Apple’s genius business model

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Two years ago I wrote about ”Google, Android and diffuse business models”. I didn’t like that Google and Android have created a kind of mystified business model and compared to Apple and Amazon which both have business models that are easy to understand = you get from where they get their money.

A lot has happened since that and yesterday Apple hold an event and dropped the news that they are giving away their new OS, Maverick, for free and they also give iWork and iLife for free. That is so totally, mind-blowing amazing! It makes me very happy and I feel like they really reward their customers. Read the article about ”Apple’s Free Software Gambit Means War With Microsoft”, Forbes.

At the same time, I still understand from where Apple get their money, there’s no mystery. Apple sell computers and iDevices. They have created an eco-system in which Apple ID is the key to buying apps in AppStore, music and videos in iTunes and books in iBooks. You can buy stuff from any of your Apple devices. They have made it so easy to use their Apple devices that people really use them too and they are happy and content with the experience – which is not true for Apple’s competitors. Apple also started to sell ads.

Apple has created inspiring working conditions for the app developers. One crucial part is that Apple has encouraged and rewarded an updated culture among their users, which means that Apple users actually upgrades anything that can be upgraded as soon as possible. Well, not everyone, but the majority is and that makes a difference when it comes to keeping the Apple devices secure and free from virus and malware, but it also encourages the developers since it makes it fun to develop for the future and not for yesterday.

On top of that, Apple has built a culture among the customers to pay. Apple users like to pay for music, videos and apps. To get payed is attractive for any developer that dives into weeks or months of  programming.

And now Apple starts to give away OS and software for free… One could say it’s a bad thing considering what I wrote above – maybe it will change the Apple users attitude into demanding more stuff without paying? At the same time, Apple’s business model is still easy to understand. We can see several sources for incomes: hardware, music, videos, books, apps and ads. Apple gives away software for free because they can afford it and because it will make their customers happy and even more loyal, which means they will continue to use their Apple devices in ways that brings in the money to Apple anyway. So, I think this is a very cool move from Apple.

Though, what makes it even more interesting is the way Microsoft has been fighting during the last years. Microsoft just don’t get what to do. The company used to live in a happy world where they were the king and then a little iPod started to challenge their empire in ways that they had never dreamed of. Yes, I think it started with the iPod and iTunes – that was the beginning of Microsofts disaster.

Today, Microsoft is some kind of software company with a flagship that is sinking: Windows. What do I, as an Apple user, know about Windows? I know that Windows users don’t like to update, because they don’t trust the newer Windows versions and they know what it’s like to struggle with software that doesn’t work and invites virus. If they decide to update – then they get confused when they have to choose from all the alternatives. Updating means problems in the Windows world, in contrast to in the Apple world where updating is joy. Windows is Microsoft’s eco-system and it doesn’t work like it used to anymore. The glory days are over.

Then we know that a lot of PC/Windows users bought iPhones followed by iPads and now they started to understand what fun it can be to use digital devices and their expectations on what a computer should deliver have increased. A lot of people have stayed with their PC:s because they need to work with Microsoft Office and they can’t do that on iPad.

Microsoft understood that they had to change something, so they started to add hardware to their product mix: the ”iPad killer” Microsoft Surface and together with that the OS Windows 8 for both computer, tablet and phone. But, the problem is: not many want those products. I have met one young man that was happy about his Nokia Lumia smartphone with Windows 8 – but he also said ”Of course, there are not so many apps”. ”Not so many apps” means less incomes for Microsoft and less joy for the users. Since there are not so many users of Windows 8, the developers are not so keen to develop app versions for Windows.

Now Apple give away the new OS, Maverick, and iWork for free… The given question is: what will this mean to Microsoft? I’m sure that this is the last push that a couple of confused Windows users need to jump over to Apple. It’s so easy to migrate from the Windows platform to Apple and so rewarding. If they have to send documents back to some left over Windows friends, it’s a piece of cake with the latest version of iWork – you just send the link and the receiver can make her own choice of which file format to use. So, not many issues left to solve for the Apple user.

Microsoft is left with a bucketload of problems to solve… do they even have an understandable business plan to follow? I bet they don’t.

Kodak, Blackberry and now Microsoft. Apple has caused disruption in many business models. I am sure that there will be an end of the Apple era, some day, but right now it’s Apple that’s surfing the waves and I think they will do that for at least five years. At some point there has to come a competitor that has found a new and better business model and it’s impossible to guess what it might be, because when it comes, it will be so new and bold that a whole world makes happy sighs, just like they did when the first iPhone was shown to an audience.

Belonging to the Apple cult?

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One of the most boring arguments that I hear from Apple haters is that all of us that uses Apple’s devices are part of a cult.

It annoys me, because that means that I’m like under a spell and once I got captivated by that spell, my brain stopped working and Apple took over the thinking. And that is the reason to why I keep on buying Apple devices since 1989 when we bought our first MacPlus?

I guess that if you don’t use Apple devices and never have experienced the user satisfaction from doing it, it might seem to be very strange that people use Apple devices and are happy and content. Especially if your experience from Windows and Android is more frustrating and annoying. So of course, you have to come up with some kind of reason to why those Apple users are so happy and loyal.

From my point of view Apple users generally know more about their devices than Windows and Android users do, they are more interested in their devices, because they work well, Apple devices almost turns into your friend. It’s more than a tool.

That’s why Apple users cares more about their devices so that they update their OS and iOS whenever there’s a new version. Read the article on Tapscape.com – yesterday 40% of all iOS devices had upgraded to iOS7. Only in a couple of days! My Facebook feed was full of friends that was upgrading to iOS7 as soon as it was launched in Sweden. What’s more, there are very few iPhones and iPads with older iOS.

