Posted by Tom Foremski - April 29, 2010
Over the past three years Apple adopted a strategy that exerts ever greater control over the content/apps on its hardware.
It has always had control over its hardware and operating system but it now has control over the apps that run on its latest devices.
The iPhone launched the AppStore and this strategy continues with the iPad, with every application requiring Apple approval.
Although many have criticized Apple for becoming an ever greater control freak, it might be better to look at Apple as if its platforms, especially the iPad, were a newspaper or magazine--and Apple is the editor, or curator. of that content.
For example, every newspaper editor wants to ensure a high quality experience by employing or contracting with the best writers it can get. In this regard Apple is not much different:
- Apple produces a lot of its own content (apps) for its iPad/iPhone platforms and it controls the publication of third-party applications in the same way a newspaper editor controls which freelance content to publish.
- Apple pays iPad app developers based on what it earns. It's not much different from Demand Media, or Associated Content, which pays writers a share based on the online earnings of the content they produce.
In the Apple world, the New York Times, Financial Times, Wall Street Journal, USA Today, and all the other newspapers and magazines that publish on the iPad or iPhone... they are all essentially contributors, freelance writers that get paid by Apple based on their sales, with Apple retaining 30%.
Google has a different model -- it's not interested in editing or curating content -- yet like Apple, it also makes money from other people's content.
About 31% of Google's revenues come from third-party web sites. The money is collected through placing ads on non-Google sites through its AdSense network.
Google's cut is about 20% compared with Apple's 30% but Google does far less work than Apple, it does very little to edit or curate the web sites that feature its ads. That's why there are a lot of link farms and sites that scrape content illegally in the Google AdSense network.
Comparing the two companies' strategies, it can be seen that the Apple approach requires more work but earns Apple 50% more in revenue share. It also results in an excellent customer experience because Apple actively curates iPad/iPhone content.
Google doesn't care if the Internet user comes across a spammy site carrying Google ads, it doesn't care if an Android app is great or bad. That hands-off policy can also be seen with YouTube and the trouble it got into in Italy, where an Italian court convicted Google execs of publishing a video showing the abuse of a handicapped child.
Google has chosen a hands-off approach in terms of editing or curating anything. But is this the better strategy?
The Apple approach is based on the belief that greater control, active curation, will generate more value than a hands-off approach.
The Apple approach can be seen elsewhere, such as on Facebook, where people choose which content to share, what to publish on their pages; it can be seen in Twitter where the content is hand selected by humans (mostly); it can be seen in people's blogs; it can be seen on Techmeme where 6 editors choose the content.
Active curation creates value.
And Apple's approach has created tremendous value for its shareholders. If you bought AAPL stock on the same day Google went public you would be far richer today than buying GOOG. AAPL recently passed MSFT in terms of market capitalization.
Apple is creating more shareholder value than Google because of its active curation of its platforms.
Active curation creates value.