The Tech Ecosystem War: Who Can Win, And How
John-Erik is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Each company is hard at work constructing its own tech “ecosystem.” Each is banking that it can woo -- or coerce -- consumers to move to a system of its products and platform, and then never turn back.
Investors in any of these companies should consider this emerging ecosystem war and evaluate where each company’s risks and opportunities lie. Each one will devote major effort into trying to build out its own ecosystem in coming years. And each one will do so in its own way, with its own weapons.
Let’s take a closer look at where each company stands.
Apple: The early favorite
Apple is no doubt the furthest along, having long ago started interconnecting a user’s iPod, iPhone, iPad, and iMac with its iOS and OS X operating systems and the iTunes service. Consumers already recognize that Apple has an ecosystem, and they see benefits of having multiple Apple devices, all connected through the iCloud.
This gives Apple a strong leg up. Half of America’s households now own an Apple product, according to a CNBC survey conducted earlier this year. But perhaps an even more impressive statistic from that survey was that nearly a quarter of American households have three or more Apple devices. That’s right. Some 22% of American homes have already bought into the Apple ecosystem. And if we know one thing about Apple customers, it’s that they are loyal to the brand.
In Forbes' recent brand loyalty assessment of products from nearly 600 brands, Apple placed in spots 1, 3 and 5 with its tablets, smartphones and computers, respectively. Apple seems to have already taken a sizable amount of ground early in the ecosystem war. Heck, even Samsung’s strategy chief has bought into the Apple ecosystem, saying it may be an even bigger draw than Apple products themselves.
But can Apple continue gaining ground while its competitors rev up their own push with new products, and their own built-in advantages?
Google: The sleeper pick
Google has been working to build an ecosystem to rival Apple's. It has an array of weapons at its disposal: its market-leading Android mobile platform, Internet search dominance, popular Chromebooks, and the inroads it’s made into business use through Google Docs. It’s also made a push into the low-priced laptop market, gaining share with its $199 Nexus 7, and has a set-top entertainment hub in the Nexus Q.
Google is ubiquitous these days, which would seem to give the company an advantage in this fight. The problem for Google is that consumers have yet to see how all these products tie together and how it might benefit them. If I can use Gmail, Google Docs and Google Maps on my iPad, my Windows laptop and my Android phone -- and I’m happy with them all -- why would I want to switch devices?
The Nexus Q could be the device that begins to establish those advantages, since it will require an Android device to stream content from the cloud. Once you have the Q and a phone, it might make sense to start building out with all things Google.
Microsoft: An ace up the sleeve?
Then there’s Microsoft. Remember that company? It was a pretty big deal before smartphones and tablets. Well, now it’s making smartphones and tablets. And it’s betting big on being able to enter this ecosystem war and start winning some market share.
Its new Surface tablet and Windows 8 operating system give the company its first real shot at earning a piece of the fast-growing mobile pie. But whether those products can compete with established mobile giants Apple and Android is a real question mark.
If consumers are not receptive, that spells trouble for Microsoft. The mobile devices and platform must serve as a driver for the company’s growth into the future. But Microsoft also has an ace up its sleeve in this fight: the Xbox. That’s right. That little entertainment unit is in about 70 million homes. And at least 40 million of those connect to the Xbox Live service, which allows users to buy and watch television shows and movies and listen to music. Microsoft will look to tie that service in with its mobile devices, using the Xbox at the keystone of its ecosystem.
If early bets were being taken on the Ecosystem Derby, Apple would be the easy favorite in this race. But this picture could change significantly in coming quarters, with Android’s push into the tablet market and Google’s Nexus Q setting up as a set-top rival to Apple TV, as well as Microsoft’s big, bold move into the mobile market.
Investors in any of the three companies should stay tuned in coming quarters to see where the battles are being fought, and who, if anyone, looks to be emerging as a winner.
John-Erik Koslosky owns shares of Apple. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!