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a16za16z Podcast | Apple and Google Won the Mobile OS War, But a New War Has Already Begun
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CHAPTERS
- 0:01 – 4:30
Is the Mobile OS War Already Over?
The host asks whether the mobile OS war is over, and Benedict Evans answers yes. He lays out the Apple and Android shares, the low-priced remaining growth, and why Windows Phone, Firefox and forked Androids are only skirmishes.
- •Apple has about 10% of phones sold, Android 45-50%, and only about two-thirds of Android has Google services
- •Remaining growth is at very low prices of $25 to $75
- •Windows Phone sells mostly low-end devices in small numbers, e.g. 500-600 thousand units in the US last quarter
- •Evans expects 700-900 million iOS devices and 2-3 billion Android devices in use
- 4:30 – 8:45
Why the PC Analogy Doesn't Hold
Asked about PC-era analogies, Evans explains why winner-takes-all dynamics from Microsoft's era don't carry over. Phones are bought by individuals on experience rather than by corporate buyers on price, and retailers and banks must be on both iOS and Android regardless of share.
- •PC sales were corporate, buying generic boxes at the lowest quote
- •Phones are bought by individuals on fit, feel and design, so Apple has product market fit
- •Apple will reach 800 million users before network effects could kick in
- •Retailers keep an iPhone app even at 10% share because iOS may be three-quarters of basket value
- •An ecosystem dies when the product is uncompetitive, as with BlackBerry
- 8:45 – 12:51
iOS vs Android Value and Apple as BMW
The host asks whether value will shift from iOS to Android. Evans says self-selection by price explains the gap, and that average and absolute numbers must be kept apart. He uses a BMW analogy to argue Apple could make a cheaper phone it is proud of.
- •Buyers of high-end phones are the more engaged ones, and iPhone holds half to three-quarters of that segment
- •Apple has only the good customers while Android has everyone, so its average is lower
- •Android basket size and payment rates are about half those of iOS, a function of price
- •Apple is like BMW: it doesn't worry about mopeds but cares about Lexus
- •Evans thinks a $300 Apple phone is possible
- 12:51 – 15:48
The War Moves to What Happens on Top
With the OS war over, the conversation turns to what is built on top. Evans describes a small war over platforms on Android and a bigger one over what the mobile internet even is, noting that the browser is only one of many things on a phone and that terms like app and install are unsettled.
- •The small war is Amazon, Nokia and perhaps Microsoft building on Android
- •On the desktop the internet and the web were effectively the same, but not on mobile
- •Evans doesn't know what 'installed' or 'app' will mean in five years
- •It is unclear what Android will mean or how it interacts with Chrome and Google Play services
- •Form factors such as watches and glasses are a wild card
- 15:48 – 19:15
What Apple and Google Actually Want
Evans argues that Apple and Google are simpler than people think. Apple makes boxes and tries to make them the best it can, while Google is a machine-learning engine for which reach is the objective. Both got what they wanted, so the platform war ended with both winning.
- •Apple makes boxes with circuit boards and won't buy airlines or operators
- •Google is a machine learning engine, with search, Gmail and Maps as applications on top
- •Google is arguably in a fight with Facebook or Amazon more than with Apple
- •Google Plus is about indexing users, 'PageRank for the users'
- •iPhone users use Google Search and Maps, and each company's problem is keeping its own product good
- 19:15 – 21:34
Opportunity for Entrepreneurs: Scale of Mobile
Asked how an entrepreneur can get into this ecosystem and keep leverage, Evans first makes the point about scale. Smartphones are bigger and richer than the web, will reach roughly half the Earth's population, and have turned startups upside down, as the WhatsApp acquisition showed.
- •About three billion smartphones compared with about 1.5 billion mostly shared or locked-down PCs
- •The internet gets two to five times bigger from the shift to mobile
- •Smartphones are the dominant computing platform, not a toy
- •A typical startup has gone from 100 people and 1 million users to 10 people and 100 million users
- •WhatsApp is a case study of how big a startup can get
- 21:34 – 23:37
App Discovery Is Still Pre-PageRank
Evans's second point is that discovery on mobile resembles the Yahoo era. App stores with a million apps are an unsolved discovery problem with no SEO equivalent, and he suggests better store search alone may not be the answer.
- •An app store today resembles Yahoo's directory 20 years ago
- •Both Apple and Google have a million apps and a generic discovery problem
- •Not being discovered in the App Store is likened to a book lost among 25 million SKUs on Amazon
- •There is no SEO or SEM equivalent for apps
- •Better search or deep linking from Google may not be the answer
- 23:37 – 24:55
Messaging Platforms and the Swirling Soup on Top
Evans explains that native versus HTML5 matters less than how content reaches the phone and how users interact with it. Facebook, WhatsApp, Line and WeChat are turning messaging into platforms for apps, identity and payment that sit above and are neutral to iOS and Android.
- •A restaurant review shared in a messaging app should appear as an interactive item, not a dumb URL
- •HTML5 versus native code matters little compared with how things get onto the phone
- •Line and WeChat are aggressively building social, application and identity platforms
- •Apple and Google control only some of the direction of this layer
- 24:55 – 26:58
Browser Wars Analogy and Apple Moving Down, Google Up the Stack
The host likens the situation to Yahoo winning one war before PageRank won another, and Evans compares it to the browser wars, which became irrelevant to people like Zuckerberg. He contrasts Apple moving down the stack into hardware-dependent features with Google moving up into cloud services, each going into its own comfort zone.
- •The OS fight may become as irrelevant as the browser wars, though it might not
- •Apple does hard things that depend on owning the stack, such as AirDrop, iBeacon and the M7 motion processor
- •Google lifts innovation into Google Play services, Now, Maps and Plus
- •Third parties face a lot of common ground between the platforms, with 1.4-1.5 billion users
- 26:58 – 27:22
Wrap-Up and Future Topics
The host thanks Evans, summarizing that one war is over and another is underway. He suggests future conversations, including a breakdown of Amazon, and says they will do this regularly.
- •One war is over and another is afoot
- •The host wants Evans to untangle Amazon in a future episode
- •The two plan to record regularly
