Apple v Google (v the rest): how important are “ecosystems”?

Apple iCloud

Image credit: Apple.

Interesting post on FT Alphaville about disagreements among analysts over Apple’s prospects for the final quarter of 2012 and first half of 2013. According to Citi, signs of increased pressure on Apple include:

  • Apple’s hardware suppliers reporting cuts in orders.
  • Cannibalisation of iPad 4 sales by the iPad Mini, with iPad Mini sales expected to outnumber those for the (more profitable) iPad 4 by at least two to one by Q2 2013.
  • Increased competition (and price-sensitivity) in the tablet market generally.
  • Growing customer preferences for the larger screen sizes offered by competitors such as Samsung.

Against that, Morgan Stanley predicts that iPhone 5 sales in the December quarter could exceed 50 million units, and argues that Samsung’s phone sales are mostly coming at the expense of other Android phone manufacturers.

But what I found particularly interesting from FT Alphaville’s post was Citi’s discussion on Apple’s “ecosystem”: the idea that Apple can lock in its customers by providing an integrated, Apple-only web of services and products that make it hard from people to switch to another manufacturer without losing content or functionality that they have come to value. Citi’s conclusion is that this isn’t currently valued by customers as much as Apple might hope:

In general consumers are indifferent with regard to having a common operating system across devices with 54% indicating that it is “Not Important.” Moreover, only 14% of respondents indicated that a common ecosystem was “Very Important.” Across iPad owners, the ecosystem is more important but only marginally so, with respondents that valued a common ecosystem up to 53% and 21% believing it is“Very Important.”

I suspect, though, that ecosystems are valued by those who are already integrated into one. If you own an Android phone and an iPad, the Apple/iTunes ecosystem probably doesn’t matter to you a great deal. But if you own an iPhone, iPad and Apple TV, and have bought dozens of movies or TV series on iTunes, then it probably matters a lot more to you that your next gadget fits into that world.

Conversely, I’m currently awaiting delivery of my first Android phone, to replace my iPhone – partly for the larger screen (to pick up on one of Citi’s other points), but mostly because I’ve found the iPhone to be playing less nicely than it used to with the Google ecosystem, which I’m more locked into than Apple/iTunes. That may not be a universal experience, but it’s far from unique.

Google Maps for iOS iconOn a wider scale, the Apple Maps debacle demonstrates the risks to a brand’s reputation when something goes wrong, not with the product itself, but with a valued part of the product’s ecosystem. Ten million iOS users downloaded the new Google Maps app in the first two days after its release last week – how many more have had their relationship with Apple’s ecosystem weakened, maybe even enough to tempt them to look elsewhere next time?

As I wrote last year, the battle between the “big four” consumer digital brands – Google, Apple, Facebook and Amazon – isn’t over mere hardware or individual services. It’s a battle between competing business models, built around competing ecosystems. While only a minority of customers may have noticed yet that this is happening, I expect that those four giants will continue to build their future plans around this trend.

The Orwellian future of TV advertising?

“In America, you watch television. In Soviet Russia, television watch you!” – Yakov Smirnov

Apple's '1984' Superbowl ad The FT’s Decoding Big Data series includes the following vision of a future which will either sound dystopian or thrilling, depending on how protective you are of your privacy:

A married couple sit in their living room, arguing about the text messages she keeps receiving from an ex-boyfriend. The television, playing in the background, listens in on their conversation, detects that they are fighting and automatically selects an advertisement about a local marriage therapist for the next commercial break.

The FT observes that this faintly Orwellian concept is already technologically feasible, at least if a recent Verizon patent application is to be believed.

The claims of the patent application make for fun reading (and it’s not often you can say that about patent claims). As ever, they begin with a very broad claim on which the others are then founded:

1. A method comprising: presenting, by a media content presentation system, a media content program comprising an advertisement break; detecting, by the media content presentation system, an ambient action performed by a user during the presentation of the media content program and within a detection zone associated with the media content presentation system; selecting, by the media content presentation system, an advertisement associated with the detected ambient action; and presenting, by the media content presentation system, the selected advertisement during the advertisement break.

Or, in English: under this system, the same TV advertisements will not be broadcast to everyone watching the same programme. Instead, your TV will show an advertisement that is targeted specifically at you, based on what you’re doing in the vicinity of the TV at the time. What sort of things might those be? Claim 2 gives some examples:

2. The method of claim 1, wherein the ambient action comprises at least one of eating, exercising, laughing, reading, sleeping, talking, singing, humming, cleaning, and playing a musical instrument.

I would love to have been a fly on the wall at the meeting where Verizon and its patent attorneys brainstormed the activities people are likely to get up to while watching TV. But these are mostly solitary activities. What about where two or more people are in the same room? Claim 3 picks this up:

3. The method of claim 1, wherein the ambient action comprises an interaction between the user and another user.

In case you were wondering (possibly with a sense of dread) what sort of “interaction between the user and another user” this might include, claim 4 gets down to brass tacks:

4. The method of claim 3, wherein the interaction between the user and the another user comprises at least one of cuddling, fighting, participating in a game or sporting event, and talking.

Though perhaps this is less alarming than claim 11:

11. The method of claim 1, further comprising identifying, by the media content presentation system, one or more physical attributes associated with the user.

So when all the ads you see in future are for weight-loss products and gym memberships, you’ll know why.

Of course, a practical implementation of this is some way in the future, as internet-enabled TVs become more commonplace. Maybe it will take the semi-mythical Apple TV set to provide a platform sophisticated enough to implement this new advertising experience. And the data protection implications of such a system would also be interesting, especially obtaining informed consent from anyone watching the TV.

What all this also highlights is how the future of advertising, both on TV and online (a distinction that will itself seem quaint before too long), lies in the ability to respond in real time to users’ actions, matched to existing data about those individuals (or others in the same demographic). And that’s a reality that is already here, at least on the web.