Short Term Thinking vs Long Term Thinking

One of the mistakes I often see in business is short term thinking vs long term thinking. It struck me over the weekend when I saw this tweet:

Sure Samsung is making a killing on handset sales right now. So is Apple. That goes to their bottom line and then onto their balance sheet. And apparently Google isn’t making any money in mobile.

Today.

But when I think about who is developing the strongest franchise in mobile, it is obviously Google. They have gmail on so many phones. They have google maps on so many phones. They are getting the majority of searches on mobile phones. And that doesn’t even begin to address Android itself. It is the dominant mobile operating system around the world. Just think about all the data they are getting from this enormous mobile footprint they have assembled.

You can change handsets pretty easily when all your data is in the cloud. There is no moat around a hardware only franchise these days. But the software you choose to use on your phone is different. There the moat is much bigger. And where your data goes in the cloud is even more important. Changing that out requires a major effort for an end user.

So my feeling is that Google is playing the long game in mobile while Apple is missing the cloud piece and Samsung is just a hardware player at this point. And the stock market understands that.

Goog vs appl

#mobile

Comments (Archived):

  1. pointsnfigures

    Switching costs and network effects. Build it into your software and your business should be sustainable as long as you stay innovative. Google has stayed innovative since they started.

  2. chrispa

    My favorite prof from business school had a saying whenever we were discussing a case – ‘the long term starts today’

  3. Julien

    The more I think about it, the more I wonder if Google is not trying to “burn” the whole mobile environment. The recent move to merge Android into the Chrome departement confirms that Android may just have been a huge diversion from Google with the hope (realized) to catch up and stay in line with Apple.Google is a web company. Android has very little to do with the web.Chrome is the final game for Google. That’s how they will ‘milk’ the smartphone market, by just making all non-web software irrelevant.

    1. Jim Hirshfield

      Not so sure…I think Google has to own the mobile OS to be able to own the browser on the device.Am I missing your point?

      1. Julien

        Chrome will be the mobile OS ๐Ÿ™‚

        1. JimHirshfield

          OK, so that’s just marketing, packaging, nomenclature…just Android by another name, no?

          1. Julien

            Hum. No. That’ll be ChromeOS. Completely different OS.

          2. JimHirshfield

            Yeah…now I’m totally confused.

          3. Julien

            What’s confusing?

          4. JimHirshfield

            I thought you were saying that Chrome, the browser, would be the OS…but now I think you’re saying Chrome OS is different.

          5. Julien

            ChromeOS and “regular” Chrome are actually very very similar. there is just a thin layer that sits underneath Chrome to make it work straight on some hardware. My bet is that soon, (GoogleIO?) “some” will be synonymous with “anything that runs Android”.

          6. JimHirshfield

            OK, got it. Thanks.

        2. Richard

          Maybe, but for most people google = complexity , apple =. Simplicity.

  4. Denim

    love the moat analogy. I hate moats. Thank you for writing.

    1. btrautsc

      thought the analogy was spot on as well… except I like moats.

      1. Tom Hughes

        As an investor we look for companies with wide moats around their businesses, and that’s what Google is trying to build. What’s difficult is that, at the same time, they are trying to do this in a technologically open way. Those are nearly, but not quite, mutually incompatible goals. For them to achieve both, they need to earn customer loyalty specifically among customers who value open standards and transparency — a demanding and fickle bunch. GOOG will earn their return from the mass market but they’ll only keep their leadership position if they keep the business of those finicky customers.

    2. Richard

      Moats matter.

    3. Aaron Klein

      The owners of moats always love them.

    4. Denim

      Problem with the moat analogy is its static. The moat actually gets bigger and deeper over time and we’re still building *our* castle. I should have stated that I like moats that protect the user, with API bridges & data liberation catapults. I’m building one for families, who are have the most risk over time & named the company ‘My Internet Corp’ to provide these tools for normal users to build their internet of interconnected personal content, devices, apps, relationships. The moat/ jail is most effective (read: ineffective & most cumbersome) for loved ones attempting to liberate the personal content after a death. No one is addressing and it’s a real shame & pain point during the most painful of times. Nobody puts baby (pics) in a corner (behind a moat).

  5. Carl Rahn Griffith

    “Everyone will be famous for 15 minutes.” ~ Andy Warhol.

  6. Richard

    The stock market discounts future earning to the present , technology forecasting projects innovation into the future. And there are some great algorithms that seems to work well in forecasting innovations of the web. I agree, Google could eventually be a synonym not for search but for innovation!

  7. Dale Allyn

    Couldn’t agree more. The long-term view and strategy are too often undervalued and misunderstood.Edit to add: Apple doesn’t entirely miss the cloud piece, they just handle it differently. It could be argued that they embrace and even push the cloud on users, but their chosen method/path is not open enough for many people. IMO those opposed to Apple’s closed ecosystem often overlook some of the advantages found in integration. Observations should “cut” both ways.

  8. Jim Hirshfield

    Spot on. Long term view is best.But it’s got me wondering, what should Samsung’s long-term view be? Hardware is easy to change, so how could Samsung counter that?

      1. Pete Griffiths

        A bold move that makes strategic sense but a very tricky thing to execute. Will have to be Android plug compatible.

  9. Brandon Burns

    Mobile is not an industry, in the same way the Internet and brick & mortar stores aren’t. They are places. Companies make things, and then sell them in the aforementioned places.Apple and Samsung are dominant in hardware, Google is dominant in software. Who says these companies need to start being dominant in other areas to win mobile? What does “win mobile” even mean? Wal-mart is the biggest retailer; does that mean they “won” brick and mortar?Reading that aloud sounds ridiculous. Just as ridiculous as talking about Google or anyone else winning mobile.In the long run, the companies that do what they do well, and keep their finger ahead of the pulse of what people want with respect to the things they do well, are the ones that’ll win โ€” as defined by whatever that means for them. The companies that try to be all things to everyone will fail, as per usual.Mobile is a big place; there can be a lot of winners in it.

    1. Dale Allyn

      Mobile is a big place; there can be a lot of winners in it.Absolutely.

      1. Donna Brewington White

        Obviously RIM … or rather BBRY thinks so. Amazing to me that they are trying to rise from the ashes…and that they seem to stand a chance.

        1. Dale Allyn

          Hi Donna. Sorry for the slow reply. I’ve been travel over the past 26 hours (Thailand to California), so was offline.Yes, BBRY’s recent efforts will be interesting to watch.

    2. Richard

      In the short and long term there are hundred of millions of affluent chinese consumers. The Chinese market is THE big place.

      1. Brandon Burns

        And no one is going to “win China” either.Some players will be dominate in retail in China. A couple may become the biggest software players, and others may “win” in electronic hardware, restaurants, automobiles or whatever other industry.But not one of those companies is going to “win China.” No one will win mobile. Just how no one won SXSW.We need to get off this talk of winning things that can’t be won. It’s not just silly, its detrimental because it makes people start to chase things that aren’t there.

        1. Richard

          I see your point, but look at the private equity space and you’ll see the the what just how valuable a “brand” is. 70% of the economy is driven by the power of “brands”. While this power is eroding (at the margins) here in the US (slowly), i think brands will play a huge role in the Chinese economy.

          1. awaldstein

            The margin power of brand is their core I agree. So if they erode, brands are as well.Curious about your numbers on two fronts: 70% feels low but I have no data and I have no sense that this is eroding here in the states. In fact, I would guess the opposite.Got any data around this statement? Very curious.

          2. LE

            “In fact, I would guess the opposite.”I agree with you on this. Observing over many years if anything brands are bigger now then they’ve ever been. Part of this is driven by celebrities wanting to have their own brands which is driven by 24×7 media allow those celebrities to have brands (as opposed to back in the day of Marilyn Monroe). And by the major brands trying to differentiate themselves and retain customers and shelf space. It makes sense as a strategy which is why it’s really hard to believe it’s not getting bigger.As far as China there was a recent 60 minutes about unfilled malls in China where faux stores with logos of major american brands were in the empty halls simply to give cache to the place and potentially attract tenants. Brands already play a huge role in china if they didn’t they wouldn’t be ripping off our brands.I believe this is the video showing the malls in China:http://www.ibtimes.com/chin

          3. Donna Brewington White

            Do you Control-F for the word brand or something? ๐Ÿ˜‰

          4. ShanaC

            i’m not sold they are eroding at the margins – the growth of “heritage” shows the power of small bespoke branding.

          5. Cam MacRae

            They already are. For example, in 2012 Chinese demand for luxury watches exceeded that of the USA for the first time. It’s a story playing out in pretty much all luxury segments. It remains to be seen of course, but China’s capitalist evolution seems likely to produce the most brand centric economy yet.

        2. Aaron Klein

          Win is shorthand for becoming the biggest player.It’s a matter of fact that the winner usually takes 2-3x the market or profit share as the second place player. (Not always, but more often than not.)Case in point: Apple has won this phase of the smartphone market. They take about 70% of the smartphone market’s profits. Second place goes to Samsung in the mid 30s. And yes, that is >100% because the other players are losing money.

      2. kidmercury

        #truth

      3. IT Specialist

        Absolutely correct! Any vendor worth their salt needs a China strategy.IT Specialist

    3. Aaron Klein

      There are different layers though. The fight is: which layer determines long term market share and profit share?Apple has bet on great hardware and is hedging by trying to develop their nonexistent cloud services muscle.Google has bet on cloud services and is hedging by trying to develop great devices.I’d bet on both being able to maintain their respective edges. But I think Fred is probably right about which one is more important. I’ve never been more of an Apple hardware fan, and have simultaneously never been more device agnostic.

      1. Brandon Burns

        There’s definitely a great debate in which mobile-related industries will be bigger. Hardware vs. software vs. cloud services.These are the industries that can theoretically be “won.” They also are not mobile specific. Samsung makes phones and TVs, Google makes mobile map software along with desktop text editor applications. Dropbox sends my files to the cloud, no matter the device.As Rich Weisberger said below, building a brand is important. And building a brand means being known for something, doing that something well and, if you want to get really big, distributing that something wherever your consumers are. Mobile web, desktop computers, brick and mortar stores, outer space โ€” wherever.The debate should be framed by what a company makes, not the place in which they sell it โ€” because they should be selling it everywhere they can.

