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July 15, 2010

Has Apple Jumped the Shark?

There's a famous moment in 1970s television sitcom lore when the super-popular "Happy Days" lost its mojo.  That moment is when the main character and hero, Arthur Fonzarelli ("The Fonze"), performs the improbable water-ski trick of jumping over a shark.  Now, I'm an avid water-skiier, and I've been known to jump a Loon or two, but jumping over a shark is so absurd its laughable.  The video clip, which I embed below, underscores how ridiculous the feat is with Fonzie still in his (dry) leather jacket.

In the common vernacular, "jump the shark" has come to symbolize that moment when something or someone has peaked and where the over-exposure gets to the point where it's all downhill from here.

I am beginning to wonder if Apple has jumped the shark.

First, they pass Microsoft in market capitalization to become the most valuable technology company in the world.  Then they purchase Quattro Wireless to enter into the advertising business, attempting to box out Google. Then they launch the iPhone 4 a mere few months after the iPad.  Both are heralded as the most successful product launches in the history of technology.  

But in the last few weeks, there have been a few signs that perhaps they have peaked and come to their "jump the shark" moment.  Here are few signs that stand out:

The iPhone 4 feels like a rushed product and, although selling well, is getting poor critical reviews.  Consumer Reports slammed it for the bad reception and took the company to task ("We can't recommend the iPhone 4").

Perhaps more worrying for Apple is Google's declaration of war and the success of Android.  Apple and Google are competing for the hearts of developers and advertisers as well as consumers, and the battle appears to be tilting.  Many commentators are ironically observing that Android may be to the iPhone what Microsoft Windows was to the Mac - an open platform that simply wins over time on volume because of its superior ecosystem.

Many people forget that Google acquired Android in 2005 - even before the iPhone was launched.  Google has been working on developing a dominant position as the open platform for mobile computing for many years, probably not even knowing that Apple would be their main rival (more likely Microsoft, in fact).  So it should not be such a surprise when people begin to recognize that Android is really working.  According to Quantcast, Android has 21% market share in June for smart phones as compared to Apple's 58%.  The Android numbers are growing fast, and this is just US figures.  Android arguably has already established a superior position in the international market given their breadth of OEM and carrier partners.

What has struck me most recently are the conversations I'm having with entrepreneurs and industry leaders about Apple.  Yesterday a mobile start-up CEO told me that when Apple declared that they would block app vendors from collecting device data to use for personalization and targeted advertising, he decided to pivot his start-up to focus solely on Android.  Android app numbers have been widely reported this week as growing remarkably fast and Android app usage is growing faster than Apple.

The president of a mobile advertising agency told me last week that he believes Google/Android will win the battle because it represents the more effective, and better-known, advertising targeting paradigm - search-based vs. apps-based.  The debate here is whether better targeted advertising will be based on what applications I'm using (and what songs I'm listening to on iTunes), which is what Apple is betting on, or will better targeted advertising be driven from search.  If Google succeeds in leveraging mobile search data on devices to inform mobile advertising within apps, it will be very powerful and both advertisers and publishers will flock their way.

A possible Trojan Horse in the mobile platform wars is HTML5.  Apple was quick to push HTML5 as a new standard on the iPhone over Flash, perhaps out of genuine frustration with what Steve Jobs refers to as a "buggy battery hog".  But in promoting HTML5, Jobs may be inadvertently encouraging developers to build cross-platform applications that are elegantly dynamic and browser-based rather than app-based.  If Android continues to get momentum, and HTML5 continues to gain in popularity, it might behoove application vendors to develop broswer-based applications that run cross-platform rather than silo'd iPhone apps.  Search-based targeting.  Browser-based apps built in an open, cross-platform environment.  Guess who wins that battle in the long run?  Strategy 101 says the arena in which you choose to battle a competitor is as important as how you conduct the battle.  Apple has chosen HTML5, an open platform, to battle Google for supremacy on mobile.  This seems like an unwise choice for Apple in retrospect.  

Apple has called a special press conference tomorrow, most likely to address the antenna issue for the iPhone 4.  Watch the body language carefully.  If it's defensive, closed and full of denial, you may be seeing another sign that Apple has jumped the shark.  That doesn't mean the company will decline quickly - after all, Happy Days continued for 7 more years after that ridiculous episode.  It just means the summer of 2010 will be remembered as the moment Apple peaked.

Here's the video.  Enjoy!

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I like the Apple vs. Microsoft analogy. Seems like you could also make the comparison between IBM/Microsoft--Apple's betting on the hardware, presumably for more control of user experience, while Android is betting on their OS to be used across different hardware. Long-term, my bet is on Android. Especially with things like the App Inventor in the mix now.

