Samsung is gobbling up mobile startups. Microsoft annexed Finland Nokia. And Google's mobile ad revenues no longer require tweezers and a microscope. Even Amazon is thisclose to selling smartphones. These are not isolated incidents. Underneath the mobile kimono is a body of intrigue, backstabbing, dirty secrets, and sabotage. Each player's moves reveal strategies that range from brilliant to desperate. Many are frenemies with complicated love-hate partnerships only a therapist could sort out. All have their sights set on Google and Apple's fat market share. I've been working on a number mobile product launches lately. Their fates – and those of everyone doing business on mobile – depend on moves mobile behemoths make. As I did with Deconstructing Google's Strategy, here's my uncensored take on where each company is placing its big mobile bets.
The mobile value chain is not a chain at all. It's a Dali-esque pyramid where each disproportionate layer teeters uncomfortably on top of another. The chart below, excerpted from my article on Surviving Platform Risk, shows the relative imbalance of power. Some of that power has steadily moved towards consumers.
As this Comscore chart shows, OS preferences change fast – and they're usually permanent. As Apple and Google surge, all of Microsoft's money can't buy enough developers, hipsters, or kale photos.
Primary apps like Facebook, maps, email, messaging, and Twitter make phones as important as air and bacon. Secondary apps can be free, paid, or games with magic potions for sale. Combined, they make or break an OS. Individually, they wield little power. Services are the holy grail for apps. Standouts like Spotify, Netflix, Evernote and Dropbox collect monthly or annual fees – a feat mostly reserved for carriers.
It's not surprising to see each player betting on the profitable segments, but some appear to be betting wildly. They're not insane. The mobile pyramid will evolve and not everyone will survive.
As I wrote in Google's Strategy Deep Dive, Google services must either make money from ads or collect info to enhance ad targeting. So it's not surprising to see Android borrowing Windows' old strategy – becoming universal.
Google wants Android on every device, in every pocket. Unlike Microsoft, they're giving Android to manufacturers for free and monetizing through ads and services. This poisons the well for Microsoft's paid OS model.
Competing with free is hard. That's why the strangest couple in the world just jumped in bed to attack Google patents in court. Microsoft and Apple created a shell company in hopes of crippling Android or forcing it to pay (and collect) hefty licensing fee.
Google's mobile strategy works like a two-tiered sleeper cell. For high-end users it's about infiltrating hostile platforms, like iOS. And someday, consuming its host. Even if it can't earn much on iOS, Google's primary apps (Maps, Gmail, Hangouts) can build loyalty, collect data, and feed off-platform revenues. It's a Coup de Goog.
At the low end, Google wants to seed the world with cheap devices. Like adding a vending machine to the office lobby, eventually the hungry will devour the M&M's. When data starts to flow to cheap, dormant Androids, Google will be ready with cat videos, Play tunes, and ads. Even its devices – Chromebooks, tablets, phones and (soon) watches, are there to seep into every consumer nook and cranny from classroom to dorm rooms.
There are ways to counter Google's strategy.
Apple makes most of its profits from iPhones and iPads. But what it really sells is iStatus. Despite tough competition and the loss of Steve Jobs, Apple can afford to build a spaceship but can't hang on to its market share. Apple customers still buy more apps but it's destined to be the American Express to Android's Visa. Not a bad place to be.
iTunes software was a masterful hub when iPods and wires ruled the land. It nourished the iLifestyle whose limbs included Macs, iPods, and iPads. Since the world moved to the cloud, Apple hasn't quite kept up. The .Me service failed and iCloud gets mixed reviews.
Apple's primary apps range from serviceable to disastrous. They're still finding Chinese tourists in the Pacific after using Apple Maps to drive to Japan. Google is taking advantage. It's infiltrating iOS with better apps like Maps, Gmail, Drive, and Voice. Essentially, Google is Appvertising Android on iOS.
Apple even finds itself imitating focused entertainment companies like Netflix and Spotify. And Apple TV, like Paris Hilton, is something luxurious but useless you might find on a few cable boxes.
For now, Apple is betting its ecosystem of gadgets and limitless real estate on iOS will keep future customers from cheating on iTunes. It's one of the many perks of platform control.
But Apple's is far from done. It's about to add an entire new tier to the mobile pyramid. Apple's will transform into full-on lifestyle and fashion brand with a B2B twist.
