Apple's chess moves: Market dominance isn't necessarily the ultimate goal

Some may criticize Apple for not taking the reins of the new App-based Internet to dominate the new market but they forget that dominance isn't always most important for that company.
Written by Sam Diaz, Inactive

The folks over at Forrester Research, including CEO George Colony, have chimed in over the past couple of days about Apple's new subscription model for content app developers. The general conclusion in the Forrester offices: Apple is blowing it.

Colony makes some interesting observations in a post that went up today about Apple's chess moves in this quickly evolving next stage of computing: the world of an App-based Internet. According to Forrester's own research, 39 percent of tablet users spend more time on the Web browser than they do in apps, compared to the 16 percent who spend more time on apps, while 45 percent said they split their time evenly between apps and browser.

Colony argues that the rise of app surfing is creating "formative and critical moments in the development of the App Internet market" where the winners could become dominant for decades. As the dominant player in the app/tablet market, Apple's first moves will have a long-lasting effect on its place in this new ecosystem - and surely Google, with that whole open-source Android platform approach, could come in and take that "dominant player" title away from Apple, just as its done with its smartphone ecosystem.

Colony says that Apple is setting the stage for a repeat of the PC wars of the early 80s - the days where Microsoft left the doors to its development world unlocked while Apple kept a security guard at the door to filter who was allowed to play on Apple's pure playground and who wasn't. Colony writes:

We know what happened -- the world has had to use a lowest-common denominator PC operating system for decades, with excursions into wonderful places like Vista. This time around, Apple's hostile position could result in a 2014 App Internet market that looks something like this: 80% Android, 10% Apple, 10% Other.

Here's the thing: Colony says that like it's a bad thing. Say what you will about Apple's share of the PC market - but the fact is that Apple's lineup of Mac computers are far superior to anything that's running Windows. And increasingly, quarter after quarter, the company notes that its share is growing and that about half of the Mac purchases in a single quarter have been by consumers who switched from Windows.

In terms of business success, there's no argument: Quarter after quarter, Apple blows away everyone - from Wall Street analysts to a growing range of competitors. The company's stock is a darling on Wall Street - and anytime Apple even hints at the mere mention of a news event, the tech world comes to a screeching halt while it speculates and waits for the official word.

But getting back to Colony's suggestion about early winners in the App Internet market becoming the dominant player for decades, he is absolutely right. The thing that he forgets to note is that being the dominant player isn't what Apple is all about. Oh sure, one could argue that the rise of the iPod throws ice all over my argument, but I would counter that Apple wasn't looking to be the dominant player in the portable mp3 player market. It just turned out that way because no one could ever come close to creating the user experience that Apple created. That bar was high - and no one else out there could reach it.

Instead, Apple strives to create quality, premium products - the "best," if you will - and the financial results show that people are willing to pay a premium for the best experiences. How else do you explain iPhone - at least in the U.S.?

If Apple had wanted to own the smartphone game, it could have broken or renegotiated that exclusivity contract with AT&T - which was only holding Apple back because of poor service in many areas - and worked to bring the iPhone to other carriers before Android had chance to lure away potential iPhone owners: guys like me.

Apple could have ruled that world and left everyone else in its dust. But it didn't. Instead, it happily charged a premium for its product, dictated the rules of its app store and created a nice, profitable little ecosystem that produces financial results that continue to wow Wall Street again and again and again.

Is that what a successful business should be doing? A company can make a great product - but if that greatness isn't obvious on the bottom line, how successful has that company really been?

Sure, Apple is taking some heat for that 30 percent cut it wants from content app developers - and maybe that was a bad (read: greedy) call on Apple's part. But this is a game where Apple sets the rules and others play along if they'd like (and they're allowed.)

That comparison to the PC wars of the 80s may be true but for Apple, it seems to have worked out well in the long-run. If the model ain't broke, why would anyone want it fixed?

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