Quick. In one simple sentence, describe how Apple makes money.
Apple makes money the old fashioned way– it sells products. Mac, iPhone, iPad, Watch, accessories, retail stores, music, movies, TV shows, applications. Apple designs and manufactures a variety of devices that are well integrated with specific applications and services. The company makes money when you buy a product or use a service.
Quick. In one simple sentence, describe how Google makes money.
Google’s revenue and profits are indirect to users because most of the company’s revenue and profits– to the tune of around 90-percent– come from advertising. That’s true one-trick pony status.
Wait a minute. That can’t be right, can it? Isn’t Google a technology giant? I mean, there’s Android OS, and all the self driving cars, and the social networks, and Nexus smartphones and tablets, and Nest Labs’s smoke alarms and cameras, Google Ventures, and Project X.
What’s going on?
Both Apple and Google are victim’s of their own success. Historically, both are focused on their core businesses, and both are having trouble going beyond their initial success.
Isn’t Apple more diversified than Google? Yes. Isn’t Apple more profitable than Google with a wider array of money making products and services? Yes. And yet both companies are struggling to go beyond their recent successes.
Apple’s Mac lineup is in disarray with the aging MacBook Pro, MacBook Air, Mac mini, and especially Mac Pro in need of upgrades after having fallen well behind competitor hardware specifications. The iconic iPhone line struggles to compete with Samsung and cheaper Chinese manufacturers, while the iPad and tablets in general have become passé.
Apple has devoted a decade of focus on masterful product integration and created a profitable ecosystem that wraps around hardware, software, services, and retail stores. Likewise, Google created a highly profitable advertising ecosystem, but unlike Apple’s ecosystem mix, the search engine giant has had little success in diversification.
There is little question that Apple’s focus on hardware, software, services, and distribution channels have paid enormous dividends (literally and figuratively) and helped grow the company to become the wealthiest technology entity ever, while Google’s massive domination of search has swelled the company’s coffers and spawned gambles into other technologies.
Both Apple and Google have used the foundations of focus to great levels of success. Now it appears that both companies have lost focus. Google’s diversification efforts have largely failed, while Apple’s core businesses see steadily falling sales.
One can argue that less favorable economic conditions are hampering Apple’s revenue growth, while Google’s troubles are more management related, but the impact is the same. Google remains a one-trick pony company fully dependent upon advertising, while Apple has yet to find the next great thing and is feeling the pinch of more nimble competitors.