        1. Aaron Klein

          I understand and agree with your oft-stated point of view that mobile is a channel not a product.But getting past that, it is an interesting question to ask: in an integrated ecosystem of hardware, software and services, can one of those drive the other?In the 90s, software beat hardware. We chose Windows compatibility over great hardware.The open web is the best thing that ever happened to Apple, despite their mistreatment of it. It lessened the consequences of going to Mac and iPhone 1.0. Hardware began to win.Fred’s argument is that the “driver role” is shifting to cloud services now. And if he’s right, Google is in a very strong position again, Apple is playing catch up and the stock prices may be reflecting that.

          1. PhilipSugar

            You are exactly right. Open web really helped Apple. People like when it is easy to switch. People don’t want to be locked in or out.Apple in my mind still tries to make it hard to switch out, and that long term is actually a problem.

          2. Aaron Klein

            Totally agree. There are things I don’t try because of worries about thirty moves down the chessboard. Lock in creates frustration and more work, or at least has the potential to.And there’s the interesting thing: I don’t feel constrained by Apple’s walled garden because I use the Google helicopter to land in it. ๐Ÿ™‚

          3. awaldstein

            Too true.I’m out of the country and my Air keyboard froze.Googled every possible fix and nothing worked.Googled how to call an 800 number from Mexico and called Apple Support. They took my call without a SS#. Laptop is fried but all software is in the cloud (except some excel and word files) so I”m simply using Lianna’s Air till I get home.Access. Great hardware support and most software in the cloud.For this consumer, it works.

          4. Aaron Klein

            Lucky you’ve got the backup Air on hand! And yes, I love being device agnostic. It makes life so much easier.

          5. Brandon Burns

            I 100% agree with the way you’ve framed the debate.Maybe the importance of mobile hardware will die in the same way TVs become commoditized โ€” when everyone has one, and everyone makes one, there’s little difference between offerings, even less loyalty to the makers, and prices and profits consistently head down. So, yes, that’s an issue that should be addressed for sure.But will cloud services become the bigger and more important sector? I doubt it, because as far as the consumer Internet is concerned, its not a sector of anything. All software providers will need to allow people to save their data to the cloud for easy access. There will be no meaningful bucket to put cloud services into, because it’ll just be roped into general software.I’m not even sure all types of software can be considered a driver. Its hard for me to wean myself off Google Docs, because all my files are there, but when it comes to, say, Google Maps vs. Apple Maps, those services are commoditized and people will switch from one to another in a heartbeat, as they did when Apple updated their maps and it sucked.All of this just illustrates the perils of trying to “win” large, overreaching, nebulous things that really can’t be won. Just make good stuff, stay ahead of the pulse, and be good to your customers and you’ll probably turn out alright.

          6. Aaron Klein

            You’re thinking about this the way that Apple does: that a cloud service is software that saves bits to the cloud.I just fundamentally disagree. True native cloud services are so much more than that.Google Maps is the exact opposite of commoditized. That is the precise intellectual error that Apple made when they launched Apple Maps. It turns out that there is extremely valuable non-commoditized data at the heart of that particular service.And you know the second thing I love most about Google Maps for iPhone (after the accuracy part)? The integration of places between the web and mobile. Before I go on a trip, I star all of the locations I’ll be going, and they’re all there in the app when I need them on the go.”Just software” can’t do that (see Maps, Apple).A real cloud service has that kind of capability at its core.

          7. Brandon Burns

            I’m thinking about it in the way consumers do. Real people don’t think of Google Docs as a cloud service. It’s text editing software that’s better than MS Word because, among other reasons, it saves things to the cloud.But you’re right about the non-commoditized data that supports software like Google Maps, and Apple’s folly there. But what happens when Apple catches up with the data? I find Foursquare’s map to be considerably more reliable than Google’s in many cases. What if Apple formed a Foursquare partnership, or outright bought it and turned it into the new Apple Maps? Apple would arguably have the better map experience. Then what, Google?The data underneath is not commoditized, as you said, but I can’t see consumers staying loyal to software like maps, or any other service that doesn’t have my habits on lockdown, if a better competitor came out tomorrow.

          8. ShanaC

            i found that foursquare is google maps, (most of the time).Access to the data also needs to nor be commoditized

          9. Dave W Baldwin

            I may be over simplifying, but the answer to if Apple/4square partnership happened, someone would fill the void on the Google side pretty quick.The folly of Apple’s maps is telling from standpoint of, they put out there something that wasn’t ready… at all! Last, per implication that Google is in too many places, they are situated to be the first item used in multiple places. Apple has been pushing via “this is the only thing available” and so on.I still have an iPhone, so don’t think of me as an Apple disser, yet they have been making mistakes over the past 3 years that leave them vulnerable.

          10. Mark Essel

            Apple had to launch a maps app of their own for that precise reason, they needed the data to make a great map app (and to open other opportunities). Chicken and the egg, they launched with a subpar product and today it closely competitive with gmaps. I say the more the merrier when it comes to data services, look at all the apis/tools that Google has closed down.

          11. JLM

            .I agree more with you than you do with yourself.The Cloud will become completely transparent as the structure of the Internet itself has become transparent. One doesn’t even know where your messages are going — they just go.The redundancy of the Cloud mirrors the redundancy of the Internet itself. After all, the Internet was invented to provide alternative communication routes in the event of war — thank you Albert Gore.It will be impossible to construct an argument as to why one would NOT be in the Cloud in a couple of years.Your analogy with TVs is very interesting. They have gone from a cable appliance to an Internet appliance.Take a look at a top shelf TV today and the packaging itself is no longer about the hardware, it’s about the Internet capabilities.It is only a matter of a year or two before people will just be using their TVs as a monitor Particularly as 4K resolution works its way into the mainstream.It will change how entertainment rooms are laid out. They will all have a desk soon. They will be a place you do serious work.JLM.

          12. JLM

            .In the last few years, we have gone from almost being embarrassed to have more than a few TVs in our homes to literally their being a necessity.I am such an addict — March Madness, mind you, my only real reason for living at all — not to just the TV aspect (guilty as charged for all the good no commercials series) but also news and sports and now computer everything.My kids are in NYC and San Francisco and I cannot go a night without Skyping. It is closer than we have ever been when they lived with me.Of course, I personally have become infinitely more interesting and tolerable since they have begun to confront the harsh economic realities of making a living in the hard cruel world.Like my son says — Damn, Dad, we had it good when we lived with you.JLM.

          13. Aaron Klein

            Agreed, but cloud services are going to replace software more than software will replace cloud services.I’d define cloud services as an integrated combination of:- Software that runs on your device- Data that is stored on servers- Software that runs autonomously on servers, processing that data and adding value to you and/or other users- All of this connected together on the public InternetRiskalyze started as just software that happened to be built on the cloud…a tool that did something for you that you happened to access in your browser.Now we’re actually beginning to leverage our cloud architecture to become more of a cloud service. For example, whether or not the user logs into the software, our servers recalculate the risk in every portfolio every night, so we can alert advisors and compliance departments when the market moves a client’s portfolio outside of their risk tolerance.Yes, the choice of technology isn’t that interesting…but to me, that’s the difference between “software” and “cloud services.”

          14. JLM

            .We are saying exactly the same thing. The Cloud will become transparent, like the Internet itself.When you sign up for a service it will iterate automatically just like your Schwab account automatically updating with new market prices.The exception will continue be those legacy services like Word but even then the software and files will be in the Cloud.Is this a great time or what?JLM.

          15. Aaron Klein

            Indeed.

          16. Capitalistic

            I think you’re missing the end game. The point is there’s a convergence of all three: cloud, hardware and software. The market participants had two options: Dominant with their inherent competencies, or grow into new segments. Most of them failed. Some have been able to straddle the blurring line.Samsung was very smart in using Android. The “build vs buy” decision making in techie industries can be deadly when implemented wrong. Apple is really a hardware company. Google is a cloud/media company. Microsoft is a software company.The lines are blurring rapidly. Companies in the TMT industry have to dominant in either one or two segments, but not all three.

          17. kiran bhanushali

            Great points. I already have a setup like this with a desktop connected to a 40 inch tv using it as a dumb monitor with a keyboard and a mouse. The hardware might change but the underlying usage pattern has shifted, atleast for me.

        2. ShanaC

          I’m actually against selling everywhere you can. That is wasted marketing.Smart marketing is understanding how people perceive your channels. And mobile as much as it is a distribution channel to set of software or services, is also a channel among itself in terms of its use.There is a reason why Grubhub markets on the the subway and not on the tv, for example. It is about how your phone is being used

          1. awaldstein

            Smart marketing is understanding where people want to buy for certain.But not all marketing is tied to the transaction.No one buys on Facebook, many market there.

        3. ShanaC

          I keep thinking the value in mobile is “realtime understanding and display of data, irrespective of location” not because of anything inherently going on on a mobile in most cases

        4. Capitalistic

          “Hardware vs. software vs. cloud services”. That’s the convergence of telecom/media/technology. The platforms and midstream companies will “win”.

        5. dkural

          I think it is much more useful to think not in terms of what companies ‘make’, but what activities they enable other human beings to perform. Companies get disrupted because they think they are in the business of making things as opposed to enabling people to do stuff & feel things. That’s why you see happy young people dancing around in Coke ads. That’s why iPad ads talk about all the things you can do; not about specs for the wifi etc.

      2. ShanaC

        they have cloud services of sorts – they locker my exercise videos in the name of DRM.

    4. fredwilson

      i did not say that Google would be the only winner in mobilewhat i said was that they are taking a long term strategy in this market and i think that is very wise

      1. Brandon Burns

        Personally, I think Google is teetering on stirring too many pots. They’re trying to beat other companies who are dominate in markets they’re noobs in โ€” namely hardware and cloud services โ€” because they’re chasing total Internet/mobile dominance instead of focusing on the things they do well. You can’t win the whole Internet.But then again, Apple has always had their hand in many pots by offering closed, integrated catch-all systems โ€” but they’ve done well by focusing on a small subsection of the population, or at least they used to once upon a time.Either way, we all know what happens when people/companies start to focus on too many things things that are not core to who they are as beings. They lose focus and fail.But then again, I love what Google is trying to do with Glass, and I love my Nexus 4.So maybe Google will have the last laugh. Time will tell.

        1. Ken

          Google is not a noob to cloud services. Check the history of App Engine and Google Docs (now Drive). They were pioneers.And, not to be the a-retentive “that guy”, but you keep using the word “dominate”, when you meaning “dominant”. One’s a verb; other adjective.

