Apple’s genius business model

Two years ago I wrote about ”Google, Android and diffuse business models”. I didn’t like that Google and Android have created a kind of mystified business model and compared to Apple and Amazon which both have business models that are easy to understand = you get from where they get their money.

A lot has happened since that and yesterday Apple hold an event and dropped the news that they are giving away their new OS, Maverick, for free and they also give iWork and iLife for free. That is so totally, mind-blowing amazing! It makes me very happy and I feel like they really reward their customers. Read the article about ”Apple’s Free Software Gambit Means War With Microsoft”, Forbes.

At the same time, I still understand from where Apple get their money, there’s no mystery. Apple sell computers and iDevices. They have created an eco-system in which Apple ID is the key to buying apps in AppStore, music and videos in iTunes and books in iBooks. You can buy stuff from any of your Apple devices. They have made it so easy to use their Apple devices that people really use them too and they are happy and content with the experience – which is not true for Apple’s competitors. Apple also started to sell ads.

Apple has created inspiring working conditions for the app developers. One crucial part is that Apple has encouraged and rewarded an updated culture among their users, which means that Apple users actually upgrades anything that can be upgraded as soon as possible. Well, not everyone, but the majority is and that makes a difference when it comes to keeping the Apple devices secure and free from virus and malware, but it also encourages the developers since it makes it fun to develop for the future and not for yesterday.

On top of that, Apple has built a culture among the customers to pay. Apple users like to pay for music, videos and apps. To get payed is attractive for any developer that dives into weeks or months of  programming.

And now Apple starts to give away OS and software for free… One could say it’s a bad thing considering what I wrote above – maybe it will change the Apple users attitude into demanding more stuff without paying? At the same time, Apple’s business model is still easy to understand. We can see several sources for incomes: hardware, music, videos, books, apps and ads. Apple gives away software for free because they can afford it and because it will make their customers happy and even more loyal, which means they will continue to use their Apple devices in ways that brings in the money to Apple anyway. So, I think this is a very cool move from Apple.

Though, what makes it even more interesting is the way Microsoft has been fighting during the last years. Microsoft just don’t get what to do. The company used to live in a happy world where they were the king and then a little iPod started to challenge their empire in ways that they had never dreamed of. Yes, I think it started with the iPod and iTunes – that was the beginning of Microsofts disaster.

Today, Microsoft is some kind of software company with a flagship that is sinking: Windows. What do I, as an Apple user, know about Windows? I know that Windows users don’t like to update, because they don’t trust the newer Windows versions and they know what it’s like to struggle with software that doesn’t work and invites virus. If they decide to update – then they get confused when they have to choose from all the alternatives. Updating means problems in the Windows world, in contrast to in the Apple world where updating is joy. Windows is Microsoft’s eco-system and it doesn’t work like it used to anymore. The glory days are over.

Then we know that a lot of PC/Windows users bought iPhones followed by iPads and now they started to understand what fun it can be to use digital devices and their expectations on what a computer should deliver have increased. A lot of people have stayed with their PC:s because they need to work with Microsoft Office and they can’t do that on iPad.

Microsoft understood that they had to change something, so they started to add hardware to their product mix: the ”iPad killer” Microsoft Surface and together with that the OS Windows 8 for both computer, tablet and phone. But, the problem is: not many want those products. I have met one young man that was happy about his Nokia Lumia smartphone with Windows 8 – but he also said ”Of course, there are not so many apps”. ”Not so many apps” means less incomes for Microsoft and less joy for the users. Since there are not so many users of Windows 8, the developers are not so keen to develop app versions for Windows.

Now Apple give away the new OS, Maverick, and iWork for free… The given question is: what will this mean to Microsoft? I’m sure that this is the last push that a couple of confused Windows users need to jump over to Apple. It’s so easy to migrate from the Windows platform to Apple and so rewarding. If they have to send documents back to some left over Windows friends, it’s a piece of cake with the latest version of iWork – you just send the link and the receiver can make her own choice of which file format to use. So, not many issues left to solve for the Apple user.

Microsoft is left with a bucketload of problems to solve… do they even have an understandable business plan to follow? I bet they don’t.

Kodak, Blackberry and now Microsoft. Apple has caused disruption in many business models. I am sure that there will be an end of the Apple era, some day, but right now it’s Apple that’s surfing the waves and I think they will do that for at least five years. At some point there has to come a competitor that has found a new and better business model and it’s impossible to guess what it might be, because when it comes, it will be so new and bold that a whole world makes happy sighs, just like they did when the first iPhone was shown to an audience.

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