No one will ever accuse Samsung of lacking ambition. The Korean giant will do anything to win. In fact, it will literally do anything. The company owns a sprawling empire that includes semiconductors, consumer electronics, hotels, chemicals, financial services and shipbuilding. Yes, shipbuilding. Its mobile strategy is like chili – it has a little bit of everything but somehow, miraculously, it works.
Samsung semiconductors can be found in almost every major device, including iPhones. In fact, semiconductors represent 70 percent of the company's operating profit – a huge upgrade from the breakeven business I knew when I worked on the company's global product strategy years ago.
Despite huge successes with high end devices like the Galaxy series, sales are flat. Most consumer growth now comes from low end phones and tablets. Yet the company has a bigger ambition – to become a software and services company.
Samsung sees its dependence on Android as a profitless purgatory to which Google will sentence all Android clone-makers. Samsung believes it can fight back with software. Slowly, it's built up a modest collection of primary apps, media services, home screens, and odd novelties. It's also developing direct relationships with developers and investing in startups here and in Israel.
By first hiding, then gutting the Android core, Samsung can do to Android exactly what Amazon did – dress up Android's open source (Linux) code with its own apps and services. Of course, Samsung knows it's too soon to gnaw on the hand that feeds it.
What I find curious about Samsung's strategy is the company is building an ecosystem around its weakest link – software. It's something Android purists treat like a tapeworm, not a feature. I believe Samsung is the only company in the world that can build an ecosystem no one can defeat – one built around the totality of their businesses.
Before the original Nokia partnership, I advised Microsoft on how it could differentiate in mobile. They didn't listen. I've mostly stopped crying myself to sleep over it. Several of my recommendations might have made a difference, but here we are again.
The biggest problem with Microsoft's heavy OS investment is that it brought succulent lamb shanks to the picnic after everyone already ate. What it should have done was bring dessert. Everyone makes room for dessert. Then after having their way with some sweet Microsoft pie, people might be curious about its other dishes. If you'd like to know why I just became Rachel Ray, read my past advice to Microsoft. Decide for yourself what is still relevant.
Having an interesting, elegant operating system is not be enough in the US, but many foreign markets still looove Nokia. In fact, Windows Phone has gained double digit share in several major markets like France and the UK. Incredibly, it has a chance to overtake iPhone in several markets. It might become the first OS to come back from the dead.
With tablets and phones, Microsoft may have overestimated the value of its new service-friendly Office apps. There were too many alternatives and most mobile devices are not used for content creation. With its spotty content offerings, Microsoft must do two things to differentiate in mobile – focus on gaming and business. That includes buying or conquering Blackberry's customers.
I saved Amazon for last because to many people, it's an enigma. Comedian Jordan Cooper compared competing with Amazon to competing with a crazy person. It's true, Amazon doesn't seem to care if it makes money or eats its own shoes. While it makes for fun imagery, the truth is a bit more complex.
Just like Google wants to be the world's information hub, Amazon aspires to be the world's commerce hub. Both have an all-consuming agenda that will not be impeded by income statements. The main difference is Google doesn't need to pay UPS to ship its inventory.
Amazon's mature businesses generate enough free cash flow to plow into new world-dominating growth segments. Of course, when you look at everything blended together, it looks like a charity. It isn't, by a long shot.
In mobile, Amazon's strategy is straightforward. It's the razor and blades model. It sells quality mobile devices at minimal cost. Then, it drives long-term profit by selling media. The devices also provide a gateway to buying physical goods. An unlimited number of services can be added over time.
When you own a Kindle, you're in Amazon's world. When you own an Android device, you're inside an experiment. The experience changes from model to model. And in some cases, you're in the middle of a battlefield between carriers, manufacturers, and Google.
Shortly, the Kindle phone will come out. It might be on a second tier carrier like T-Mobile or Sprint. If Amazon math works like I think it might, the company will offer its own mobile service as a MVNO. Why sell someone else's brand when you control distribution?
You must be at least a little curious about what happens next to the heroes of this story. Will Android win it all? Does Samsung become a software powerhouse? Who should each of them buy or partner with? Are there any dark horses in this race? Subscribe to IdeaFaktory newsletter. If enough people do, I'll release a detailed Future of Mobile Report like this one about Google. If not, I'll die alone clutching my notes. You can bribe my undertaker.