          1. Brandon Burns

            Yes, you’re right about Google and cloud services. When I wrote that, I was thinking of enterprise cloud services, and that’s when I think about Amazon, or cloud-specific stuff like Dropbox. Google has integrated cloud services into “normal” consumer software apps like Google Docs for a long while.And please, be “that guy.” I’m a stickler for proper usage of the English language, even when replying to messages on the fly in a comment section. :o)

          2. Ken

            Check App Engine. It is an enterprise service, like Amazon, but in a more managed sandbox. Not sure the history, whether it came before or after Amazon, but they were somewhat simultaneous. I use App Engine, and it is a great service. Again, Google was a pioneer in cloud-based applications in this regard.

          3. Brandon Burns

            I’ll take your word for it and stand corrected.

          4. Ken

            Words you rarely see in online discussions: “I’ll take your word for it and stand corrected.” Good on you, Brandon. Intellectual honesty is rare, and very respectable. +1

          5. Brandon Burns

            I don’t look at commenting on AVC as a chance to get on a soapbox, but rather to exchange ideas with smart people and learn things. I’d rather be told I’m wrong and shown what’s right, instead of not listening and not learning.And I greatly appreciate being corrected when wrong, so thanks for the new learnings about App Engine et. al.

          6. Ken

            Exactly. Me, too. Thanks for the discussion. One of life’s greatest pleasures for me is an epiphany. I come to these boards looking for more; for education. Much better to discuss in a challenging environment. Shouting into an echo chamber is a waste of life.

          7. Ken

            For the record, Amazon EC2 was 2006. App Engine was 2008.

        2. andyidsinga

          i couldn’t disagree more with the first part of your comment which seems to boil down to “don’t participate in a market your a noob in” — a company should ask themselves this:are we attempting to competing head on in a market with something that would be considered a sustaining innovation to an existing successful leader?if the answer is yes, they might consider an alternate path, if no, i.e new market disruption or low end disruption, making many small bets might be a great idea.

      2. JamesHRH

        And a pair of proven strategy at that – SW beats HW, network based services beat people based services…..

    5. kidmercury

      software will commoditize hardware; we are already seeing this in amzn having a software/digital centric profit center thus enabling it to subsidize a hardware strategy. sure, there will always be those who want specific hardware, but software commoditizing hardware is a major trend that will effect prices and business models significantly. price is a major factor as one cannot buy what they cannot afford.

      1. Aaron Klein

        The web and cloud services may be having the opposite effect.First, they often give me more money with which to buy great hardware. Second, they make it easy for me to buy the best hardware.In 2011, my Sony Vaio died. I didn’t dislike Windows 7 at all but I was sick and tired of cheap and crappy PC hardware.The operating system of the web is what made it possible for me to become device agnostic and buy the best, most expensive hardware.

        1. kidmercury

          that may be how it plays out, although i’m betting on hardware/software/media integration being the primary basis of competition, and software/media being the profit center while hardware is the cost center of the business model for larger markets.

      2. Brandon Burns

        In general, I think Amazon is the company to look at for a case study in long term success.Amazon sticks to what it knows and that’s it.Amazon started as a retailer. To become more efficient at retailing, they built internal solutions for logistics and storage. Now they sell those solutions to other people, and today Amazon is more of a logistics and storage company. They hold lots of shit and distribute it to people.Amazon cloud services are a natural extension of that: they’ve built the underlying storage and logistics structures needed to store and distribute things in the cloud, and they sell them to other businesses.With respect to Google and the other players in Fred’s post, one could claim that building hardware to deliver software is analogous to Amazon’s situation. Maybe, maybe not. But when I see Google buying up Motorola and making glasses, they’re getting into things that they haven’t proven any excellence in, I don’t see them executing with the same focus and vigor as Amazon.

        1. LE

          Amazon tremendous gamble lost boat loads of money billions for so many years. If you are able to float something long enough timing doesn’t even matter anymore. Generally things that aren’t right for their time are and have to be abandoned for practical reasons.

          1. Brandon Burns

            In addition to starting early and putting in the time, I think Amazon’s foray into logistics and storage paid off because, whether they could sell these services to other businesses or not, they were investing in themselves. Putting money into logistics and storage would help them offer lower prices as a retailer, regardless of their ability to turn those services into enterprise products.

          2. LE

            I wrote a long reply to this but disqus hung when posting.Summary was that this is an example of how you can make numbers say anything you want (because you are essentially correct but it doesn’t change my point that much) the profit they earned in 2003 was really tiny (<1%) and they were no where near out of the woods with profit like that. I don’t have the exact year they became comfortably profitable instead of a few points from death. Does it matter if a company loses 100million or only makes 35 million on sales of such a large number? I don’t think it does. If you run a small business and have $500,000 in sales and only make 1% profit you have no ability to weather any storms. No to mention this is after being in business for essentially 6 or 7 years. That’s a long time to be losing money.http://news.bbc.co.uk/2/hi/

          3. kidmercury

            profits would be even higher if they didn’t invest in future growth. but cash flow is the real story. they are not doing secondary offerings so cash is coming from business operations. in what i regard as one of the best acquisitions i’ve ever seen, amazon paid $775 million in cash (not stock, cash) for kiva systems last year. you’re not able to do this unless you have a real business.their many other acquisitions, as well as their investment in data centers and content rights, illustrates their profitability.low margin should not be mistaken with low profits. low margin works when it scales — then it works better than anything else. though the real genius of amazon is that the stage is set for margins to explode — at its current scale.

          4. LE

            “though the real genius of amazon”Sure a gamble that works is later seen as genius.But it’s still a gamble when taken.In no way shape or form, even in retrospect, can it be said that what Amazon did was not a gamble. Anymore than you can look at what Walt Disney did in Florida (even with the success of Ca park) was not a gamble.To me a gamble is something where you focus on the upside without respect to the downside. Bezos could do this because he was playing with other people’s money essentially. So the downside was very small (for him personally) with respect to the personal gain he got from the upside. (Sorry I don’t have time to research whether or not he put his entire fortune on the line with his idea but I think he did not. That said it’s not unusual for people to bet the house either).That’s also the essence of angel investing and soon to be crowdfunding. You have money and you make small bets on entrepreneurs. Your downside is finite.

          5. Cam MacRae

            If your investment is exceeds the expected value of the return you’re gambling. Whether the downside is finite (and it must be, by definition) is moot. Of course when constructing a portfolio it is possible to bet on some individual investments, say for emotional reasons, while still producing a globally feasible portfolio.

          6. kidmercury

            he quit his job, did a friends and family round, raised money from professional investors, and the rest is history. basically, his path is a typical one in the VC-backed world in america. his success is drastically atypical.his accomplishments can be dismissed because he took external money, though by that criteria the accomplishment of many great american businesses (google, apple, msft, etc) can be dismissed as well, and no one deserves credit for anything.

          7. LE

            “his accomplishments can be dismissed”I’m not dismissing his (or anyone’s accomplishments).My “beef” if you want to call it that is essentially the media (or bloggers) failure to understand all the factors that lead to that success (or perhaps they do mention in a nominal “to be sure” kind of way) and get people all riled up about (as you put it) “genius”. And all the worship that goes along with that. And then people read that (because what do people know about someone other than what they read, which is someone’s opinion, right?)My point made again is “a gamble that works is later seen as genius” more or less sums it up.For every Bezos that is seen as “genius” there are others who gambled and failed and you never hear them referred to as “genius”. (And now you don’t even hear the world failure since that is accepted as something good – a trophy for everyone).That said I just ordered a Macbook Air from Amazon last night. Saved the tax and I’m getting 4% back for associates referral and free shipping so I’m glad Jeff did what he had to do on other people’s dime (and his friends and family) just like I’m glad Steve was an asshole and built a great product and company.

          8. PhilipSugar

            So did the Roberts at Comcast.

      3. fredwilson

        agreed

    6. ShanaC

      is hardware more valuable than software of visa versa. And with the cloud, isn’t software also a commodity?

      1. Brandon Burns

        The more this debate time-sucks my Monday morning, the more i’m wondering if the whole thing is moot.Its almost like trying to predict what’ll be the most important sector for food: grocery stores vs. restaurants. Who cares?!When you’re playing in a sandbox that’s so big, like software or food, why are we even talking about who’s going to come out on top? What does top even mean?Just brings me back to my original point to know what it is you make, and make it well.

        1. LE

          “Its almost like trying to predict what’ll be the most important sector for food: grocery stores vs. restaurants. Who cares?!”Exactly. This is big thinker and academic. The amount of business people that have to worry about these issues is infinitesimally small compared to the amount of business people who have to figure out how to get a container shipped cheaply from China or shift manufacturing to Indonesia.I feel bad for any young people who are learning about business right now and have to make a living in business thinking that issues like this matter to them and what they are trying to achieve in the next 10 years. Thinking that you can correctly predict the outcome of these high level issues is almost pointless unless you are an investor who is trying to determine where to spend money and spreading it around.(Remember podcasts? Imagine if you were an entrepreneur and bet the ranch on thinking that was going to be a big thing.)

          1. Brandon Burns

            It’s such a double edged sword.You’re so right that all of this is academic and won’t factor for a lot of people. Makes me think, “screw it all โ€” do what you love and it’ll work itself out.”But then again, for example, there are probably literally thousands of people who’ve set out to build a social app over the past 2 years, only to find the investors sour and consumers consolidating their social lives onto the bigger platforms. Thousands more are probably STILL trying to build the next great social app (just look where the buzz still goes at SXSW); if they were involved in the debate, maybe they’d steer clear of an area where they have little chance of success. What if mobile electronic hardware is next to be on the outs, and you’re in your garage fine tuning your prototype for an iWatch competitor?So you’re damed if you read too much into the debate, damned it you don’t!

          2. LE

            I hate to be like the Martin Sheen character in the first “Wall Street” but the only thing that’s ok about this is many of the people doing these things have something to fall back on when the thing they are doing inevitably fails.When I was growing up it was assumed that you didn’t go into something which had 1 in a 100 chance (arbitrary) since it was well known that the chance of failure was so great and your parents weren’t going to bail you out of the mess. So people pretty much knew that it was foolish to think that you would be the great artist that made it, or the author that did, the musician or the athlete.Today though parents haven’t caught up with that or maybe they have enough money that they don’t care if their kids waste years of their life pursuing a dream that has little chance of succeeding.I spoke to a parent recently who wasn’t even up to speed on the fact that law wasn’t a good career anymore they were still stuck in the past on that.

