say they have no business model with Android. Their model is the same as it is on desktop. Give something away for free so that they can monetize the eyeballs contextually"

They're not giving away phones. They're funding the R&D on the operating system but only because they're afraid Apple will lock up the market for the devices. The reason I say they don't have a business model for Android is that they don't care who makes money on mobile phones as long as there isn't a single vendor that can dictate terms to them. The browser must remain a commodity. That's the common theme across Chrome/ChromeOS/Android. None of them are revenue lines, they're there to control the risks of having your product's ultimate delivery in the hands of gatekeepers.

As you say Apple was doing great work on the web front and had they aimed to be the high-end supplier to a commodity market (like on the desktop) Google wouldn't care. But they made a larger play and now we get to watch the fireworks.

Pedro

stereo speaker

It's just for business.I think that we will see something between Iphone vs Google soon...

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