You point out interesting anecdotes, but I think it is a pretty huge leap to conclude from them that Apple has peaked. The Consumer Reports review notwithstanding, the iPhone 4 is selling well. 2M units flew off the shelves in just a few days. People who want them still can't even get them!

I also think a lot of the media hoopla over the antenna issue is because people are used to AT&T being at fault rather than Apple on reception issues, and it looks like that's not the case this time around. Curious to see what they say tomorrow.

Jeff, I've been thinking about this for a long time and I think you are right about Apple repeating history - the closed hardware + close software of the Mac lost to the PC. Google has taken a tactic out of the old MSFT playbook and is going hardware agnostic. I blogged about this in '08 and it seems to be coming true now. http://www.startable.com/2008/09/10/is-chromes-target-apple-not-msft/

I'd love to see Apple allow other hardware players to build on their software platform + app store. But, given the fact that the app store isn't generating as much revenue as I would have predicted maybe that's not where the money is? Hard to say without more data.

I agree that Android will take a larger share of the market but I believe that Apple will hold on to the more profitable portion. The same has been true with computers and I think this will continue with phones, tablet devices and advertising.

They have always looked for the high-end of the market. If they can continue to do this they can continue to lead.

Jumped the shark? Not yet, but the ramp is out and the leather jacket is on.

Good post! From personal experience, there's definitely something deteriorating at Apple as they sprint for market share. I haven't had many complaints from a developer standpoint, though.

I don't see HTML5 as a major factor in mobile apps anytime soon. User experience is so important on the mobile device, one can't afford the hiccups and slightly less polished look of another layer of translation. And that goes in particular for games, which make up many of the top-grossing apps. User experience is where the iPhone already has a tremendous advantage over Android; I don't see Apple converting developers from Obj-C to HTML5 in the name of standards.

And, the real reason Apple will continue to profit (cartoon version of Sprint salesperson with iPhone seeker, NSFW language in latter half): http://tcrn.ch/aJT37D

"jump the shark" to me has always referred to the beginning of the end rather than a misstep. I think apple,ms and google have all had missteps, but I don't think any of them is starting a decline (a la getting the cute freckled kid on Diff'rent strokes).

When I was developing for web in the mid 90s, we always had to decide which browser to support (or all of them). That meant more programmer time to satisfy all customers. Netscape, MS and more went to task to compete for my attention and as a dev, I'd just say 'you both win and both make my life miserable'. I see the same thing with Flash, silverlight, html5 and native apps. As a dev I realize that I somehow have to support all available variations if I want to maximize exposure (and if I cannot dictate platform to user). So I write core, modular functionality and build special interfaces for each type of presentation.

So while Apple and Google and the rest fight, guys like me just have to support all of them if we're not in a position to dictate what we support (which I find impossible in b2c).

Back to initial point, I think Apple needs to release a Vista or two to signify true 'shark jumping'. For now, I'd say that they just had a guest-star crossover from another show on the same network: signs that they have to get some better 'writing' soon or a shark might end being jumped.

Don't forget about location in the advertising targeting paradigm... which may turn out to be the most effective method for mobile advertising. Apple's acquisition of Poly9 as well as Facebook's acquisition of NextStop are evidence of how important location is becoming to their overall strategy.

Great post. I agree with you that Apple has been showing signs of late that it is about to or may already have peaked. The iPhone4 was definitely a rushed product. The last few Apple product releases have been more reactionary than revolutionary. Apple seems to have on a number of recent occassions, cocked the gun and aimed at its foot. You're absolutely right on the HTML5 strategy. If I can deliver content anywhere using HTML5, why do I need to build software for the AppStore? Of course, that would work against Android too. Again, great post.

It's unfortunate that you choose to filter your data to make your opinions stick. Yes, Consumer Reports cannot currently recommend it, but that's because of the antenna debacle, which they hope Apple fixes. Otherwise it's their highest-rated phone ever. Even with the issues the iPhone 4 currently has, much of it (including reception) is much better than previous models.

Please, use all the facts.

I was thinking of an OS2 vs Windows analogy but decided it was too old school. :-)

We'll see, Robby. Every company has it peak moment (see GE, MSFT, AT&T, Yahoo!, eBay, etc.). Maybe Apple's is still a ways away. Maybe it's closer than we think.

You are prescient, Healy, and have the blog post to prove it! They are addicted to their fat device margins - it will be hard to change business models midstream. Public companies simply don't have that luxury.

As the Fonz would say, "Ayyyyy."

Thanks, Matthias. Maybe you are right about HTML5. That said, I'm hearing a lot of app developers sick and tired of the silos. They'll devote the incremental good features on the easiest, highest volume platform. If Android can evolve into a stronger developer tools system, all bets are off.

Stick with your guns! If a young pup like me would comprehend, you're set :)

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Thanks, Russell!
 