          3. Brandon Burns

            People my age (30) and younger grew up in a “follow your dreams” environment.Our parents are products of the 60s and 70s. They grew up in relatively prosperous times, especially in relation to our grandparents who lived through the great depression and WWII. Not knowing struggle, when they saw dreams get made on American Bandstand, they wondered why their parents never encouraged them to follow their dreams. They found their parents to be unnecessarily strict. They snuck out in the middle of the night, experimented with drugs, and swore to themselves that they would not be the parents they had, but the parents they wanted. When they had kids in the 80s, they told them that they could do whatever they want when they grow up. When the kids were out of line, the parents didn’t discipline them as strictly as they were disciplined. The weekly allowance became standard. “No” was a word rarely uttered.Now we live in a world where college graduates don’t understand what it means to pay their dues, and would rather be almost-30 and still figuring it out, hopping from shit job to the next, rather than “sell their soul” to the ways of corporate America.Maybe when we have kids, we’ll tell them to be practical, and the tides will shift back. We’ll see.

          4. LE

            Super excellent summary.My wife is much younger than I am and on our first date told me she drank the bong water [1] from one of her parents many parties because they were always stoned (they were NY teachers iim). (That was totally martian to me since I never tried pot nor did I associate with any people that did. I had exactly 1 or two puffs on a cigarette at my bar mitzvah which my parents said was ok. I didn’t like it and that was that.) I didn’t drink at all in college. Zip. In my 30’s though I came to the “revelation” that a drink made it easier to not be bored at social functions. It was like an epiphany to me like I had discovered something that was so obvious to the rest of the world that I had just figured out. “Ok I get it now”.That said my sisters were not the same and they were raised by the same parents in the same household. They didn’t want to go to private school like I did they wanted to socialize at public school. I was just different and immediately saw why drugs and certain choices people made were bad. I immediately knew “suffer now enjoy later”. If my parents told me that being a doctor was a good career move I could tell they were right it made sense to me (did not become one obviously). One of my sisters on the other hand pursued art and studied in Rome to my parents non-approval. When she got back she could only get a job in a frame shop at $5 per hour or something. She later ended up working for me, learned printing and graphics and got a great job at Vanguard (after quitting with very little notice so much for “family”) [2] making big dollars. Had she stayed in “art” (printmaking) she would be no where.[1] My parents (probably your grandparents age) on the other hand didn’t even drink more than 2 times per year. Any alcohol in the house was only for holidays and it was kept in a few bottles out of the way like the baking soda.[2] She didn’t know about “root” on the unix system we had at the company. So I had advance warning that she was looking when I found her resume in her home directory (sosumi).

          5. Brandon Burns

            “I came to the ‘revelation’ that a drink made it easier to not be bored at social functions.”HA! So true.

      2. andyidsinga

        neither are simply commodities / not commodities. it depends on the product and level of integration. christensen talks about highly integrated systems and more commoditized modular systems in innovators dilemma. he also talks about how highly integrated appear first and then how over time, as things are better understood and standardized they become commoditized and modular.the thing that makes successful software particularly valuable is the low / next to zero cost of producing the Nth copy whereas with hardware these will be higher. That hardware cost should not frighten away the investor in all cases though – hardware / firmware is getting easier and cheaper to make in very small quantities and this means that scrappy entrepreneurs can find some level or market feedback ( traction? ) without having to make 10s of thousands of units. entrepreneurs, on a shoestring, can build 10s to even 1000 devices to test with customers and learn a ton in the process.edit: the other reason the hardware costs should not always frighten the investor away is that the cost of build comms hardware into a device is coming down drastically – this means hardware can be connected to the cloud and take advantage of all of the web tech that has matured over e past 10 years.fun times!

  10. Bo Sartain

    Probably why Microsoft still makes billions; its the switching costs.

    1. fredwilson

      exactly

  11. Sebastian Wain

    There is room for a lot of disruption on this market. So, even if Google is playing the strongest rational game new players or structural changes can make a lot of difference in the future. They are unpredictable.I imagine a future where you buy generic phones like a generic PC, where they are more cheaper and you have more operating system options (probably more Linux distributions). Thinking on more SoC integrations we can imagine new brands entering the mobile space. It is not by chance that Ubuntu is making some efforts on the mobile space, even if now there are strong entry barriers for them (hardware vendors + carriers).Even in that space Google is strong with its Android, Search, GMail and Maps offerings but I can imagine running a transparent virtual machine there, running side by side with different mobile OSes. And I can imagine vertical search engines performing better: when I look for some development issues I almost always filter by StackOverflow or GitHub. I just use Google because their page rank works better than the sites rankings, but I don’t think is rocket science to improve specific sites searches.Google movements not only show its strengths, it reveals their fears too.

    1. Pete Griffiths

      Interesting. But why would you want to run multiple mobile OSes? Offhand I can’t think of a decent use case.

      1. Sebastian Wain

        An example is the children interactive books market: there are high quality apps in the iOS that are not available on the Android market. Not one, but several ones. Indy studios are more tempted to create certain apps for a specific mobile OS depending of the kind of customers there.This doesn’t happen for mainstream applications like Facebook, FourSquare, and so on but for niche titles.

        1. Pete Griffiths

          Good point. Thanks.

  12. David Miller

    “Changing that out requires a major effort for an end user.”I know, because I recently switched my primary email address from one Gmail hosted-account to another Gmail-hosted account and it was a major hassle. And that was between two accounts on the same service!I’m certain that this general issue, whether for consumers or for the enterprise (even more interesting) – what I’d call cloud portability – permitting easy migration from one cloud service to another cloud service for a variety of apps and not just email – is going to spawn some large companies.

  13. JimHirshfield

    I don’t mean to be kinda sorta off-topic, but let’s give Dustin @dcurtis (poster of the Samsung tweet you referenced) a shout out for highlighting a Pope’splosive moment.https://twitter.com/dcurtis

  14. OurielOhayon

    But Fred if Samsung “owns” the devices which holds your Software, maybe Google will lose at its own game and Samsung will end up also owning the relation with users through its own software as they build it (we start to see things coming out from them)…Imagine an OS by Samsung…What would remain of Google then?

    1. Aaron Klein

      And how would Samsung get people to move all of their data out of the google cloud into their software?Not gonna happen. I don’t want Samsung mail or Samsung docs, even if I’ll use their phone to access google services.

      1. OurielOhayon

        by acquiring companies who already do that. EG: RIM

        1. Aaron Klein

          RIM doesn’t make cloud email services. They connect to Exchange and Gmail.I suppose Samsung could acquire Yahoo. Then they could make that kind of play.

          1. OurielOhayon

            i think RIM would disagree with you, but yes Yahoo could be an asset

          2. Aaron Klein

            RIM doesn’t host email. They do enterprise provisioning and delivery of other people’s email services. That has not been the moat they wished it to be.

          3. PhilipSugar

            Another good point.

          4. Carl Rahn Griffith

            Yahoo is a desktop company. Too late to make the move, now.Their recent HR edict only serves to emphasise just how non-mobile a culture is prevalent at Yahoo – past, present, future.Saying that, perfect for Facebook.They’re toast.

      2. Dale Allyn

        And while I use some of them, I don’t really want Google docs or gmail either. I have multiple gmail accounts, but I don’t use them for anything I truly care about. I use Drive/docs for a few things, but important stuff is not entrusted to the G-platform. The events surrounding G-reader is one reason, but not all.I, too, am more agnostic than in the past, but I’m not comfortable relying on pure cloud “solutions” because transition and crossover is more difficult when services expire.

        1. Aaron Klein

          I have a great deal of trust for Google. They don’t owe me anything that I don’t pay them for. It’s telling that I pay them for Mail and Docs but never did for Reader.And Google has often made transition simple when they end free products. Look at Reader: simple export of subscriptions that other services quickly built an importer for.

          1. Dale Allyn

            I don’t disagree on those points, Aaron. To Google’s credit, they have made export a reasonable process.I don’t use their paid services, so wish to clarify that point. I manage multiple servers, so do not personally represent the main user demographic. Still, I prefer local autonomy, especially over documents and email. My G-services are mostly fall-backs, and I appreciate them for that.All that aside, Google does have some creepy data-mining habits. E.g. I’m sitting in Thailand and decide to click the YouTube link at the top of Google News. I don’t normally access YouTube this way. Of course Google recognizes me and suggests a bunch of crap based on data from many (I mean MANY) years ago. This is not a ‘service’ to me. It’s off-putting. Of course, I “get it”, but I don’t like the model.I like Google search, and they get plenty of revenue from my use of that service, but I don’t care for some of what they do with the data.Furthermore, I find the overall Google user experience to be amazingly atrocious. I support some people in very technical jobs, but which are not “web technical”, and they struggle with Google UX/UI so much that I happily move them out of the service. This indicates a lack of end-user understanding which should be addressed.

          2. Aaron Klein

            Actually use the services and that experience gets much more meaningful and even magical. I love it. If I want bland results, they’re a click away (in a Chrome incognito window of all places).And Google UX has changed dramatically over the last six months. They’re not done yet, but I’ve never seen a company grow the UX gene so quickly.

          3. Dale Allyn

            You’re a tech-savvy user, Aaron. Don’t forget “your mom”. I’m comfortable working in the command line, I like Terminal, hated FileMaker Pro after FoxPro and dBase, but nerdy UX/UI is not “cool”, it’s weak.We don’t disagree much here. We have different needs. I respect Google, so please don’t misunderstand that if I’ve communicated poorly.I agree that Google are tweaking UI (and some UX), but they have a long way to go to grasp what the average user wants or needs. Don’t underestimate your ability to grasp and navigate “tech waters”, in contrast to those who are just looking for simplicity.

          4. Aaron Klein

            Have you used Gmail or Google Maps on the iPhone? Those are the best examples of the new non-geek Google UX that is developing.My wife is my usability testing secret weapon. That’s why I can say with confidence that your opinion on Google UX was deadly accurate. But it’s changing.

          5. Dale Allyn

            Lost my reply here due to user error (incoming Skype, tired, feeble multi-tasking, etc.). I’m sure my previous draft was brilliant. ;)To answer your question: yes, and yes. I, too, see improvements and await more. I’m not a G-basher, I just don’t embrace their free services for my needs most of the time. I prefer paid software solutions or some cloud solutions, with some expectations of privacy.Like you, my wife is a great usability tester. She can navigate bad design to a point, but won’t. I have a colleague who fits this same description and calls Google gmail and other tools UI/UX “torture”. Great UI/UX takes compassion and a total lack of arrogance. Google is (are) starting to display some understanding of this. Compassion for “every” user is important in UI/UX.

