The End of the Zero-Sum Game
By Harry McCracken | Thursday, January 27, 2011 at 8:50 am
“It is not enough that I win. Everyone else must lose.”
–famous quote variously attributed to Attila the Hun, Genghis Kahn, Don King, Larry Ellison, and Ross Webster (the villain in Superman III)
Back in the 1990s, in the world of technology, it certainly seemed that if one company was a winner, everyone else was by definition a loser. It’s a concept known as the zero-sum game. And back then, nobody played it better than Microsoft.
When Office got popular, 1-2-3, WordPerfect, Harvard Graphics, and other programs fizzled. Internet Explorer surpassed 90 percent market share in the browser business, reducing Netscape Navigator to a has-been. Windows boomed, and the Mac’s market share went in only one direction: down.
Again and again, Microsoft won and everyone else lost. Including consumers who preferred products from other companies.
Plenty of people think that the epic technology battles are still zero-sum games–especially the most epic one of the moment, the competition between Apple’s iOS and Google’s Android.
Here’s Katherine Noyes at PCWorld:
Android accounted for 25.5 percent of worldwide smartphone sales in the third quarter of 2010, according to a recent Gartner report, making it the No. 2 operating system (OS) on the planet. That’s particularly impressive given the measly 3.5 percent of the market Google’s platform held just a year ago–impressive, but terrifying, if you’re on the iPhone team.
Apple’s iOS, meanwhile, fell from a 17.1 percent market share a year ago to 16.7 percent in this year’s third quarter, Gartner reported.
[snip]
In short, Apple may always have its share of fans among consumers who don’t mind living in its “walled garden,” but there’s no way it can compete in the market as a whole with the diverse, compelling and powerful platform that is Android.
It’s tempting to assume that good news for Android is bad news for iOS and iOS users–but I think there’s far more evidence that the era of the zero-sum game is over. Multiple flowers can bloom, and we consumers can pick whichever one appeals to us without undue fear of our mobile OS being driven into irrelevance.
The rise of Firefox was one of the early signs that the zero-sum game rules no longer applied. When it first appeared in 2004, it wasn’t clear that there was a sustainable market for more than one Windows-based Web browser. But there was. And Firefox didn’t need to to get to 90 percent market share to be vibrant and healthy–even when it had ten percent of the market, it had a remarkably rich ecosystem, with thousands of add-ons.
Today, there are more viable browsers than ever: Internet Explorer, Firefox, Chrome, Safari, and Opera. As long as the organizations that build them stay interested, they can peacefully coexist for years to come.
With Android and iOS, there’s even more reason to think that both can have bright futures. For one thing, the real opportunity isn’t stealing customers from the other guy–it’s reaching out to the millions of people who don’t yet own a smartphone at all. (As I wrote in an earlier item, nobody agrees on what percentage of consumers own smartphones, but it’s way, way less than 100 percent.) Millions of first-time smartphone buyers may buy iPhones; millions may buy Android handsets.
As Firefox proved, robust ecosystems aren’t contingent on market dominance. In terms of raw quantity of users, Google will surely outperform Apple–how could it not, considering that there are hundreds of Android models vs. Apple’s grand total of two (the iPhone 4 and iPhone 3GS)? But as long as the iPhone platform has millions of users, it can have an outstanding collection of third-party apps and accessories. And much of the stuff we do on smartphones–e-mail, Web browsing, and more–is platform agnostic; nobody is going to send e-mail in a form that can only be received on an iPhone, or create a Web site that only works well on an Android phone.
Come to think of it, the Mac also shows that the zero-sum game is over. Even if its marketshare has crept up to ten percent or so, Macheads are radically outnumbered by Windows types. But that’s fine–Apple makes billions in profits from Macs and dominates the market for $1000-plus machines, and Mac users have a great platform that isn’t going anywhere. (Even Apple haters can’t make a rational case that the Mac is endangered anymore–the best they can do is to call Mac users names and insist they’re part of a cult.)
For some people, the end of the zero-sum game is tough to deal with. (I certainly know iPhone owners who’d like to see Android fail, and Android owners who’d take pleasure in the iPhone petering out.) For those of us who like competition and choice, though, it’s reason for rejoicing. I may not use the same products that you do–but I hope your favorites are wildly successful for years to come.
