Converging and diverging

Satoru Iwata, the Nintendo president, is understood to have told his senior executives recently to regard the battle with Sony as a victory already won and to treat Apple, and its iPhone and iPad devices, as the “enemy of the future”.  This is just another example of the digital convergence in the industry.

Now Apple vs Google:

  • Apple has just launched the iPad, Google is developing a tablet
  • Apple has the iPhone, Google Android
  • Apple has the app store, Google the Android Marketplace
  • Apple has just launched the iBooks and Google will launch Google Editions
  • Apple has just launched iAd , Google has AdWords and AdSense (Apple acquired Quattro Wireless after being denied Admob, acquired by Google)

What it is interesting is that the two companies approach the digital convergence in a complete different way, in terms of strategy and vertical integration.

The two companies are somewhat at the extremes. Apple vertically integrated, Google placed in the software and services domains.

Apple designs its own chips, the A4 powers the iPad and is the fruit of Apple acquisition P.A. Semi in 2008. It develops its own OS and controls the distribution channel for the content with iTunes. Google develops the Android OS and Internet services such as Google Maps and Google Search. The HW for Nexus One was done by HTC, and while Google tried to bypass the operators for the distribution, now it is stepping back. Apple approves every single application that goes into the App Store, the Android marketplace allows anybody to publish applications. Apple has total control of the platform, their system is closed and the latest rules forbid the use of other languages other than C, C++, and Objective-C.

Apple strategy is paying back, and with only a small percentage of the world handsets market share (2.5%), it leads in operating profits. And here comes Android, according to NPD, Android phones managed to pass the iPhone in market share in the U.S. for the first time last quarter. NPD says that in the first three months of 2010, Android captured 28% of the smartphone market, while Apple’s iPhone grabbed only 21%.

What we are seeing are companies with very different  philosophies, business models and approaches but still competing in the same domain, the digital convergence.  Open vs. closed systems, vertically integrated vs. not vertically integrated. The dynamics are interesting and worth to follow.