I think developers are tired of the silos but I think, like the browser wars of old, we'll just end up supporting everyone. I think we'll see the brightest devs write wrapper functions which will output code that's platform specific, minimizing porting work. But most will just write multiple versions of their software, which is a shame.

No shark jumping but definitely a QA issue with respect to the antenna issue. Apple has never had to deal with this much volume in multiple product lines. Even the stores are overcrowded.

I think Apple's support of HTML 5 is more in line with their original intent of web apps for the iPhone. They bowed to developer pressure and sent out an SDK, started the app store to limit the risk to their premium image. People still came and bought anyway.

Google's Android was necessary to get the overflow of demand Apple set loose. I say there is plenty room for everyone.

My iPhone 2G is still going strong after three years, so I haven't been able to justify the purchase of an iPhone 4, at least not yet. I have no doubt Apple will get this straightened out and the phone will continue to be a huge seller for Apple, and I'm sure that by then I will be heading to the Apple store to pick one up.

I give them credit for being better than most in releasing products that are usually trouble-free, even in their first iteration. Because of their long-standing reputation for quality, I am less leery of buying a version 1.0 product from them than any other company I can think of.

It would be helpful if you could cite the sources of these "critical reviews." I've read more reviews for it than I can count, and none were even close to concluding it was a "poor" device. Quite the contrary. Even Consumer Reports loved it, then later jumped on the bandwagon when the antenna issue came to the fore, something they didn't notice when they were evaluating the phone independently.

Apple's real problem is arrogance, which no doubt stems from Jobs' legendary "inflexibility," to put it kindly. That aspect of his character has not changed much from the Macintosh days, and it's what got him canned during that first go 'round with the company. Arrogance is a luxury only an unchallenged industry leader or - dare I say it? - monopolist can comfortably sustain.

Apple can probably be said to have something close to a monopoly in the online music business, and an almost unchallenged position in several other areas. This is due to smart business strategy and, more importantly, because they have frequently envisioned new markets well before the competition, thus giving them a huge headstart.

Fortunately, Android is bringing to bear enough pressure that Apple may be forced to give up some of its famously tight-fisted policies. Eventually, iPhone and iPad-like devices will appear with similar feature sets - but they'll be much more open, and suddenly consumers will have a real choice to make.

Whether you like the company or not, the fact is that the only real competition they have to their mobile device platform is Android. Though gaining rapidly, has not grown large enough for Apple to feel the pressure. So it's business as usual. For now.

The trouble with saying that something or somebody has 'jumped the shark,' is that it is a judgment that can only in retrospect be shown true. We'll all know in a few years how this turns out.

Or maybe we won't.

You are probably right. The real losers here are Nokia, Blackberry and other handset folks.

Thanks, Mike. I remain a huge Apple fan (the iPad is spectacular) but, as you say, time will tell how long they can sustain their (arrogant?) Market leadership position.

Great post. I a particularly like the comment about winning with the better ecosystem. At the risk of repeating your point, usage begets more usage and usage ultimately results in money. Controlling the user experience may (actually does) make for a better experience, but at the price of having to fall behind the innovation trend.

I agree with Shock Me here. Android was necessary to fill the gap on other mobile networks. When Apple opens up to Verizon, their sales could skyrocket. It's still dominant in the music player category, and, when you factor in the great reviews of the iPad and how it's still far from a mainstream product, Apple still has a ways to go before its peak.

The future will be full of a wide array of personal electronic devices with various purposes, with the distribution likely weighted towards multipurpose devices rather than single-purpose. But the future of devices will not be dominated by three big companies.

Twenty years ago, almost no one knew how to build consumer software. Ten years ago, almost no one knew how to build consumer hardware. But DIY is no joke, nor is open innovation. Over the next ten years, I expect we will witness the emergence of multipurpose devices and tools built on a much more open model than is even imaginable in our world of picking one of three networks, one of several devices, one of three OSes, and one of a few development platforms. The open future is on its way!

The shark jump is not just the peak, but the creative peak. When a series or other enterprise has lost its creative momentum and reserves of originality, and is forced to use gimmicks to compensate. Apple is still a very innovative company, they probably will be as long as Steve Jobs is around. As far as peaking in success... everybody loves to speculate about when things are going to crash. It seems, particularly, immediately after you reach a career milestone. Now I personally do not agree with all of Apple's products or practices. I believe it is a mistake not to use multiple carriers, etc. But the simple truth is, Apple exceeded market capitalization of Microsoft; a company that nearly destroyed it 15 years ago, and one of the largest companies in the world. Apple, also, has some of the most innovative and popular electronics around. This in the -middle- of the worst economic climate in generations. I mean, if Apple is doing this well NOW, how well do you think they are going to do when unemployment is back to normal and the consumers are out and about shopping?

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