Comment by sulam
4 years ago
> “There’s An App For That” is why you buy an iPhone—but it’s Apple with the $930 billion market cap & not the app developers.
Oh yeah? Tell that to Facebook, Netflix, and the YouTube part of Google. Tell that to Twitter, Snapchat, and TikTok.
There’s another principle at play here, and I think it’s an important one. Pleasantly, it also operates as a kind of Golden Rule for economics in platform development (and has legs at a wider scale, too, but I won’t cover that).
Specifically: Create more value than you capture. Apple of course captures some of the value of their ecosystem. So do other platform providers. The thing that distinguishes a healthy platform ecosystem from unhealthy ones is whether or not more value is on offer to platform adopters than the platform itself captures. Unsuccessful platforms generally fail at this, either because they don’t provide enough intrinsic value themselves (and therefore “end users” don’t benefit) or because they don’t make it profitable to operate on the platform (they try and capture too much of the value for themselves, and thereby strangle their own success).
Facebook, Netflix, Youtube/Google would be in similar positions even without Apple. They are not "app developers", they are software developers. Snapchat and Tiktok are good examples, but, what are their market caps? Add them all together and I think they won't be $930 bln (whereas e.g. if you add together all companies that depend on Amazon, the valuation would most likely be much higher than Amazon's; that should be the normal, for a platform).
Apple absolutely attempted to commoditize apps/ establish 1-to-5$ as the "normal" prices.
When the iPad launched all of Apples own unbundled productivity apps were listed at $10 each so we know for a fact that this is not true. They tried very hard to establish a market with sustainable prices for premium apps.
I think it’s just unreasonable to try to do that with the phones back in 2008 though, with the small screen size and relatively low resources of the very early devices high prices for phone apps just wasn’t going to fly.
Whether or not $10 is "sustainable premium price" is more than questionable. They tried so much, that they don't yet have free trials and paid upgrades for apps.... (like, true support, not the in-app-purchase workarounds)
Those apps existed before Apple had power.
That's important because Apple couldn't have started their ruse by moving in and taking away FB's power from the start.
If FB was weaker, Apple could be moving on their turf now by requiring a cut of their money.
You're missing the bit about power and value chains here: if Apple can take all of your surpluses, they will, it has nothing to do with how much money you make.
Consider also the vast distortions happening right now: and digital player that wants to charge a fee - has to give 30% to Apple. That's huge.
The alternative is advertising - for now - Apple doesn't go after that.
Many businesses to not run on huge margins - if you could eke out a 5% margin living under Apple's 30% cut, and switch to ads (assuming same revenue/gross margins), then you'd 5x your revenue.
Of the monopolizers, Facebook is the least worst - nobody needs them, and they're not a primary source for anything.
Apple's closed system is the worst, followed by Google's incumbency of search, propped up by their control of Android, Chrome etc. Thirdly is Google's abuse of Search to screw over competitors in near fields.
SnapChat and TikTok were both created well after Apple achieved its current market position. Not to mention the fact that I have only picked a few examples from a few categories. What will you say when I add Uber, Door Dash, AirBnB and others to the list? Again, I'm barely scratching the surface here.
You really can't escape the fact that applications built on top of Apple's platform are worth, in aggregate, multiples of Apple's market cap. I'm not an Apple apologist, this is just obvious math.
Companies that use Verizon network are bigger in aggregate than Verizon itself! Look at all the value Verizon has created!
Also - neither Snap nor TikTok charge money for their apps, it was never an option due to Apple's monopoly.
Right, the App Store is worth half a trillion a year just in raw billings and sales alone. That’s double Apples own revenue. The value of free services on top of that, where the value is captured in other ways which is most of the companies you listed, is likely of the same order or even significantly more. If so that all adds up to a decent multiple of Apple’s own revenue. Maybe 3x to 5x depending on what assumptions you make.
This is why competing phone platforms can’t get any traction against iOS and Android. You’re not just competing with Apple and Google, you’re competing with the entire ecosystems of companies and services on those platforms which combined are worth far more, and have aggregate resources far exceeding those of even Apple and Google.
> Specifically: Create more value than you capture.
They can ensure this by copying the most successful apps in the App Store, down-ranking the original authors, and repeating this game.
Apple has tried to put Netflix out of business and so far isn't succeeding. They sort/of tried to put Facebook out of business and failed so miserably they may not get over it for another 5 years. They haven't even been able to beat Spotify, where they arguably should be dominant.
Apple is pretty pitiful as a services company. Yes, they're trying, and they may eventually figure out whatever structural issue it is that's keeping them from being successful here, but I think for every significant business Apple has successfully cloned (Evernote, maybe? What else?) you can come up with at least another where they haven't been able to despite trying, and another 2 or 3 where they haven't tried (yet).
Yes, many small startups watch WWDC with fear in their souls that Apple is about to disintermediate them. It's worth spending some time to understand the differences between those companies and companies that Apple has failed to compete with despite trying hard. I'm sure some obvious differences will jump out at you if you're willing to abandon the position that Apple is an unbeatable juggernaut.
According to Drew Houston, Steve Jobs offered to acquire Dropbox and when refused said he'd compete with them. iCloud is right about there at this point, I know people who turned off Dropbox and just use iCloud (or the Google offering).
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