A strategy credit/tax analysis of why Apple trails.
From Thompson’s daily Stratechery mailblast ($): An Update on the Battle for the Home.
[Quoting himself] User information [of the type Google collects] isn’t important to Apple’s business model, so they “choose not to retain it.” It’s less important to praise this reality — or denigrate it — than it is to acknowledge it. In the meantime, though, Apple will happily score rhetorical points in the court of public opinion for a decision that wasn’t difficult at all.
Certainly this particular strategy credit has become more valuable over time, although one could certainly make the case that Apple, by virtue of shifting its stance on privacy from a by-product to a priority, is now paying strategy taxes when it comes to the effective use of data. The classic examples are data-based services like Maps or Siri: Apple claims that its methods are just as effective as Google’s, but the only real evidence we have are the products, where Google in particular is far ahead.
There are also opportunity costs: how much of Apple’s lack of interest in podcasts comes down to a desire to not take advantage of an opportunity that is basically predicated on gathering and leveraging data?
To be very clear, what I am writing is business analysis, not a value judgment; I know there are many of you that value Apple’s stance. My only point is that, when looking at Apple’s business, there are costs from this stance that should be measured.
Meanwhile, from Google’s point of view:
To the extent your business model can leverage data — i.e. if you are a Data Factory — the more leeway management has to pursue opportunities with long-term upsides…
That’s the advantage of being a Data Factory: leaving aside the point that few Silicon Valley companies could say “no” to any opportunity seemingly in their technical wheelhouse, the truth is that there is a strong business case to be made for Google Home even if there is no clear path to monetizing directly — get more data. And, in the long run, Google may as yet uncover something extremely valuable — like the Play Store — by virtue of its investments in Google Home.
Perhaps that also explains why Apple appears to be bowing out of the race: the company is focusing on directly monetizable services like the soon-to-be-announced Apple Video and Apple Music, and partnering with device makers — including Amazon — to get those in front of customers. This despite the fact the company brings its own advantages to bear in the home space, including a focus on the user experience, integration, and yes, privacy; but, without a data credit, there simply isn’t the business case.
My take: Thompson’s strategy credit/tax idea is a sharp analytical tool, and nobody wields it better.
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