Apple's Game of Services: Winter is coming

Cupertino's got a giant war chest, but does it really want to be in the business of search engines, volume email services, social networks, productivity and enterprise software, and all the other things that are needed to complete the mobile picture?
Written by Jason Perlow, Senior Contributing Writer

I don't know about you folks, but I'm a huge fan of Game of Thrones, the HBO TV series based on George RR Martin's A Song of Ice and Fire series of epic fantasy novels, which I've also read and enjoyed.

If you haven't seen the TV series or read the books, here's the basic premise in a nutshell: The characters interact in a fantasy world with thousands of years of history, with medieval-era technology and seasons that can last for years.

Paralleling our own medieval history, the world of "Westeros" (which is actually the name of one of the two super-continents in which many of the events take place) is feudalistic. There are major "Houses" that control large territories and city-states that have lesser allied families and vassals sworn to them.

Each of these Houses compete with each other, are frequently forced to cooperate due to the nature of trade, and sometimes due to their desires to control territory and resources are at all-out war with each other.

The political intrigue between the dramatis personae and shuffling of power between the Houses is what makes up the main plot elements of the books and the TV show.

Image: CBS Interactive/ZDNet

During the time of the first several novels, one of the longest "summers" on record — sixteen years — is starting to come to an end. Winter, where the nights are long, temperatures plummet, and resources become scarce, is now approaching from the northern part of the continent. Along with zombies. Ice zombies!

After reading the books and watching the show, I see a lot of parallels between Game of Thrones and that of our own computer and mobile technology industry.

Like the Lords of Westeros, the mobile technology industry has four major "Houses": Microsoft, Apple, Google, and Amazon. One could argue that Apple is currently the strongest of the Houses, much like Lannister is in Game of Thrones.

Apple, like Lannister, is making the most amount of money from mobile, and can throw its weight around purely by the nature of its wealth. It has 39.2 percent of the mobile market locked up. In the context of our mobile industry, Apple is making the most amount of money from the mobile industry due to the high margins on its devices, and also has the lion's share of developer interest as well as an oath of fealty by its own loyal end users.

Google is a bigger House than Apple in the sense that it has about 52 percent of the mobile market, and has almost the same amount of developers that Apple has. But its developer ecosystem isn't nearly as profitable as Apple's. Its power base is also fractured among at least three or four other Houses — Samsung, Motorola, HTC, and LG, to name just a few.

Although it could be argued that Samsung is just as powerful a House as Google itself due to its manufacturing capacity, the critical component chain that it controls and its overall device share in Android's ecosystem.

Microsoft currently has the smallest mobile industry share if you examine it strictly from an OS platform perspective. Windows Phone and Windows-based tablets are playing catch-up in an industry that has matured over what I would call a protracted and very profitable "summer" for both Apple and Google, as it pertains to iOS and Android's success, respectively.

In our War of Mobility, Microsoft is not unlike the House Targaryen that Lannister and its lesser allies Baratheon and Stark unseated from the Iron Throne in the War of the Usurper just prior to the events of Game of Thrones.

While the other Houses are distracted in battle over such mundane things as software and design patents on the main continent, Microsoft is re-grouping its forces elsewhere.

Just like Danerys Targaryen, Redmond is flying under the radar, building a formidable army of partners and raising "dragons" — a powerful cloud (Azure) and a converged application development strategy in the form of the next generation of Windows client and server products.

Finally, there is the mysterious House Amazon. Its mobile device platform is the same as Google's, so in a sense, Amazon is one of the allied Houses of Google. But Amazon has its own Appstore for Android, and Google makes no money from Amazon's development of the Kindle Fire, not even in OS licensing, since it bases its products on a open-source implementation of Android and doesn't use any of Google's apps.

Amazon hasn't entered the smartphone arena (yet), sticking strictly to small tablets, and we don't know exactly how much money Amazon has made from device sales of Kindle Fires, or how many they have produced.

But as one learns in Game of Thrones, the complex plots and mechanisms that lie below the surface are far more revealing and much more interesting.

Apple is indeed wealthy and powerful. But just as the Houses in Game of Thrones are reliant upon each other for trade, Apple is dependent on Microsoft, Google, and Amazon for the overall success of its platform with the applications and services that are preferred by its own end users.

