The State of Tech on the Eve of WWDC ( May 2014)

We are a few days away from W.W.D.C., Apple’s worldwide conference for developers. I won’t be attending, but my 14-year-old son will be there as an Apple Student Scholar, (I guess the world really does belong to the young.) As the event approaches, one that I am very confident will bring a whole series of announcements that will once again shake up the industry, I had a few random thoughts to share on the state of the worlds of Apple and Google. In a way this is not really fair – since we live in a world of Apple, Google, Amazon and Facebook (i.e. the four companies that truly dominate the consumer tech world.) Of the four tech world giants only Apple is not in fact a monopoly. Though, ironically, Apple holds a monopoly on the profits in the industry.


Today, I think there is no doubt that Google is unquestionably a monopoly when it comes to controlling search-advertising, (and probably advertising generally) on the web – since that is how Google makes most of its money. Google also holds an undeniable monopoly on search, (as anyone – who like us – has suffered from a change in its rankings over the years. A small change in Google’s search algorithm can easily make or break a company.  The online world is littered with road kill from firms that were collateral damage resulting from Google’s changes.


Amazon is also clearly a monopoly – shown by its recent dispute with Hachette. As a business, we have had no problems with Amazon … other than the fact that below $3 (which is really the “sweet spot” for Kindle book pricing on Amazon), the company will only give the publisher 30% of the sale price (claiming “they have to pay for delivery” – something that is taking place more and more over free WIFI.) Unfortunately, our experience has show us that selections on Amazon outsell both the iBook store and the Nook store on a scale of more than 10 to 1. Recently, we have had two cases where the difference has been 100 to 1. So I believe it is clear that Amazon has reached monopoly control over the book market – both physical and electronic. Furthermore, the barrier to entry in this low margin business today are probably too high for any new competitor to succeed.


Next on the list is Facebook (the only one out of four companies that is probably not quite a monopoly – after all, there is LinkedIn and other social networks used by the younger set. On the other hand, there is no doubt that Facebook has the older generation pretty tightly locked in. They have reached the “network effect”, and none of us are likely to leave – now that all of our long lost friends and acquaintances are on the Network. This gives Facebook a great deal of power to do what they want with us – e.g. decide what news feeds we see and what we do not see, what gets promoted, and what does not. This is a great deal of power for a private company that is not regulated.


Finally, there is Apple. No one can call Apple a monopoly. After all, it does not have the majority of the market in any of the products categories in which it competes. Yet, Apple dominates all of its markets today. Up to now it has achieved its success by focusing on few products and making sure that they are sincerely the best (i.e. “insanely great”.) Today no one questions that that is a fact – whether it’s in the area of having the best operating systems – both mobile and desktop, or the best laptops, and of course, the best smartphones and tablets. Needless to say, that could change at any time (not so much in terms of operating systems, which Apple already has years, and years of continuously rewriting and adding to the code, but in the area of hardware.)


However, in truth, this is unlikely to happen, as today Apple has a tremendous advantage over any potential competitor. Moreover, its vast cash coffer allows it to invest in material and other basic research that no one else can afford. These resources assure that the next generations of Apple products will no doubt be a step a head of its competitors. Could they misstep? Certainly. There seem to be things that Apple has inexplicably failed to get right – like the Cloud, or areas in which their striving for profits has put them at a slight competitive disadvantage (e.g. the very slow increase in memory on iPhones and iPad over the past few years). However, barring some disaster, it’s likely they will continue to dominate the fields they currently dominate – especially since each category feeds on the other.


What about the new areas we will no doubt hear about next Monday? I will not venture a guess. Though, if I were a betting man, I would NOT bet against Apple.


PS There are few companies that are not mentioned here, they are not irrelevant but are no longer in the same league

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