Five years ago, I wrote my most successful blog post ever (well, so far). It was originally intended to be just rant for my gadget-obsessed friends, but it got quickly upvoted on Hacker News and was finally republished by Business Insider and Gizmodo, reaching probably around 300,000 readers. Obviously I had struck a nerve.
The post was entitled “Frozen Glass Effects: Why I Switched To Android After All These Years” and explained why I had just left the iPhone ecoystem for its main competitor. The post drew a comparison that was intentionally superficial, but in my opinion accurate and symbolic: Apple had just introduced frozen glass visual effects in the new iOS 7, which strongly reminded me of the same effects in Windows Vista introduced a few years earlier. That operating system was of course probably Microsoft’s biggest failure, leading to its relative decline, and in my opinion Apple was on the same path, prioritizing silly UI glitz over innovative substance. In my opinion, Apple was starting to lose out to Google’s superior offering that leveraged cloud-based services in conjunction with its increasingly polished Android OS.
How has this view stood the test of time?
In many ways, Apple has continued to do really well. It’s currently the most valuable public company in the world with a market capitalization of about $850B. If Jeff Bezos doesn’t get there first, it might become the first trillion-dollar company in history. It’s also, depending on the source, one of the top 3 most valuable brands in the world. It’s had some successful new products such as the Apple Watch, which now outsells all Swiss watch brands taken together, as well as the iconic AirPods, arguably the first really good wireless headphone. Apple still defines style in the smartphone industry, with countless Android handset makers now copying the notch Apple introduced with the iPhone X.
So it’s all well in Apple world? Not so fast.
Since 2013, Android managed to expand its global market share in smartphones from 74% to 86%. iOS declined from 18% to 13.7%, so all of the gains from the market exit of Microsoft’s Windows Mobile went to Android, and Google’s OS also took share from Apple on top of that. But even facing this decline, Apple continued to increase its iPhone revenue thanks to increasing device prices, topped most recently by the iPhone X that starts at $1,000.
In a way, Apple has turned itself into a luxury brand: It can command high prices for well-made products that have a loyal following — a following that doesn’t necessarily care too much about cutting-edge innovation, but mostly about quality, convenience and the social cachet of the brand. Nothing wrong with that, but it remains to be seen how sustainable this strategy is in a rapidly moving technology market.
This great financial performance is also about where the good news end. A lot of other things are very wrong in the world of Apple:
- Apple’s product line for professionals, which was one of its strongest and most stable segments for a long time, is frankly an unmitigated disaster. Its latest line of Macbook Pro laptops suffer from inferior keyboards (that triggered a class action suit), a badly executed touch bar, and underpowered hardware for the price. These and other problems made me recently switch to Windows, and I’m not alone. Apple’s pro-level desktop products continue to disappoint. Also, many creative professionals can’t understand Apple’s botched software strategy that for example ruined its amazing Final Cut Pro video editing product and drove back many editors to Adobe Premiere Pro — which happens to run on PCs as well.
- Apple had a huge head start in voice-based computing with Siri, releasing its voice assistant three years before Amazon Alexa was launched. But since 2014, Amazon and Google have captured most of the voice assistant market with superior products. Siri is by now not much more than a laughing stock, and Apple’s attempt at cracking the smart speaker market with HomePod fell largely flat, despite the amazing commercials. It’s OK to be a luxury brand, but if your product literally seems stupid compared to the competition, brand power just isn’t enough.
- The iPad, once a category-defining product, is in decline, in line with the overall tablet market that gets crushed from both sides by larger smartphones and ever more flexible laptops. Sure, with Google’s negligence of the tablet market, the iPad is largely the only game in town now, but that’s not much of a consolation.
- Remember when Apple completely dominated digital music distribution? That was long ago, before the market shifted to streaming music, which is now dominated by Spotify. Apple Music was launched in 2015, and while it showed some good traction, has failed to catch up with Spotify. Quite an embarrassing loss of a dominant position in a category that was once brand-defining for Apple (remember those iconic iPod commercials?).
- iCloud. Where do we even start? Apple’s cloud-based services are far behind the competition. For some reason, Apple even missed out on building the underlying infrastructure and now runs iCloud on — get this — Amazon’s, Google’s and Microsoft’s cloud servers. Sure, it’s not a bad idea to concentrate on your strengths, but it’s kind of concerning to see a dominant tech giant like Apple miss out on a foundational wave of innovation like cloud computing. Of course, Google, Dropbox and even Microsoft will happily sell you their cloud-based services for your shiny Apple device. The problem for Apple is that it makes its hardware so interchangeable. When I switched to Android and later to Windows, it was ridiculously easy because everything that mattered was in the cloud anyway. Apple completely missed out on building a service-based lock-in, with the notable exceptions of iMessage and Facetime.
- Apple was early in connected TV devices with Apple TV, but the market is now dominated by Roku, Amazon and Google. Winning in the living room is presumably one of the most important challenges for tech giants, but Apple has not done much to earn this title.
The list goes on. Apple has tried and failed to build an advertising business and social network. It’s not really a power in articifial intelligence, in contrast to Google and Facebook. Its iWork productivy apps never became a serious competitor to Microsoft’s offering, which is now readily available on all Apple devices. It has sort of of a strategy in home automation, but no recognizable products. Apple is a no-show in virtual reality, which is admittedly not mainstream now, but might be some day. And so on.
The big question is if Apple can sustain its financial success despite all these shortcomings. To be honest, I’m not terribly optimistic. The core substance is healthy, but the pipeline of innovation seems weak, particularly in fundamentally important areas like AI and cloud computing. The network of strong products, services and lock-in effects that make Google so strong seems to be largely missing with Apple. Once you start to understand that you can get very nice hardware from other brands too (I’m writing this on this, which works much better than my Macbook Pro), the brand value starts to erode. I still think Apple makes great products in some segments. I recently got a new iPad Pro because I think it’s by far the best tablet available. But frankly, nearly none of the time I use it is spent with any of Apple’s apps or services.
It’s of course important to understand that Apple never tried to be first in new segments, with few exceptions. It’s strongest at entering an already established category with a product that is more fully baked than the competition’s. Apple still does that occasionally, most visibly in recent years with the Apple Watch.
But it’s not clear that this strategy is enough in today’s market that is dominated by complex value networks of devices, services and two-sided markets. Google and Amazon play these games masterfully, Apple does not.