Bert Danner piece for Seeking Alpha, came across as a well thought-out analysis of the mobile platform war between Google’s Android and Apple’s iOS. According to Danner, when the smoke clears, Apple will be crowned the winner.
Danner’s theory is based on what he calls the ‘Network Effect,’ where developers and consumers work in tandem to create a powerful platform (in this case iOS).
“The network effect is a virtuous cycle (“a complex chain of events that reinforces itself through a feedback loop”) of value creation as more users participate, Danner writes. “On a software platform, this occurs when developers and service providers create software and services to run on the platform. The added software and services increase the value of the platform and attract new users. New users buy more software and services and thus a virtuous cycle of ever-increasing platform value is created – the network effect.”
“Simply put, developers and service providers must prosper financially to add value to the platform. As platform users buy software and services, developers and service providers are incentivised to create more offerings. The engine of this process is the platform users actively purchasing the offerings being provided,” Danner posits.
According to Danner:
[quote] The reason the Android platform does not have a self-sustaining network effect is because it lacks a meaningful financial opportunity for developers and service providers. The type of consumer that purchases Android is looking for free deals and has little interest in making ongoing purchases. In fact, Android’s overriding appeal is to consumers with an aversion to spending money. In contrast, Apple’s platform is designed to attract those consumers who enjoy buying things, especially nice things. This is why Apple’s customers are so valuable to Apple’s developers and service providers, whereas Android presents developers with little profit opportunity.New users will choose the platform that has the best software and services. So, as more and more users join the platform, the financial opportunity for the developers and service providers grows as the number of potential customers increases. Again, the consumers attracted to the platform must be “paying customers,” with the desire and the means to engage in ongoing platform commerce.[/quote]
As you can see, Danner argument is very convincing. However, a comment from Google’s Chairman Eric Schmidt comes to mind.
Here is what Eric Schmidt said at LeWeb 2011:
[quote] Ultimately, application vendors are driven by volume, and volume is favored by the open approach Google is taking. There are so many manufacturers working so hard to distribute Android phones globally. Whether you like ICS or not, and again I like it a great deal, you will want to develop for that platform, and perhaps even first. Think of it as a transition over the next 6 months.[/quote]
In my opinion, Schmidt has a valid point. Developers cannot afford to ignore this huge volume of users forever. At some point they will have to invest in Android. The investment might not be on the same level as iOS and the user experience of the product may be inferior to that of its iOS counterpart, but it will be there.