    2. fredwilson

      that is their opportunity. they have to execute on it.

    3. Pete Griffiths

      That has to be Google’s darkest fear. Most especially in light of Samsung’s massive market share in Android.

    4. kidmercury

      they need to start with apps that leverage unique aspects of their hardware. S Pen apps are a prime example. unfortunately those still suck but they are getting there. if they can build a cloud off these apps, they can iterate their way up until they get mail, maps, and other keystones of the mobile environment.

  15. Charlie Crystle

    I’ll agree with this: habit is stronger than fashion. Habit (daily use of software) is hard to break, even when you’ve built something better, but fashion (i.e. commodity phone) is temporary, even at $500/shot.The Reader outcry speaks to this…outdated, ugly, but useful and a daily habit for a lot of people who couldn’t care less about the device they use to access its content.But I’ll disagree with the implication that Samsung isn’t playing the long game, or that today’s profits aren’t a result of the long view from years back. It’s not crushing it because of a fluke. I’d be surprised if it doesn’t (or isn’t–I don’t know) get deeper into the software side. Would love to know what it’s doing with software in other countries.

    1. kidmercury

      yup they are getting deeper into the software side. they have a smart software strategy and understand hardware/software integration. whether they can execute it remains to be seen, but strategically they understand where they need to go.

  16. StreetEYE (@streeteye)

    Hopefully Google doesn’t see that tweet, think about how much they’re making on Android right now, and target it for ‘spring cleaning.’Seems like Google used to be a little more focused on the long term.

    1. Aaron Klein

      Canceling a product based on a technology that no one beyond geeks ever grokked does not a short term focus make.

      1. Druce

        Clearly news aggregators are something only geeks can grok, and that’s why Twitter, LinkedIn, Facebook, everyone else is not getting involved in them. If Google couldn’t turn Reader into something everyone can grok, that’s lame. If they’re going to dominate an open ecosystem via Feedburner and Reader, and then dismantle it, that’s evil.

        1. Aaron Klein

          Sorry, but it’s not evil to not provide a free product with declining usage that isn’t strategic to you.Providing data portability out of that free product was just the icing on the “not evil” cake.Google is no more evil for not providing a RSS reader than Toyota is.

          1. Druce

            Microsoft was ’embrace and extend.’ Google is ‘control, then kill.’ The analogy is more, if Toyota stops selling parts for your car after 7 years, and only support the driverless car that doesn’t work in snow, and only goes where Google decides. call it evil, call it unworthy of trust, whatever.

          2. Aaron Klein

            You paid Toyota $30K for the car. That creates much more of an ongoing support obligation.This is the equivalent of Toyota giving you a free car for seven years and you shaking your fist at them when they decide to stop offering free oil changes.I hear Feedly is doing free oil changes now, by the way.

          3. Druce

            The thing that made Google special was that they had a mission to digitize the world and make it available to everyone.They’re having a bit of a Microsoft/IE moment … they’re winning the Facebook battle, but afterwards it’s not going to be the same company.The thing is, they could have integrated Reader into G+ without sacrificing what made it great. The heavy-handed focus on getting everyone to G+ at all costs is alienating the early adopters, and in the end they’ll be just another walled garden for geezers,And that’s not long-term thinking.

          4. Aaron Klein

            I respectfully disagree.G+ is not about building a walled garden for Google. It’s about building identity and interests into search.Reader + RSS are technologies that non-geeks just haven’t grokked. RSS has failed, I’m sorry to say. (It’s too bad…I liked it.)Normals do not subscribe to RSS feeds. They follow, like or “circle” the content they want to show up in their newsfeed.

        2. kidmercury

          RIP google reader. i’m still going through withdrawal. i would have paid for it.

    2. MTLinville

      Android is a means to an end. Current technology requires most of mobile to go through a traditional-style OS.They do have a very strong focus. People tend to miss the forest for the trees though. Chromium, Fiber, Glass, and the driverless car all have the same thing in common: they’re all designed to make people & businesses more connected to the web and derive more value from Google’s services.

      1. StreetEYE (@streeteye)

        Driverless cars free up people’s hands to use Android! It all makes sense now.Why standards-based news aggregation isn’t in that category of tying people to Google and deriving value, I’m still not getting. Seems short-sighted.Seems like, we can’t figure out how to make social news aggregation work and we don’t want to run a platform for people to pipe news into Twitter, Facebook, and Flipboard.

  17. PhilipSugar

    I’ve thought about this a ton over the years.There are “debts” and “assets” that are real but don’t go on the books.People understand development and management debt where you make a short term decision that is going to cost you down the road.Google is building an asset no different than erecting a building that they are going to profit from down the road.I don’t want to put these on the books because as it is people only look at top line revenue because you can fudge profit.But they are important to look at, because they have real effects.

    1. fredwilson

      absolutely

    2. Pete Griffiths

      Yep. And their biggest assets arei) their infrastructure, which supportsii) collecting, storing and analyzing data on a massive scale

    3. Aaron Klein

      Love this comment. So true.

    4. Jeffrey Hartmann

      This is absolutely so very true. A company for me is not what it currently is, but what it will become. In software, expertise, development methodologies, leverageable code and infrastructure can and should be considered just like hard assets when you evaluate them. Long term vision, a culture of greatness and execution to long term goals can also be something that is hugely valuable but hard to put real numbers on.The same works in reverse, bad design decisions, interdependent tightly coupled code and modules, and a toxic culture or maybe a bad attitude on work/life balance are all things that go in the debt pile.I personally think that Google has a great deal working for them, and I love their renewed and focused vision since Larry took over the CEO spot. I think they are destined for great things and really think they appreciate the long view.I think they are masters at the knowing that your competitors are not standing still, so they prepare to do battle with the giants they will become not the gorillas that they are now.

      1. PhilipSugar

        The most interesting thing to me is how you can use them up or accumulate and either make or lose money while you are doing that. That is where classic finance is wrong. I’d also discuss return on invested capital but don’t have the time here.For instance if I’m Sears I can take the reputation of the Kenmore brand and for a short period of time milk it. Trade on the reputation of product and service, strip out your costs for both and short term sales don’t decrease but expenses do.If you are GM short term put in crappy plastic, shave every cost you can and expenses go way down while sales not affected short term.However payback is a bitch, because now you have to do all sorts of discounting and even if you try to increase quality it takes a long time to recover.No different the other way: If you are Zappos or LLBean the good service costs a ton of money upfront but long term you get to command a premium price.I would agree with the Kid that is what Amazon is doing right now and why their profitability is not as important.I still think Google is doing what they’re doing as a moat to protect the search business because if you can be the last and definitive player that can sell a consumers intent to buy it is worth a ton of money to people that sell.Amazon went at it the other way with their stores.

        1. ShanaC

          Something I’ve found is that people will accept bad quality in in terms of good service – the issue is that labor is a huge cost, so cutting service often comes with cutting quality.Google faces this issue regularly – they do not support their products well, and sometimes you see the cracks in the system (like why does boomerang exist)

          1. PhilipSugar

            I think it is not a huge cost just a yucky hairy beast that Google does not want to deal with which is going to kick them in the ass.I give Apple huge respect in this area. Went to the store in DE this weekend to get my phone fixed (earpiece speaker worked intermittently)Sixty people on staff. Sixty. Talked to a human, shook my hand. Took my phone and said even though they couldn’t find a problem (just like when you take in a car, replaced the part)Priceless. Sixty people that probably cost less than 5 employees. Huge leverage.That is why Amazon bought Zappos. We’ll see.

      2. ShanaC

        they are the giant. Are that they scared of innovation coming from nowhere? If so, what is the point of labs when it comes to their core

    5. Ken

      And the stock price is supposed to be a discount of future cash flows (adjusted for manias, panics, hyperbole, herd migration, and zeitgeist). So, it appears many other investors share your perspective. I do.

    6. Donna Brewington White

      This is a really helpful way to look at it, Phil. Thanks.

  18. Piyush Tiwari

    Interesting. Why would you say Apple is missing the cloud piece? I agree that Apple software are specific to the iOS platform devices, which it has managed to scale up substantially, however still cloud is the backbone of AAPL’s offering. As far as the stock price is concerned, we all know AAPL is not innovating at the same pace as it used to (incremental changes are not innovation) and the stock price is driven more by expectations and sentiments than by the logic. Unfortunately for AAPL, they all are not in its favor…. well until it comes out with something new.

    1. fredwilson

      apple users opt to use google’s cloud offeringsi am unaware of any google users opting to use apple’s cloud offerings

      1. Pete Griffiths

        And their experience in scaling cloud services doesn’t come close to Google’s. This experience and the associated hardware and software infrastructure is itself becoming an increasingly deep differentiator.

  19. Aaron Klein

    There is no doubt that Apple is making the best hardware right now. The iPhone 5 is still unmatched on the Android side.But you’re dead right that Google is a million times better at cloud services. I have never been more device agnostic than I am today. And one signal is my iPhone home screen…filled with Google apps (or standard apps accessing Google services).If the Nexus 10 came with Verizon LTE, I would have seriously considered it over an iPad. There’s no reason not to when the cloud can feed my stuff into any device.

    1. Julien

      Yay for Sunrise!

      1. John Revay

        I have been using sunrise as well

      2. Aaron Klein

        Love Sunrise. ๐Ÿ™‚

        1. Donna Brewington White

          And yet another thing to look up after reading AVC.

          1. Donna Brewington White

            @aaronklein:disqus Oh it’s iOS. Boo. I’m not envious or anything.

    2. Pete Griffiths

      You think iPhone 5 is the start of the art hardware?????

      1. Aaron Klein

        You can pry it out of my cold, dead hands. The most beautiful computing device I’ve ever owned. I love it.

        1. Rohan

          Agree 100%. I never really thought there’d be a difference but when I went back to a 4s for a few days, I realized how wrong I was.

          1. Aaron Klein

            My dad still has a 4S.The last time we had dinner, I picked up his phone and sang one of my kids’ favorite “Winnie the Pooh” songs…”I am short, fat, and proud of that!”

