Comment by sah2ed
8 years ago
> One example is using Android to prevent a monopoly on the smartphone side. If Apple had a monopoly or near monopoly, it would be able to extract larger economic profits from the other links on the value chain, including Google
Your example actually shows the opposite and that's because conventional wisdom is often wrong.
Conventional wisdom states that there is a direct correlation between market share dominance and excess profits which is why anti-trust laws target monopolies to protect consumers from price-gouging, but this characterization is not always the case, as Apple has proven by not pursuing a market-share focused strategy.
Apple enjoys 87% of smartphone profits from a mere 18% of all shipments [0].
[0] https://www.investors.com/news/technology/click/apple-rakes-...
They weren't talking about profits in the smartphone market. Everyone seems to have read OP wrong.
They were saying that if Apple had a monopoly on smartphones, they could extract more value from adjacent markets (google search, etc)
You are correct if you believe the term "adjacent market" represents an actual thing.
If you do not believe it is an actual thing, then an adjacent market is no more real than a map is real. An adjacent market is merely just a mental aid, it is not somewhere you or I can schedule a visit to.
At the end of the day, a hypothetical Apple monopoly in the "smartphone market" would mean consumers would have less money to spend on other things like google search (to use your example), apps & games, Netflix subscriptions, etc all of which exist in "adjacent markets".
My gripe is that the use of jargon here is very misleading as it has lead you and others to conclude that there is a dichotomy -- between a market and its adjacent(s), where none exists in the real world where all of this matters.
I think it was meant more in the sense that Apple would have a lock on phone users, which would let them monetize access to them for others such as google. They would also have been able to be more influential as an ad company.
They already do charge for making google the default browser, so it's not a stretch to imagine this payment would be larger and other similar payments would exist. I'm not sure why you think this is a hypothetical when it already happens.
Thanks :)
How are you disagreeing with him? Just because the luxury/high-end part of the market is making most of the profits doesn't mean a luxury company wouldn't extract even more money with few competitors.
The gp talked about a threat of a smartphone monopoly from Apple, a threat that never existed to begin with. The argument is revisionist at best.
1. Before the iPhone, Nokia enjoyed a large market share on mobile phones based on Series 40, Series 60, Maemo, etc. Essentially they had several OSes. There was also BlackBerry which had several editions of one OS but was huge as a "smartphone" for checking email.
2. Before the iPhone went on sale, Steve Job's target was 1% of all phone shipments in the original 2007 keynote:
957 mobile phones in 2006. Goal: 1% of market share = 10 million iPhones in 2008. [0]
3. Prior to the public unveil of the iPhone, Eric Schmidt who was a board member at Apple, frequently recused himself from board meetings focused on the iPhone due to the conflict of interest from Google's own mobile phone efforts. IOW, there was no monopoly threat to quelch because both companies were working almost simultaneously.
Monopolies sometimes get overused as a metaphor as in this case where the gp talked about them in the context of excess profits. My point being you don't really need to control market share to enjoy the bulk of an industry's profits as shown by Apple. Heck, even the terms market share, industry etc are proxies for determining (abuse of) market power. Their overuse/overreliance as a measure of power can be misleading when trying to reason about the effects of competition.
[0] https://www.engadget.com/2007/01/09/macworld-2007-keynote-li...
My critique of your comment is not based on a dispute over facts about the history of phones.
That's because for Google the loss in per-unit sales of cheap phones versus $1000 iPhones is entirely made up by the data they're collecting from Android users.
Not entirely. The largest phone markets - China and India - don't have integrations into Google. They took the open source version of Android to use with their own phones.
India does have, only China doesn't.