Google v Apple – A Lesson in Value

Pricing captures value. Although true, it doesn’t tell the whole story.  Realized profit is a great indicator of how much value was captured.

A recent article estimated that Google makes $1.70 per Android device.  At the same time, Apple makes $576.30 per iOS device.  WOW!

To consumers, Android devices and Apple devices are priced similarly, but the profit difference to the two creators is HUGE.  Why is this?  There are many reasons, but the lesson to take away from this blog is that Apple created a ton of value and figured out how to capture a lot of it.  Google created a lot of value with Android as well, but they share most of that value with other companies.

Apple makes and sells their own hardware, Google licenses Android. Apple sells apps and makes a large percentage, Google doesn’t.  Apple licenses the right to sell accessories, Google doesn’t have control over them.

When Disney first created Disneyland, they bought 510 acres and built the park.  The city of Anaheim grew around the location, with hotels and restaurants popping up and capturing a lot of the value that Disney created.  When Disney created DisneyWorld in Orlando, they bought 25,000 acres and have built 23 of their own hotels.  They knew they created the value and they were able to capture more of it the second time around.

Google is like Disneyland, Apple like Disney World. Both create a lot of value, but Google shares that value with other market players. Apple is able to create value AND capture it.

Here’s your challenge.  What value are you creating?  How much of it are you capturing?  Look around your market and see who else is making money.  Are they capturing value that you create?  Is there a way for you to capture more of that value?

This doesn’t mean you MUST expand your reach, but this does identify areas where you may be able to capture more value.

What Apple has done isn’t easy.  They have built a fantastic brand and a relatively closed ecosystem where they can make money from almost everyone who participates in their success.  This has taken years, sharp vision, and big risks.  But success is sweet.

Can you be a little more like Apple?  Can you capture more value?  Think about it.

 

Mark Stiving, Ph.D. – Pricing expert, speaker, author

Photo by missha