        2. Pete Griffiths

          So you love it. I get it. And it is a triumph of design and usability. But it isn’t state of the art hardware. ๐Ÿ™‚

          1. Aaron Klein

            How do you define that term? Gigahertz and Jigawatts? ๐Ÿ™‚

          2. Pete Griffiths

            You read my mind. ๐Ÿ™‚

    3. ShanaC

      I don’t get it – if Apple can write beautiful software (see, IOS even if it isn’t my preference), why don’t they write beautiful software for the cloud.? They got their devices to sync, why not with the cloud….

      1. Aaron Klein

        Because Apple uses services to build a moat around hardware.And Google uses hardware to build a moat around services.Which one do you think should be better at services?

        1. ShanaC

          i don’t see google as building a better moat around services. Getting data from google isn’t so difficult (unless it is search data) And I wouldn’t call search a service per say

          1. Aaron Klein

            First of all, what is search if not a service?Second, Moat != Lock-in.Every piece of hardware that Google builds – phones, laptops and tablets – are moats around search.The Chrome browser was a moat around search.Maps is a moat around local search.Google understands what many startups don’t. Distribution channels are equally important to great products.To steal Fred’s lingo, Google started as Yahoo’s bitch and didn’t want to end up as Apple’s.

          2. PhilipSugar

            You are on a roll.

      2. Elia Freedman

        It really is extremely hard to cross over when you are good at one thing. In the early days of my company we wrote some of the best Palm (read small screen) software. In the mid-2000s we tried to write a web app. It came out like a larger version of a Palm app, which was completely wrong. We cancelled it before we started selling it. It took me years of studying web design and desktop apps before I could even think correctly about the problem the right way.

        1. Aaron Klein

          Exactly. It’s a DNA level thing. Well put.

    4. kidmercury

      galaxy note II > iphone 5 #sizematters

      1. Aaron Klein

        It’s not the size, it’s what you do with it.I am not sure if this is true beyond smartphones.

    5. Brandon Burns

      Argument of who’s winning aside, my Nexus 4 is easily my favorite phone ever. Hardware wise, next to the Nexus, the iPhone feels tiny and bulky. I’m not sure Apple is still making the best hardware.Brand recognition and lead time is why Apple is still bigger. Those two things are also why PayPal is still the biggest payments service, despite their poor excuse for UX and customer service.Apple’s superiority in handset quality is more perception than reality. But perception is what sells, not reality.

      1. Aaron Klein

        I’m holding both in my hand right now. If your comparison is with an iPhone 4, then you’re absolutely right. That feels tiny, bulky and old school next to an iPhone 5.But the Nexus 4 and iPhone 5 are at parity. With the iPhone 5 you get LTE, and with the Nexus 4 you get a larger screen.I’m just not a fan of larger screens. The iPhone 5 screen feels perfect.

        1. Ken

          If Apple would put cellular voice in the iPad Mini, I’d replace my iPhone. Seriously. I use the headset for voice (not holding it to my ear), so it would be a great device. Though, I’m sure holding the iPad Mini to my ear while wearing Google Glass would be a sight.

          1. JLM

            .I have been using VOIP and Skype on a Nexus 7 with a Bluetooth device for a long time. It is really a nice setup.JLM.

  20. MTLinville

    It’s been mentioned before, but Google is the Web. Everything they’re doing today has a singular focus of increasing the penetration of the Web into all aspects of people’s lives. Android as a native operating system isn’t as interesting to them as a full-fledged cross-platform Chrome ecosystem. Google is doing everything it can to speed up the decline of native apps, both mobile and legacy.

    1. Pete Griffiths

      And they are strategically right to do so.If it’s not on the web you can’t crawl it, index it, search it, monetize it.

  21. christopolis

    it’s not a business when you do not make money. I doubt you can build a business by continually giving stuff away. Its faking it. See google reader. “Changing that out requires a major effort for an end user” And I switched to Feedly in about 2 seconds.

    1. fredwilson

      google doesn’t give it away. they take something that is potentially more valuable than cash in return. and they have the revenue model to monetize it.

  22. mikenolan99

    One repeating message I’m hearing from CEO’s is how difficult it is to play the long game while running a publicly traded company. One CEO told a class of mine that he took his company public because they needed the currency (stock) to acquire companies and fund growth. Soon, the demands to hit quarterly numbers took its toll on the long term strategy of the company, and ultimately forced his resignation. The company has never recovered.I think we will see the trend towards more pulbic companies becoming private… much like Michael Dell is trying now.Another interesting company structure is where a large voting block is held by a non-profit foundation – Hormel and Bremer Bank are two examples here in Minnesota. The Foundations demand long term thinking and security, and prevent take over bids.

    1. fredwilson

      yes, i totally agree

      1. mikenolan99

        Would you ever consider, on the march towards the pay window, to set up a foundation to hold stock in a company? It is an amazing thing to hear the CEO of Hormel talk about how the Foundation does so much to support long term thinking. Plus, the founders and investors could fund an entity to support causes they believe in for the long term

        1. fredwilson

          i like that structure

        2. Ken

          Hmmm. A single-stock mutual fund. Novel way to combat excess executive compensation, short-term thinking.

    2. Carl Rahn Griffith

      I shudder at the number of times I used to be urged to ‘Think Quarterly’…

  23. Dan Conway

    Generally agree but shouldn’t Long term thinking should also consider the Long term chart (say 10 years) of the three stocks…not just for short term performance of the past year?

    1. fredwilson

      i think what is more interesting is the chart over the next ten yearswhat’s done is done

      1. Dan Conway

        What done is done but using what is “done” (in this case, the ten year chart) can help give a possible indication of the next ten years. Google has a nice base and a great long term chart. Their long term chart really tells their story.

        1. fredwilson

          i do not think past performance is much of an indicator of future performance

          1. Dan Conway

            sure you do or you wouldn’t have posted the one year chart. past is prologue. it’s why we teach our children how to do their homework. it’s why there’s an nba draft. it’s why you’ll invest in the management team who you’ve had success with before. all an indicator of future performance.

      2. Jim Peterson

        Would love to have that chart in hand- today…

    2. MTLinville

      The chart highlights the decoupling of the two stocks, which is most interesting IMO.

  24. AlexBangash

    The VC’s who invested in later stages of Groupon GRPN would likely have invested in Samsung/Apple over Google. Thankfully, later stage VC’s are limited to investing mostly in late stage private co’s and not public co.’s by their LPA’s.

  25. Jim Peterson

    It’s dangerous to use a stock price chart as a proxy for where a companies stand against each other. The price looking a year back can reflect many things: current sentiment (right or wrong); profit taking after a huge run; momentum in either direction; even media bias, media goes from loving something to hating it in a heartbeat since they are basically lemmings and if one writes something the others pile on with different twists.

    1. fredwilson

      agreed

  26. JLM

    .I offer no argument that it is rightly perceived that Samsung is seeing a bit of short term benefit from its hardware sales but it would be a great mistake to suggest that this very unique Korean company is not a long term player.One only has to look at the sheer magnitude of their capital investment in the US and the adaptability of its manufacturing base to see how flexible and agile this company really is and can continue to be.They came to the US in a big way about 20 years ago and have slowly but surely supplanted — SONY, as an example — the established highest quality consumer electronics brands.Samsung, as many Korean companies, has a long term view of the world and that is clear when one studies their history in Korea and their growth into a global brand.I am very high personally on all things Korean. Interestingly enough their history of having been completely subjugated by the Japanese and literally having been forced to learn Japanese and being banned from speaking Korean is still a driver in their competitive view of all things Japan including their competition with Sony.I spent a year in Korea in the service when the Koreans could not even produce steel reinforcing rods — 5 years later they were the world’s foremost shipbuilders. Truly a great leap forward. They are incredibly hard working and smart.I look for Samsung to be one of the big winners in all things technology with a particular affinity for the factory floor.JLM.

    1. fredwilson

      i agree with you about Koreabut i also think software is the future and they are a hardware company

      1. Carl Rahn Griffith

        What about when a lot of software/apps simply become embedded functionality?

        1. kidmercury

          yup

        2. Aaron Klein

          It has always been true that you choose computing devices for what their software can do for you.I will bet on that continuing to be true.

          1. Carl Rahn Griffith

            Fair point but I believe they are becoming white-goods consumer devices, which means embedded. I suspect it’s just a phase we are going through at the moment, because of the sheer novelty of it all. It’s not sustainable. Huge consolidation happened in all past scales of computing devices.

      2. JLM

        .I agree with you completely that software on an otherwise agnostic platform is going to be a BIGGER driver than hardware but in a continuum of good, better, best not in a binary environment.They are both going to be winners.I also think that more and more software is going to “come with the device” and thus the device can be a bigger driver than today. You will make a lot of your software decisions in your hardware decision.The device market can look to the television market in which TVs are now coming with a huge amount of embedded capabilities at a very small incremental cost.All working at the time of plugging the TV into the wall. Wow.And, of course, devices have some finite operating life.Great topic BTW.JLM.

        1. mikenolan99

          I toured the Samsung plan in Slovakia in 2007 – they have a global footprint, and extremely agile production. An amazing attention to fast production and inventory management… and building new factories in developing areas…

      3. Pete Griffiths

        They are indeed a hardware company. They know software is the future, but it is a hard culture to change.

  27. Tommy Chen

    Apple’s long term strategy is their ecosystem too. Many have invested in lots of apps, media, and more and more of your data is being stored on Apple’s servers via iCloud. There’s more users leaving Android for iOS than vice versa, so Apple has retention. And why wouldn’t they? Some of Google’s best products are on iOS, some would even say they are better on iOS than compared to Android. Android is still the leading mobile OS, but Google mostly doesn’t benefit from it. Lots of Android handset don’t have a hint of Google products on them, especially in China.

    1. legend112

      I totally agree with what Fred is saying here. Google in playing the OS (agnostic) game…it has a variety of its apps on android as well as on competitor platforms in a very aggressive way. No one can deny Google wishes to better Apple’s app success on its own turf. That is loads of data Google is mining and its prime advantage or focus might not be to let people off competitor platforms, it is to have them use its apps as if they are using Android. Same result ๐Ÿ™‚ Quite clever I think, in the short(long) term.

  28. Pete Griffiths

    Good post.These three companies represent 3 different generations of strategy/business model.Samsung is a hardware company.Apple is a design / user experience company.Google is a data science company.Judge for yourself what is stickiest. ๐Ÿ™‚

  29. chrisdorr

    Apple, Samsung, Google and you can throw in Amazon, if you like are all proceeding with long term strategies. None of them are really short term thinking companies. And these long term strategies proceed from their current strengths whatever they are. And only time will tell if those strengths will lead to long term wins. My bet, they all are likely to “win”..

