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Google’s strategic decision around maps on iOS

Charles Arthur of the Guardian wrote a very well-circulated piece this week about Comscore’s latest numbers for Google Maps and Apple Maps. The title was “Apple Maps: how Google lost when everyone thought it had won” and I have two main objections to the piece. One is that I’m not sure everyone did think Google had “won” when Google was stripped of its role as the mapping data provider for iOS, and the second is that I’m suspicious of the Comscore data he cites to back up his point. Let’s take these one by one.

The removal of Google data from Apple Maps was a strategic decision – for both companies

Firstly, Google’s removal as the provider of map tiles and other data for the native Maps app on iOS was always on the face of it a loss rather than a win. It was obvious that it would lose many users on its platform (especially as a downloadable Google Maps app wouldn’t launch for three months after the launch of iOS 6, and that for a company that makes much of its trove of user data, this was a significant blow. However, there are two points worth bearing in mind here:

  • First, Google derives value from data, but revenue only from advertising, at least in the context of Maps. Thus, the value it gained from Maps was exclusively secondary in nature. That’s not to dismiss it entirely, but it is to make the point that Google was not fulfilling its primary objective 1 – revenue generation through advertising – through iOS’s native Maps app.
  • Secondly, it is not clear that Google had all that much choice in the matter. Yes, Apple has certainly positioned the shift to using its own mapping platform as a response to broken promises on Google’s part, but the fact is that it was imperative for Apple from a strategic perspective to shift to developing and using its own mapping assets and moving away from Google’s. It’s not clear to me that Google could have fulfilled any of its larger objectives while satisfying Apple’s demands.

As such, it was a strategic decision on Apple’s part to move away from using Google, and a strategic decision on Google’s part to go along with it. That decision involved a calculation on Google’s part that it would derive more value from being able to truly own the mapping experience from Google Maps users on iOS, even a smaller number of users, than it would from being having to play second fiddle to Apple. That calculation was risky for both parties – Apple must have known how hard it would be to provide a competitive mapping experience with no track record from day one (though perhaps even it was overwhelmed by the negative reaction), and Google knew what it was sacrificing and what it hoped to gain. Continue reading →

Notes:

  1. This distinction between primary and secondary value is something I hope to explore further in a future post – every company has both primary and secondary sources of value and necessarily treats them differently. ↩
Earnings, Microsoft, Office, Steve Ballmer, Structure, Whole company analysis, Windows

Microsoft’s intertwined consumer and enterprise businesses

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At the time Steve Ballmer’s retirement was announced, there were calls for Microsoft to be split up into two businesses, serving consumers and enterprises respectively. I believed then, and believe even more strongly now, that this is fundamentally flawed thinking, and the reason is that Microsoft’s consumer and enterprise businesses are deeply intertwined, to a great extent because Microsoft has wanted them to be.

Below is a slide from Microsoft’s 2013 Financial Analyst Day, which is intended to illustrate (in the diagram on the left) Microsoft’s three customer segments:

Microsoft's customer segments, from Financial Analyst Day 2013

Microsoft’s customer segments, from Financial Analyst Day 2013

The reality is that, while Microsoft does serve three audiences, they’re not the ones it shows in that chart, mostly because OEMs aren’t really customers, but channels to reaching either consumers or businesses. In reality, they are:

Big picture, Meta

Beyond Devices

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This post is intended to encapsulate the philosophy behind this site and its name. If you spend any amount of time working in or covering the consumer technology industry, you quickly find that it’s dominated by devices – principally, smartphones and tablets. At Ovum, our relatively small devices team dominated our press coverage, not because those analysts were better than the others, but simply because of the huge volume of stories written about the latest smartphone or tablet launch across the industry, business and popular press. It’s easy to see why this is so – devices are the most tangible aspect of the consumer technology market and also its status symbols.

And yet there are two key reasons why this fixation on devices is misguided. Firstly, devices serve no purpose of their own – they merely act as endpoints for the things consumers really care about: namely, content and communications. And secondly, the hardware itself is nothing without the software that runs on it – both the operating system and the individual apps. Apple isn’t successful merely because it makes great hardware – its success is predicated on its prior success as a purveyor of content (through the iTunes store) and on its tight integration of easy-to-use software with that hardware.

Samsung, by contrast, is successful largely as the default option for Android smartphones (and to a lesser extent tablets), with its marketing budget rather than particularly good software-hardware integration explaining its present dominance. And there is a reason why most other purveyors of smartphones and tablets aren’t making money: hardware by itself is not that compelling, and that results in commodity pricing and thin margins.

Five parts to the consumer digital lifestyle

There are essentially five pieces to the consumer digital lifestyle, and they’re shown in the diagram below. Two of these are paramount – communications and content. These are the two elements that create emotional experiences for consumers, and around which all their purchases in this space are driven, whether consciously or unconsciously. The other three elements are secondary, with two being conscious choices and the last – cloud services – being somewhat hidden from the user in many cases.

Beyond Devices 1Of course, without devices, consumers couldn’t engage in communications or consume (or create) content, and removing connectivity from the equation is equally fatal. But these are means to an end rather than ends in themselves – consumers spend hundreds of dollars on devices not because the devices have inherent value, but because they are endpoints for content and communications. Equally, connectivity is essential, but to many consumers a pretty fungible element of the equation, one that might easily be provided by a number of companies in a largely interchangeable way.

Why is all this important? Why does it matter which of these things are primary, and which secondary, in consumers’ minds? And why does the inter-relationship between these elements matter? Well, for two primary reasons:

  • The successful companies in this space are those that increasingly combine several of these elements, ideally in a tightly integrated fashion
  • Consumers are increasingly building meaningful and sticky relationships with the companies that provide the primary functionality, while their relationships with the companies providing the secondary functionality are loosening.

That’s good news for companies which are successfully combining these elements, among whom are Apple, Samsung, Google and others. But it’s bad news for those that aren’t, including many carriers but also players which own a number of the elements but haven’t yet combined them in compelling ways, notably Microsoft.

All of these ideas are worthy of further exploration, and that’s what this blog sets out to do. This is the framework through which I’ll be looking at this space and the set of players that competes in it, which is far more than just those companies that make devices, and where the keys to success are to be found in combining these elements of the consumer digital lifestyle in an integrated fashion.