[NOTE: This story is republished from last week’s Technologizer’s T-Week newsletter–go here to sign up to receive it each Friday. You’ll get original stuff that won’t show up on the site until later, if at all.]
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17 Comments For This Post
January 27th, 2011 at 9:23 am
Good to see someone not wanting the fall of something
i support android but it is nice to see someone wishing all well
January 27th, 2011 at 9:35 am
I have a competition in me. I want no one else to succeed.
January 27th, 2011 at 10:21 am
The only reason this might not be true is the hardware ecosystem. You need a platform with big enough share that manufacturers of smart cars and smart appliances will make compatible versions.
It's also worth asking whether a few years down the line Apple is going to be kicking themselves for giving up global marketshare in exchange for high margins on their phones in the short term. Perhaps that share will prove to be quite valuable as ecosystems prove both profitable and sticky.
January 27th, 2011 at 11:28 am
I think there's a big difference between zero-sum games and winner-take-all markets.
As long as most people buy only one smartphone, the smartphone market is a zero-sum game. Market size may increase as feature phone users upgrade to smartphones and this can increase unit sales over time. But as long as each consumer buys only one smartphone, then market share is a zero-sum game.
The PC OS market was winner-takes-all because standards did not exist to allow competition and innovation. Also, the PC market was very small in the early days when competitors stood more of a chance. Cell phones now out ship PCs 3x or 4x to one. The standards needed for cell phone competition have been in place from the start, wisely mandated by the governments that licensed the scarce spectrum.
So this is one of those rare times when I have to disagree with Harry. I don't see this as the end of the zero-sum game. The cell phone and smartphone markets have never been winner-take-all markets and they never will be. But they have been and will continue to be zero-sum games among the vendors.
I think it just looks like the end of the zero-sum game because of the decreasing importance of PCs and the increasing importance of mobile devices like smartphones and iPads. This thankfully represents a shift from a winner-take-all PC market to a mobile device market with healthy, ongoing competition and innovation.
January 28th, 2011 at 12:01 am
As a windows fan, I love having nearly every single application out there available for Windows, many of them of high quality. I suppose that is the core reason why the fans want their OS to be overwhelming dominant, so that they can enjoy a really rich ecosystem. When I switch on my Ubuntu, I'm always faced with applications I don't really enjoy using/am efficient at using, resulting in my running virtualised Win XP.
Similarly, though I dislike the Apple culture, I have to say I'm willing to switch over from Nokia to iPhone after my contract's done, so I can enjoy the vast array of applications available on the AppStore (which I'm led to believe has more quality and variety than Android?).
Zero-sum game is conflicting in that it's easy to get applications/develop for, but its development stagnates without competition. I think the current Mac/Win, iPhone/Android is just about right, providing variety yet a 'monopoly'.
January 28th, 2011 at 5:24 am
Great post! You hit the nail on the head about the paradox of Zero-sum game being the easiest to get applications/develop for but at the same time stagnating without competition!
Sean
January 28th, 2011 at 7:04 am
I think Android is the Windows of the mobile market, which is going to be the most significant digital device market in the not too distant future. As such, it will be the basis for competition, and that will drive down prices to commodity levels, as has happened to the PC. That locks iOS into a niche, just like iAnythingElse. Apple was fortunate in the iPod market, because they developed the marketplace for content that became the standard, thus dominating the digital music player market handily. Jobs understood that controlling access to content was key to the success of the iPod and has done everything in his power to control content in the iOS market, but that is all, or soon will be moot. He has to compete if a free market, thus his customers will primarily be the insecure and zealots (and those that just want stuff to work well) that he has today.
January 28th, 2011 at 9:09 am
"He [Steve Jobs] has to compete if a free market, thus his customers will primarily be the insecure and zealots (and those that just want stuff to work well) that he has today."
I might be ashamed of my insecurities. I could be ashamed if I let zealotry get ahead of rational thought. But who would feel shame in just wanting stuff to work well? What's wrong with that?
I've soldered CPUs in the early hobbyist days. I've written my own compilers, operating systems, GUIs, and applications. Just because I could build and maintain my own computing infrastructure doesn't mean that I want to spend my energies doing that. Been there; done that. I'd rather have a stable and reliable platform on which to build things that haven't already been built.