Apple doesn't have a search engine. Google, Microsoft, and Yahoo have those (and you might have missed it during the demos at WWDC, but Bing is now the default search engine in iOS 7).

Apple has a mail and calendaring service, iCloud, but compared to both Hotmail.com/Outlook.com and Gmail, and even Yahoo's own Mail service, Apple's cloud mail and calendar offerings are a joke.

Google's applications for iOS rival those of their own offerings on Android, and many have said that the iOS implementations actually look and work better. As a Gmail user, I vastly prefer using Google's Gmail app on iOS than Apple's own Mail application. If it had its own Calendar app to replace the one in iOS, I'd probably use that as well.

We'll see if the eventual release of iOS 7 makes me change my position on this at all.

Yahoo's newly redesigned Flickr app for iOS essentially makes Apple's iOS Photostream and built-in Photos app a vestigial organ.

Apple social networks? There are no such things. Twitter, Facebook, and Google Plus for iOS rule that platform. Plus Instagram and all the others.

Apple Maps versus Google Maps. No contest, especially now that Google is buying Waze. Apple's Siri versus Google Now in terms of overall usability and usefulness of results: Also no contest.

And how many iOS users absolutely depend on Google Voice for unified messaging? Or use Skype? I'm raising my own hand here. I'm sure another few million also just went up.

Apple has productivity applications in the form of iWork, and I admit they aren't bad, because I own and have used all of them on iOS.

But now that I have Office 365 Mobile for iPhone, I can use the very same tools and productivity cloud that I have on my Mac, Windows 8, Windows RT, and Windows Phone systems, without concern for botching up formatting when I share these documents with others, should I need to edit them on the road.

SkyDrive as the unifying cloud storage back end behind this is incredibly powerful, and having access to Lync 2013 for corporate VoIP and video call-conferencing, which is integrated into my work Exchange email and contacts platform, is killer.

And SharePoint Online, which runs on both iOS and Windows Phone, is invaluable for having access to my corporate intranet.

And lest we forget Amazon has a far more compelling ebook ecosystem than Apple currently does with iBooks, plus Kindle has the advantage of being multi-platform, in that it runs on all of the device platforms, not just its own or even just Apple's.

Its multi-platform music cloud and video-streaming platforms, while not as popular as Apple's, are extremely profitable, and Amazon also runs the cloud infrastructure that powers Netflix, which is arguably the most popular video-streaming service on the internet, period.

We should probably also not ignore that the balance of the e-commerce that flows through Apple's iOS (and, well, just about everyone's devices) also ends up at Amazon. Wanna buy that accessory cable for your iPhone? Yeah, there's an app for that, but where are you gonna spend your Prime loyalty points?

What's the main takeaway here?

Apple is indeed a powerful and wealthy company. But it is dependent on a number of third parties that it openly competes with in device market share for the essential services that its own end users expect on the platform.

To quote Nilay Patel over at The Verge, in his article criticising Apple's Phil Schiller's "Can't innovate anymore my ass" bravado at the most recent WWDC, "Until the company can master data and services — a critical component of how things work in 2013 — all that's left for Apple is how things look and feel."

The Houses have all positioned themselves. The question remains for Apple: Is it going to try to grab more territory using that big Lannister-sized war chest and continue its warlike behavior in the courts, or will it come to the realization that it needs the other Houses for commerce and to supply it with essential services?

One could say that there's really a symbiotic relationship here, because Apple's share in the mobile market funnels services users to those respective companies as well. So in all honesty, they can't swear off Apple no more than Apple can realistically swear off them, either.

Cupertino's got a giant war chest, but does it really want to be in the business of search engines, volume email services, social networks, productivity and enterprise software, and all the other things that are needed to complete the mobile picture?

I don't really think that Apple wants to be in these businesses, truthfully, nor does it have the essential expertise to pull it all off, no matter how much money they might throw at a given problem.

But the flip side of this is that the more Apple is dependent on everyone else, the more mindshare (and service revenue) it actually loses, and risks losing platform users to those Houses as well. So it is going to have to make some services investments, regardless. Where it plans to invest is anyone's guess.

What I can say is that Apple's five years or so of summer is definitely coming to an end. And winter is coming.

Does Apple need to vastly expand its services portfolio to keep pace with the other Houses? Or will it always be dependent on them in some fashion? Talk back and let me know.

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