There are many advantages of using the same ecosystem for your computer, tablet and smartphone. Devices within the same ecosystem are designed to work well with each other. They syncs simple so all your data becomes available on all your devices. It may be possible that the applications that you bought will work on multiple devices at the same time. The user interfaces are usually similar or identical across all devices. An ecosystem is not only beneficial for users, it's a gold mine for tech companies. If you are using an iPhone, it's more likely that you use safari than someone who doesn't use an iPhone. If you use Google Chrome, it's more likely that you use Gmail than people who don't use Chrome. If you use Microsoft Office you are more likely to use Skype than someone who does not use Office. I think you get it. This is good for business, and tech companies seem to be more aware of this than ever before.
An ecosystem is not only beneficial for users, it's a gold mine for tech companies.
The big tech companies is continuously improving its ecosystem, Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT). But, for the most part, is Apple and Google doing a much better job of connecting their products. Apple has a very strong ecosystem which is often talked about in the media. Developers are submitting their apps and hope that they will be approved by Apple in the App Store. (Google Play don't have such a process.) Even though Apple takes 30% of all app sales we find that apps in firsthand is developed for the App Store. First you make the apps for iOS and then if they manage to get any success, it's followed up with an Android app. Google Play is not near the financial powerhouse for app developers that the App Store is. Even Microsoft's OneDrive has an app for iOS.
Microsoft has not had the same success with their platform. Developers hardly feel the pressure to create compelling software for Windows Phone users. The reason is that there is no financial incentive because their market share is only 2.25%. Users of Windows devices have fewer apps to choose from and this can deteriorate their experience. At Microsoft Convergence this year their marketing executive, Chris Capossela talked about their ecosystem. They conducted a study and results is displayed in the image for this post (see the image at the top of this page). The relative size of circles indicates the number of users during the time that Microsoft conducted the study. Capossela said to the crowd, according to a Microsoft transcript. “It shows you that we’ve got a lot of big businesses at Microsoft. Windows is big, IE is big, Office is big, et cetera. But it also shows you that we don’t have nearly the connectivity between our products that Google has engineered and that Apple has engineered.”
You only market the locomotives. And then when someone uses your locomotive, it pulls along the cabooses.
This is giving Apple and Google a marketing advantage, he explained. “If you look at what Apple advertises on TV, at least in the U.S., it’s all iPhone and iPad. And yet you see all the lines that connect their ecosystem... They can focus their marketing dollars on a very small number of things, be very disciplined, but because they’ve engineered their things to work together, one product naturally leads to the next product without any marketing at all; very efficient marketing to build your marketing into your products,” he said. Microsoft is aiming to adopt this approach “in a big way,” Capossela said. “The beautiful thing about having lots of lines is that you don’t have to market all of your products. You only market the locomotives. And then when someone uses your locomotive, it pulls along the cabooses.”
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I think Capossela gives a good description of the benefits that a strong ecosystem contributes. But as he said, Microsoft don't have nearly the connectivity between their products as Google and Apple has. It's good that Microsoft show that they are aware of how important it is to have an ecosystem, they seem to have changed their tactics but they are far behind. As you can see in the picture above does iOS and Android dominate the mobile market. I have written a post where I explain why I don't own shares in Microsoft, you can read it here: 1 Big Reason Why You Shouldn't Buy Microsoft
These four ecosystems all have their weaknesses and strengths.
E-commerce giant Amazon has also problems with getting market share. They have an even smaller market share than Microsoft, but they have been more successful in recruiting developers to re-release their content for its platform. Amazon's devices do technically "run Android" but they run a proprietary version that locks you into Amazon's own ecosystem. The Amazon app store is distinctly isolated from Google Play. Amazon seems to have always had a vision to create an integrated ecosystem. CEO Jeffrey Bezos said, in an interview with the New York Times from 2005, that it's "...very important to get into new categories beyond books reasonably quickly." Today, Amazon is a huge network that is well-integrated and possibly the largest media ecosystem in the world.
As you can see in the picture above is the tech companies businesses very different, this means that they have different priorities when designing their ecosystem. These four ecosystems all have their weaknesses and strengths. When it comes to media (especially books), Amazon is the clear winner. Although Apple's iBooks can be considered a success, it's not near Amazon's dominant market position. Amazon's business is retail, therefore I believe that they are trying to increase their sales by start selling own devices that can serve as a platform for their sales. With Google's ecosystem, you never need to plug anything in or download local programs. It's simple to manage your stuff and you're connected to your content regardless of place and device. Google makes money on advertising and is basically a search engine, a very dominant search engine. I think their strategy with Android is to ensure their dominant position as a search engine.
Apple has probably the most integrated ecosystems of them all, this is also one reason why I own shares in the company.
Microsoft doesn't have as strong ecosystem as the others, it becomes particularly evident when their marketing executive himself says so. In contrast, Microsoft is very strong in gaming with the Xbox. All the tech companies ecosystems have their strengths but which is the best? According to me, Apple has the strongest ecosystem and I think most people would agree with me. Apple has probably the most integrated ecosystems of them all, this is also one reason why I own shares in the company. I have written a post where I explain why you should buy Apple for a long-term investment, you can read it here: My First Stock: Apple
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