A gutsy call by Bert Danner in Seeking Alpha. Why? It’s the network effect.
On a software platform, this occurs when developers and service providers create software and services to run on the platform. The added software and services increase the value of the platform and attract new users.
That’s exactly where iOS is vastly superior to Android OS. How does it work?
The software platform with the richest offerings of software and services becomes dominant. The increase in the platform’s value rises much faster than the cost of providing the value, accelerating the positive feedback loop. The process continues building more and more momentum until the platform’s value proposition becomes so compelling to prospective customers, an inflection point is reached.
After comparing Google’s business model with Apple’s business model, Danner concludes that Apple will win this platform war.
The commercial interaction of a platform’s customers making ongoing purchases creates the financial incentive for developers and service providers to produce increasing quantities of high quality software and service offerings. This process creates a virtuous cycle of value creation, causing the software platform to increase in value for all current and future users.