Have you heard of anything like it in the Android world? I’m sure you haven’t. The typical Android user would explain that Android users are not part of a cult and therefore don’t follow every step that ”the leader” takes. As an Apple user I think it’s just plain dumb. To upgrade is to care about your devices. This is what it looks like in the Android world:

This picture is also from Tapscape.com

Add the fact that Android users has more than 3000 different variations to choose from. That is what they call freedom of choice. The developers call this hell. Well, I guess there has to be some enthusiastic developers that actually like to develop apps for Androids, but if you ask me, you probably have to belong to a cult to cope with all the extra difficulties that follows from this mess of variations and different stages of upgrades.

Who’s the master behind this mess? Google. The ”do no evil”-company that gives away everything for free like the kid on the schoolyard that gives candy to everyone and hopes to become popular. Well, that’s not the whole truth. There are no such a thing as a free lunch and there is no such thing as a big search engine company giving away things for free. They earn their money from ads and payed search results. That’s why Android is free to use for everyone that wants to build a smartphone. You can do whatever you want to do with Android if you just know how to do the code.
The problem is: that’s exactly what developers do and especially in China. They figured out that all that ad-stuff was a bore and that they don’t like Google’s search engine, because they have one of their own, Baidu, so it turns out there’s not much for Google to earn their money on? You can read about that in this article from ExtremeTech. To make it worse, China is the number one source for Android malware.
Now, there are of course some Android power users and they are very easy to detect: they are the ones that actually have found out how to surf the internet on their devices… Do you think that I’m unfair and mean writing this? The fact is that research after research give the same result: iOS users surf the web, Android users don’t. It’s like a mystery why they don’t. Maybe they think it costs a lot of money, maybe they just want to make phone calls with their smartphones (that’s like buying a computer to use it as a lamp) or maybe they can’t figure out how to do it. The consequence is that Android users don’t buy much stuff from the internet either, while iOS users do – which means that more money flows in the system, which makes it more stable. An OS without money in the system is like a house of cards – it offers no stability.
By the way, Android users don’t like to pay for their apps either… they just want everything for free and believe that Apple users are stupid to pay for everything. I guess they thought it was stupid when Apple turned the music business upside down with introducing iTunes several years ago. Pay for music? When you could get free, pirate copied music from the internet? Well, it didn’t take long until a lot of people bought a lot of music from iTunes and they are still doing it and it’s not so bad for the musicians either, because, they get payed. App developers get payed, authors get payed when they sell e-books in Apple’s iBookstore.
I believe in clean business solutions. If you want this, you have to pay this. Simple like that. If you don’t pay, you just won’t get it.

This is why I want to stay in my Apple world as long as it keeps on being smart, functional, beautiful and delivering an excellent user experience.

What is a country now when we have Internet?

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Today we live our lives not only on the physical Mother Earth, but also in the digital cyberworld where borders between the earthly countries are less important. We connect with people from anywhere in the world based on their interests or personality and even if we notice which earthly country they live in, the meaning of it has changed. Our inner images of people living in other countries change when we can see glimpses of their life on internet and recognize ourselves in them. ”She’s like me! He’s like me!”

It can’t be only me that feels a new kind of connection growing over the world, a new sense of belonging and being together, all of us (well, that is all of us who has access to internet) being cyber people or internet persons.

In this global dimension we sometimes get reminded of our earthly countries, like when some country censors the access to internet because there is a conflict between intentions. Trade has always been a great connector between people in different countries – I live in Sweden, the land of the Vikings and I know how much we have to thank the vikings for doing their brave journeys to new places. They learned about other places, they brought home both knowledge and goods. Some of them also moved to other places, like England. (Okay, lets not talk about violence in this blogpost…)

Today I can buy music, books and magazines from all over the world from my iPad and have it delivered in a few seconds. (What do you think about that mr Viking?) I can buy physical items and have them delivered to my house here on Gotland, which will take some days. I can also be the one that sells goods on Internet, if I want to. As soon as we start to trade over the borders we have to deal with the currency issue. It’s a piece of cake in most cases, because the payment solutions deals with it with us hardly noticing it. But if you want to trade globally on the internet, then currency and also taxes might become an issue that’s not so easy to solve.

Where does the transaction take place? Which taxes are applicable? And if the transaction involves not only two countries, but three or four it gets even more complicated. Wouldn’t it be nice if the internet also was a country with it’s own currency?

I found it interesting to read this article in Cult of Android, Google’s executive chairman Eric Smith says:

That businesses must be run more like countries, with diplomatic meetings and the like. He said that “the adult way to run a business is to run it more like a country. They have disputes, yet they’ve actually been able to have huge trade with each other. They’re not sending bombs at each other.”

When a company expands in ways like Apple and Google the earthly borders don’t matter in the same way as they used to, but they still matter.

So, what is a country? I checked Wikipedia. The definition begins with: A country is a region legally identified as a distinct entity in political geography. And it ends with: Regardless of the physical geography, in the modern internationally accepted legal definition as defined by the League of Nations in 1937 and reaffirmed by the United Nations in 1945, a resident of a country is subject to the independent exercise of legal jurisdiction.

When we buy music at iTunes, who’s exercise of legal jurisdiction are we the subject of? When we register an account at Google to start a blog like this or to participate in Google+, who’s rules do we have to follow?

Eric Smith points out an issue that will become more important over the years as our global connections via Internet will expand and establish it’s position as a natural part of our lives. Businesses must be run more like countries, yes. But what if we also need a new ”country” in cyberspace to make it easier to handle money and laws?