I have nothing against people who want to tinker. I'm a strong supporter of open source development models and have contributed to a couple of projects (precisely because I wanted them to just work well too). There's no shame in wanting things to just work well.
I see people relating to their mobile devices in ways they wouldn't relate to a desktop or even a laptop. They have an emotional connection of sorts with the device. They carry it everywhere. They depend on it for reliable communication with other people. This is why dropped calls and data performance are such a constant battle among cellular providers.
I think this shift from a detached relationship with a desktop PC to a much closer relationship with mobile devices is driving the demand for mobile devices that just work.
I think today's iOS devices score better on "just works well" than Android. My crystal ball says they'll maintain that edge for structural reasons that are hard for Android to change.
January 28th, 2011 at 7:19 am
Kipp – you said:
just like iAnythingElse
You mean like the iPod – a device that is manufactured as closed (even more so than) the iPhone and is still the most dominate mp3 player to date?
There is 2 fundamental problems with drawing a comparison to windows. One Google does not have an IBM to give them an advantage like Microsoft had in the 80's. Two, Google is not selling Android in any similar fashion that MS sold Windows.
It;s not going to be the same thing. I have no doubt that they are going to sell more net units, but just because you can fire more bullets doesn't necessarily make you a better shot overall.
Apple is not in the iPhone market to earn raw marketshare – they are off to make money on hardware – something that Google does not attempt to do.
February 7th, 2011 at 1:19 pm
Apple is not out to make money on hardware. They make their money on apps and iTunes songs. They do not need to outsell Android to be profitable at that. Google makes their money on ads and search. These phones are just an avenue for both companies to make money on their strengths. That is how this zero sum game is over. They both can sell their respective units and make money and be successful. The total number of phones sold is not proportional to their profits and success.
January 28th, 2011 at 1:41 pm
I think this article is missing the underlying reality of the smartphone market currently. The market is exactly like the PC market was in the 80s and early 90s. The growth in the market is because of new/more people purchasing phones, not in people replacing or buying more phones. The PC game has played itself out to become a dominant force and growth is largely limited to developing markets and hardware replacement/upgrades.
A comparison to Internet browsers is equally a ridiculous proposition. The internet was designed to be cross platform capable, phones and more especially phone applications are not. Internet Explorer becoming a market dominating force was because the competition sucked not because of any other factor.
At this point the market is so small but growing so rapidly that if any OS falters for any reason they will be overwhelmed much like how Windows took over every established vendor. The market isn't in the tens of millions of units already sold its in the billions of units waiting to be sold.
Unless we see some amazing cross platform standard like the Internet has we will either find a dominant OS will take over or applications will continue to dilute out to provide less and less value as is currently occurring in the iPhone market.
January 28th, 2011 at 3:11 pm
A really interesting post, Harry. But how are these guys all going to play nice in sandbox without competing for marketshare? Especially in mobile, the desire for dominance among Apple, Google and RIM isn't just held by the companies themselves but by the end-users too. Unfortunately, in a lot of industries one company's slice of the pie is a slice that cuts into your market potential.
On a side note, as a WebOS user I've seen a platform that I love get driven into virtual irrelevance because of the competitive nature of the mobile space. If HP disappoints with their announcement in February, I'm switching to Android and it will be the beginning of the end for WebOS.
February 1st, 2011 at 12:01 am
Oh, I think there will always be competition–even in non-zero-sum games, companies will want a bigger slice of the pie. But the smartphone market is more than big enough for several OSes to thrive.
January 29th, 2011 at 6:58 am
There is also the issue about comparing say Firefox and other browsers and smartphones. I can download an install any number of browsers for little or no cost, and move back and forth with ease.
A smartphone, on the other hand, requires a fair amount of money, ongoing costs and a contract commitment. Interesting article though.
January 29th, 2011 at 7:14 am
Zero-sum games never really existed: if you look at a market in terms of *percentage* share, then shock horror, they always add to 100 so you have a zero-sum. But markets are always growing (or occasionally shrinking) so the true sum is always net positive or negative. A 1% drop in market share in an emerging market still means a big increase in volume of units shifted.
February 17th, 2011 at 6:39 pm
Well, it doesn't matter if there's a zero-sum game, they're always fighting to get rid of each others through out times.
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