  30. William Mougayar

    Are you echoing some of your frustations about the Android ecosystem being as disorganized as a bazaar?These 3 companies are very different, and they make money differently from each other. They don’t each approach “mobile” the same way.All 3 companies have long term thinking and are generating short term income. It’s tough to peg them directly against each other. They are all long horses.

    1. fredwilson

      i am not frustrated with Android. others are. but i am not.

      1. William Mougayar

        Their ecosystem would benefit if it was slightly more organized. Not crazy controlled like iOS, but a tad better than now would help.

  31. John Revay

    Great Post, nice hiatus from MBAM

  32. William Mougayar

    “You can change handsets pretty easily when all your data is in the cloud.”Right now, the only thing preventing me from changing handsets is not about whether my data is in the cloud or not. It is the freggin 3-year contract I have with the telco company that I hate.

    1. Aaron Klein

      Three years? William, you have signed your technology life away!

      1. William Mougayar

        I’m in the last year. Never again. Waiting… We have no other choices, but the CRTC is recommending to ban 2 & 3 year plans and have just 1-year ones.

  33. Matt A. Myers

    Dustin Curtis is famous IMHO for making narrow-minded comments.Google is planning for 20-40 years from now. They’re doing R&D and have all the monetary and data resources they need to do a better job than anyone else.; They’ve had the data set longer than anyone else too.I.think.Google could be worth 10x what it is now in 20 years.

  34. Angela Min

    I respectfully disagree – not with your point about Google’s ability to think long-term, but about Samsung’s incapability to do the same, if not more. This is merely a marketing press release to keep shareholders happy, drive up hype, and nothing more. It says nothing about Samsung’s long term goals. In other words, the existence of one, does not prove the absence of the other. Samsung, let’s remember, is a global conglomerate that has been around for far longer than Google, endured much historical and political upheavals and control industries far beyond just tech (though tech is certainly the juiciest one at the moment). I don’t underestimate the long-term vision of Google, especially when considering Sergei Brin. Something about his story, immigrating from a country known for big thinkers makes me put my bets on him for Google’s long term future. If I may take some dramatic license, I imagine those foreboding Siberian tundras and vast Russan horizons inspiring all kinds of visionary thoughts, for better or worse. For better, the epic novels of a Tolstoi, or the dreams of a father to become an astronomer (Brin’s father). For worse, Stalinist conquests. But I also do not underestimate Samsung – a company on the opposite end of the geographic spectrum, that is a tiny country in the scheme of things – and yet a company that has nonetheless managed to rise to a level that now intimidates the largest tech companies in the world, including Google. Sometimes, it is the very fact of being a blip on the radar, that puts the fire in the belly, to achieve far more. For better or worse. For better… cool mobile phones. For worse … well, just read the news. My point is that marketing is marketing. It skims the surface. Look a little deeper, and you’ll find discover much, much more.

    1. kidmercury

      i agree. 8 years ago the idea that google could enter the hardware space and become a major player was difficult to fathom, but here we are. i think it is too early to dismiss samsung under the assumption they cannot do the same when it comes to entering the digital/software space. they clearly understand the importance of this and are showing signs of adapting accordingly.

      1. Matt A. Myers

        They want to own as much of the holistic ecosystem as they can, and if you do this you can leverage it in powerful ways – directing traffic (preventing traffic leaks), and keeping mind-space. Hardware is part of this, it’s how you access their online services.

    2. Jean-Franรงois Noรซl

      I agree and I think we already see that Samsung get this when you look at how they launched the Galaxy S4. The emphasis was on Samsung specific software, they almost didn’t talk about the hardware.

      1. JLM

        .Samsung is pretty damn nimble when they want to be. Witness their cutting edge spoofing marketing v the Apple. They have put Apple on the defensive.Apple does not play defense well. Like the NBA.JLM.

        1. William Mougayar

          Leaders always play defense. That’s all they have to do, because every one attacks them.Only #2 and #3 can play Offense because it’s more expensive to attack than to defend. Those Samsung ads attack Apple.Did you end-up getting that book I suggested: Marketing Warfare? It’s a classic. There are 4 essential marketing strategies: Offensive, Defensive, Guerilla and Flanking.

          1. JLM

            .I do think that Samsung is playing offense and I do think that Apple is the leader and therefore susceptible to being attacked.The Samsung campaign is working as evidenced by the sensitivity of Apple response. They have hit a soft spot at Apple.I have the book but have not read it yet.Maybe this week.JLM.

        2. fredwilson

          ha. i went to SLC last night to see the Knicks play the Jazz. it was a defensive affair. the knicks played a team averaging 36 years old for most of the game. and the Knicks prevailed.

    3. fredwilson

      i agree with you about Samsung. they are an amazing company. but the future is not in hardware. it is in software and increasingly software running in the cloud. that is where the awesome devices they make are the payload for. they are the trojan horse for google. and i am sure they know it.

      1. Angela Min

        Thank you for your reply. I could be wrong, and perhaps I didn’t make the point clearly enough, but I am questioning the premise itself that Samsung will always be a hardware company. For their first foray into internet tech, that’s where they started, since they understand manufacturing. However, it doesn’t mean they’ll stay there, exclusively. I think their long term vision far exceeds a quarterly report, or an annual one. I’m thinking at least 10 years out, since those are the kinds of horizons a company like Samsung – a newcomer to those in the US but not in Asia – are accustomed to. But again, I could be wrong!

  35. kidmercury

    no mention of amzn in this blog post……just wait. it’s coming. i believe 10 years from now amzn’s cloud will be more monetizable than google’s. i believe google will have a cloud with more information, but i don’t believe they will have the governance policies in place to get the most out of this, and to make the most profit as well. so for these critical reasons in my opinion amzn will have the best cloud out of the top dogs.

    1. Donna Brewington White

      They’ve entered the HW market too. Think they’ll develop an OS?

      1. kidmercury

        i think they’ve got the right idea with forking android. i think almost everyone going after a broad consumer base should do that.

    2. fredwilson

      i just don’t like their products very much. i use them but i am not inspired by them. so very utilitarian.

      1. kidmercury

        my family is from the part of india that spawned the gas station/convenience store stereotype, and there’s no business that trades sexy for utilitarian like the gas station business. by the power vested in me as a gujarati indian guy i hereby declare jeff bezos an honorary gas station owner

  36. jonathan hegranes

    i think the interesting piece about samsung’s direction is a software focus on top of android with the connection of other devices…while i’m a cyanogenmod guy when it comes to android, the gs4 adds some nice functionality on top android and better utilizes sensors and all the phone has to offer.but then samsung is also going after companies like nike and fitbit around fitness, and using a combination of software and hardware to do so.the market is rewarding this, per the chart below, where $goog and $005930 (samsung) are tracking pretty close…

    1. fredwilson

      i wanted to post that chart but i could not figure out which samsung security to chart

      1. jonathan hegranes

        interesting thing about the chart is that $goog is the clear underperformer over the last five years, with $aapl more than double the upside and samsung somewhere in the middle.at what point does google’s winning the “long game” show up in this chart?

        1. fredwilson

          i guess that depends on how long of a game they are playing

  37. Donna Brewington White

    Will be interested to hear your thoughts at some point on the attempted BBRY resurrection. The attempt alone regardless of its success is a reminder of how huge and how global the mobile market is…and how agnostic many average consumers are to OS. It is easy to forget this hanging out with tech people.Also recently read an argument for Android based on the emergence of the internet of things and the lack of integration with iOS at this level.

    1. fredwilson

      the numbers don’t look good for them or microsoft right now

  38. Donna Brewington White

    Are you sure this isn’t an MBA Mondays case study edition?

    1. William Mougayar

      The new MBA,- Mobile Bashing Apple.

      1. Donna Brewington White

        Ha!

    2. fredwilson

      i thought about that when i posted it but opted not to categorize it that way

  39. Ken

    I am what they call a Google ION. That means I have gone to every Google I/O convention. I come out of every convention very impressed, with a better view of the future. Google certainly has a great vision and makes many great apps. But, when the dust settles, and I get to actually use the new products, I have been disappointed almost every time. The Android phones are nowhere near as easy/streamlined to use as the iPhone. Same for the tablets vs. the iPad. Google TV seems like it is still in beta, and frustrating to use. Last year’s home audio product (Nexus Q) was missing some simple, yet crucial, features, making it fatally flawed. And, Google & Partners’ use of cheap plastic is a real turn off. Reminds me of the difference in plastic between US and foreign cars in the 80’s and 90’s. (Foreign 100x better). Google, don’t cheapen your product with cheap plastic!I was one of the first through Stanford’s Product Design curriculum (now called D School), taught by early IDEO pioneers in 1980. It’s a design eye I still retain. Google desperately needs an internal Jony Ives design studio. Even though most of the hardware is produced by outside partners, Google should retain the right to review & improve the final product.Next time I see Sergey, I’ll make sure to tell him my thoughts.

    1. LE

      “Google desperately needs an internal Jony Ives design studio.”Why that is going to be difficult is for the same reason that it never happened at Microsoft (their marketing and collateral materials down to the color choices really suck).The reason Apple had Ives is because Jobs recognized the need for good design and he knew “seat of the pants” enough to hire a good designer and put $$ into that area.All that flows from the top.If it’s not at the top it’s not going to happen.My mom wouldn’t know the difference between a Subaru and a BMW so she is not going to be someone who can hire a person to head up design at a car maker and, most importantly, wouldn’t even see the need to put resources into that area. (Just like I don’t care about the table layout at Thanksgiving.)My father always questioned my buying machinery for my first business “why are you spending so much on that machine w/o orders” because he didn’t understand that type of business so he couldn’t wrap his hands around the expenditures necessary to succeed. “Why not a small machine first?”.Brin and Page aren’t creative (afaik) they are engineers.They jumped aboard a rocket and rode it.They didn’t grow up in a business they didn’t really even build the business like Walton built Walmart or Kroc built McDonalds understanding all parts of it. Or Ford with cars the list is endless.”Next time I see Sergey, I’ll make sure to tell him my thoughts.”I would pay to see a video of Brin’s reaction to this when told.”Reminds me of the difference in plastic between US and foreign cars in the 80’s and 90’s.”Proving of course Prima facie that this is not a money issue. Just taking the design issue alone how hard would it be for American manufacturers to pay the money to steal away top designers in a billion dollar industry? I don’t care where they are living throw enough money at them and they will move to Gross Pointe even for part of the year.

