Not every company can be Apple or Google, even if they want to be
One of the things I was struck by watching Facebook's (NASDAQ:FB) Home for Android presentation was that Facebook was declaring--to the media, consumers and Google (NASDAQ:GOOG)--that it was more than just an app on smartphones. The social networking giant was making a play at being a true mobile platform.
I think there are only a handful of companies that can be mobile platforms--which I define as companies that can control end-to-end user experiences through software, services and hardware. Apple (NASDAQ:AAPL) is certainly one. And while I think there are many companies that want to be mobile platforms, including Facebook, Amazon and Samsung Electronics, I don't think they can be or should be trying.
Facebook tried to make clear that its ambitions are not to be a mobile operating system but to be something perhaps even more ubiquitous: something that drives the experience people have on their phones.
"We don't want to build a phone or operating system that only some people will be able to use," Facebook CEO Mark Zuckerberg said. "We want to build the best experience for every person on every phone." Additionally, he told Wired: "We have a pretty good partnership with Apple, but they want to own the whole experience themselves. There aren't a lot of bridges between us and Google, but we are aligned with their open philosophy."
So Facebook doesn't want to offer a siloed mobile experience--it wants its social network to be prominent across all devices. "Facebook is in a very different place than Apple, Google, Amazon, Samsung, and Microsoft," Zuckerberg said. "We are trying to build a community."
To me, this point is critical. Facebook sees itself in the same class as Apple, Google, Microsoft (NASDAQ:MSFT) and the others. But at this point, only Apple and Google are true mobile platform companies. Microsoft has the assets and resources to make itself into one--if it can get consumers to start buying Windows Phones at a steadier clip.
"Everyone wants to be a platform vendor to one extent or another," said Current Analysis analyst Avi Greengart. "It provides you a way of controlling the user experience. But it's complicated. There are very few companies that control the end-to-end experience, as Apple found out when they tried to cut out a major maps supplier."
Apple's platform is self-reinforcing: through iTunes and the App Store, consumers with iPhones, iPads and iPod touch devices can download apps and content, which makes the Apple ecosystem larger and more valuable, which in turn fuels iOS device sales, which is where Apple makes most of its money. Google gives Android away for free but in return has seen 750 million Android device activations, which are all new screens through which Google can deliver its services like search and, more importantly, advertising, which is where it makes most of its money.
No other company that is trying to be a mobile platform vendor has so far developed a business model that would allow it to claim such a title. Greengart noted to me that people who develop games, sell goods and download apps from Facebook have made Facebook into a platform of sorts. But to a large extent that exists on the desktop, not mobile, and isn't an all-encompassing experience.
"The best way to think about the platform is one that has a relevant software and services around it. It's not just an operating system," said Creative Strategies analyst Ben Bajarin. "It's certainly something that, from a proprietary standpoint, has services and software that are unique." Extrapolating from that, he said, leads one to conclude that a platform is something that delivers actual value to the company producing it.
Amazon and Facebook are trying, in limited ways, to be platform companies. Amazon has created a forked version of Android for its Kindle Fire devices that bears no resemblance to the software found on most Android smartphones. Yet Amazon's platform is based around primarily one thing: buying content and services from Amazon. There's nothing more to it, which is fine as far as it goes, but its ecosystem is limited by that factor. "You're buying a vending machine," Greengart said. "If [Amazon] doesn't control certain aspects of these experience, their business model doesn't make sense."
Facebook is also trying this approach with Home to a certain extent, but I think it will backfire. I haven't played with the app (or is it a user interface?), but I've read enough descriptions and seen enough videos to get a good sense of how it works. I'm an extremely avid Facebook user and I can't imagine having the need to use Home. That certainly doesn't mean others won't, but I see its appeal as limited (as well as its value it Facebook, though the company said it will eventually sell ads through Home).
Samsung is also trying to be a platform company, and, as I wrote last month, is trying to use its Galaxy S4 smartphone to bring its banded software and services front and center, taking pride of place in consumers' minds over Google and Android (even though Samsung currently depends on Android for most of its smartphone sales). Samsung's effort to build mine-stores inside Best Buy is another piece of evidence that it wants to be seen as not just a smartphone provider but as a company that can tie together consumers' entire digital lives. Yet as things stand now--with no Tizen phones on the market--Samsung remains the largest and most profitable Android vendor.
Through the synergy between Windows 8, Windows Phone, Xbox Live, SkyDrive cloud storage, Skype and more, Microsoft has the requisite assets to be a mobile platform company. "They have a very successful platform," Greengart said. "They're just more successful on the desktop, server and productivity tools and software than they are in the mobile market. They know they need to effectively transition and they have not effectively transitioned yet."
All of these companies are trying to transition to become platform companies. Not all of them should. My advice, which will surely go unheeded, is that they should stick to what they're good at: selling content, being a social network, selling hardware.
The ambition to be a platform is a burning one right now. But not every company can be a platform, and not every company should try.--Phil