      1. Ken

        Interestingly, Stanford created the Product Design department as part of the engineering dept. (some overlap with the arts, but officially part of engineering). My degree is actually in mechanical engineering. But, there really is a left brain/right brain aspect. The same chasm exists between web designers and engineers. Cultivating someone who exists in both is what Stanford was attempting. It’s a very interesting space.

  40. Brandon Burns

    BTW, I find this post very MBA Mondays-esque. A nice lesson and debate on an academic topic: long term business strategy. I could spend my Monday mornings like this, for sure.

    1. Donna Brewington White

      I commented something similar earlier. For a moment there, I forgot that it wasn’t “technically” an MBA Mondays post. Discussion generated by comments like yours helps create that effect.

      1. Brandon Burns

        We won’t let Fred kill MBS Mondays! Never!

        1. Donna Brewington White

          Ya — we can create a pact to turn any post into an MBA Mondays. Just like I’ve seen this crowd turn any day into a Fun Friday. Fred’ll come off the slopes and wonder where we’ve taken this thing.#crowdblogging #FTW #occupyAVC

    2. fredwilson

      yup. i thought about that. i might go in that direction.

  41. David Petersen

    Maybe their stock is down because no one can figure out how to buy it. I tried and failed a few months ago.

  42. LE

    “There is no moat around a hardware only franchise these days.””You can change handsets pretty easily when all your data is in the cloud. “There is a moat around hardware it’s called you like the hardware or you like the brand and are loyal to it and like the look and feel.What moat was around Marantz stereos back in the day?Around Ohm speakers?Around Apple pre “everybody and their uncle loves it now”? Around a car brand? Around a wine or clothing brand?Software for sure has it’s own moat which is similar in the “like the look and feel” and they way it operates. This ranges from trivial to overcome by a new entry to really difficult as in try to get someone who uses a Mac to use Windows even though they essentially do the same thing.As far as google maps, gmail or even search first came mapquest and hotmail and excite.com.

    1. FAKE GRIMLOCK

      ITUNES GOOD MOAT.REBUY ALL APPS, MUSIC, VIDEO, GAMES = STAY INSIDE MOAT. ALL YOUR STUFF THERE.

      1. LE

        Ok but who could have predicted pre-cd that the cd could replace people’s record collections?Or that itunes could replace people’s cd collections.It only looks like a moat many times because a) ok it is a moat b) like a monkey we can’t understand how something can end when the thing that ends it hasn’t been invented yet or it’s something we don’t know or understand.

        1. FAKE GRIMLOCK

          EVERY MOAT CROSSABLE WITH SUFFICIENTLY DISRUPTIVE BOAT.

  43. Ajay Kapal

    Fred you come to this conclusion based on the observation that Apple and Samsung make much more money than Google, so Google must be playing the long game (just like Amazon).I have a few thoughts about this. First, does making more $$$ now necessarily mean that a company is focusing on the short term?Second, I think that the stock market can be wrong for long periods of time, so the current disparity between Google and Apple in their stock performance doesn’t tell me very much about either company’s long term health.I don’t think the issue is with their strategic time horizon, but has more to do with each company’s mobile strategy. Google wants to drive eyeballs through mobile (and glass!) to further its ad revenue. It will sacrifice profitability and margins to do so. Apple uses its expertise in product design and manufacturing, coupled with its vertical integration to build products people want to own. And its investment in brand + ecosystem (itunes/apps), manufacturing scale, and vertical integration allow it to make these margins.The big question in my mind is if Apple’s strategy to not build a low end phone, but to sell 2 year old phones at that range will be enough to win.

    1. fredwilson

      maybe i wrote my post incorrectly. my point was that making the most money right now is not an indication of the best long term strategy.

      1. Ajay Kapal

        Hi Fred – maybe I misread your point – yes, making the most $$$ now is often not the best long term strategy – it really hurt apple in the late 80s. Hopefully they can strike a better balance this time.

  44. jason wright

    a nicely constructed blog post title.I think it’s a bad thing that Google has unfettered access to so much of our personal data.Where are the circuit breakers?

    1. Donna Brewington White

      Hmmm… good question.

    2. CJ

      You are your own circuit breaker. Lots of choice, if you feel uncomfortable, unplug. I don’t want circuit breakers here, I want to be able to pick the best services and opt to use something else if I’m uncomfortable, not have that choice pushed on me.

      1. Donna Brewington White

        Funny you should show up — I was just thinking about how to get in touch with you to see how clearsync worked out for you. A moment ago looked up Sunrise because of the mention in the comments. Turns out to be an iOS app — boo!I let the clearsync trial run out but am probably going to pay for the subscription because even though it is buggy I am desperate and so far nothing else I’ve seen is superior.

        1. CJ

          All you have to do is say my name three times fast in the mirror and poof, in a puff of smoke,I’m here! I’m still on the fence. I wasn’t satisfied nor dissatisfied so not taking the plunge right now. I’m just living with the issue and hoping for something better. Might end up changing how I work instead. *shrug*

      2. jason wright

        GOV and GOOG are in business together. Look beyond its two poster boys and their godfather.

        1. CJ

          Doesn’t matter to me. GOV is in bed with everyone and it’s yet to be me. I police myself to stay ahead rather than relying on relics with no understanding of the internet to do it for me. They’ve done so well with it thus far. /sarcasm.My point is the only real way is for all options to be available and allow knowledge to dictate the path rather than artificial restriction. I’d sooner live in Google’s earth sized garden than Apple’s walled one and that’s just an example of how I think about restriction – not a value assessment of the two companies. Give me the choice, I’ll take the liability.

  45. timrpeterson

    great assessment, thanks for the read!

  46. Scott Francis

    I would propose that it is a mistake to think that Apple is not thinking long-term, that they have not been thinking long-term for quite some time.Also a mistake to think Samsung (investor in FABs and massive manufacturing muscle) doesn’t think long-term…It may be that the lion’s share of profit stays with integrated hardware-software for a long time to come. We’ll all find out in the long-run!

  47. rafer

    I would (and am) betting on Facebook for mobile instead. Google’s ecologies are getting less vibrant and responding poorly to competitive incursions. They haven’t learned anything obvious from losing the 75M+ Apple Maps users, and Samsung’s going to do a lot more damage than that.

    1. fredwilson

      hmm. that is an interesting view Scott.

      1. rafer

        It’s easy to make a longer list too. Facebook Nearby vs G-Local/Zagat is low-hanging fruit; the myriad photo assets including the cameras; the huge advantage of the Open Graph for structured data; ….

  48. David McMahon

    These conversations often ignore Microsoft. But Microsoft are so very tenacious and long in the tooth at this game. Ignore them at your peril.With tenaciousness (and a rather large pot of cash) Microsoft will leverage its base [office, xbox, windows, developers & partners] and integrate with the Azure cloud. And the work they have done with WinPhone8/Nokia & Surface is really good.And by the way, much of what Microsoft do is open-source these days. They have learned. The ‘Mobile’ market development is similar in many ways to the ‘PC’ market history – Apple is playing the same role & Google could arguably be Microsoft. Possibly why Steve Jobs was so angered by Android ‘a stolen product’?Microsoft – Been there. Seen it. Done it. Will do it again.

  49. Stephen Alfris

    I think Samsung does understand this and that is why they are increasingly trying to differentiate the platform used on their S line of phones from the Android platform and working hard on their own OS, Tizen.

  50. FAKE GRIMLOCK

    UNTIL SAMSUNG BRANCH OR REPLACE ANDROID.THEN THINGS INTERESTING!

    1. Donna Brewington White

      You mean with their own OS?

    2. fredwilson

      exactlydo you think it will be Tizen?

      1. FAKE GRIMLOCK

        NOT SURE.BRANCH ANDROID EASIER.BUT SAMSUNG HAVE MONEY, WILL, AND ENGINEERS TO MAKE OWN OS.THAT COME WITH MUCH BIGGER REWARDS LONG TERM.IF WAS ME? USE ANDROID AS FREE BOOSTER ROCKET, THEN TOSS ASIDE FOR OWN OS THAT NOT HAND FREE MONEY TO GOOGLE.

  51. FAKE GRIMLOCK

    APPLE: IOS IS JUST WAY TO SELL YOU PHONE.GOOGLE: ANDROID IS JUST WAY TO SELL YOUR DATA.

    1. fredwilson

      indeed

  52. Tim F.

    Google has mostly lost me as a user of the majority of their services except search.

  53. Capitalistic

    Thank you posting this. People think Q results are indicators of future performance. The media is slamming Apple…even though Apple is generating an unusual amount of cash. Amazon has lousy margins but wall street hugs Amazon every quarter.What matters is the company’s long-term operating strategy. Google doesn’t care about Samsung per se. Google wants to dominate the internet via EVERY conceivable medium.

  54. rah33ls

    “People who are really serious about hardware should make their own softwareโ€ฆ””People who are really serious about software should make their own hardwareโ€ฆ” Steve Jobs

    1. fredwilson

      that includes software that runs on other devices because of the cloud

  55. Brandon Marker

    I’m counting the seconds until the Galaxy S4! I’ll finally abandon Apple and all of my purchases (and hopefully headaches). Nexus 7 conversion for tablet. The main reason I’m doing this isn’t because of a Samsung screen being a higher resolution or other specific features; its to get a Google OS.I couldn’t agree more on the positioning of Google and mobile, and the data… pretty sure Google knows me better than my friends.

  56. beidaren

    apple has no cloud service?Apple’s iCloud is most-used cloud service in the US, beating Dropbox & Amazon!http://appleinsider.com/art

    1. fredwilson

      i did not say they have no cloud serviceit just sucks

  57. invisibleman29

    I recently got a linked-in suggestion for a car dealer I had gmailed ‘once’ 2-3 years ago. This is preposterous at multiple levels — starting from gmail analytics creepiness (do no evil indeed) to being flat out fatuous analytics syndication. I agree that for those of us whose entire transactional life lies in gmail, google has the catbird seat. But equally it will only take one ham handed move on their part (the above being a promising start in that direction) for the hammer of regulation to disrupt it

  58. John Revay

    Just saw announcement of Google KEEP to compete w/ Evernote