Google (GOOG) Will Probably Win the App War

By Jan 28, 2013, 5:56 PM Author's Blog  

My theory on a falling apple has little to do with Sir Isaac Newton’s musings on gravity.  In case you haven’t heard, Apple (AAPL)  is no longer the world’s most valuable public company as of this week. Plenty of hedge funds sold off their AAPL shares on the disappointing earnings news. The Wall Street rah-rah bullish cheerleader chorus is still fond of this darling stock. They want sucker retail investors to buy in to AAPL and save the bacon of their hedge fund manager friends. I have no intention of playing the role of greater fool.

Apple is IMHO likely to lose its preeminent market position in mobile devices simply because it has always been a premium product maker for early adopters. It has never been able to translate the enthusiasm of its boutique products’ first buyers into staying power for cheaper products. Apple has never been able to lower the price points of its products to compete with later arrivals. Samsung’s Droid phones will gain traction as their price points come down.

The future market for mobile devices will belong to the low-cost products competing in emerging markets that have either not reached their saturation point (North America and Western Europe are saturated) or are served with poor telecommunications infrastructure.  Your average African tribal shaman doesn’t have the local equivalent of US$700 to drop on an iPhone and Apple isn’t going to lower its prices. Some other competitor – probably Samsung – will take that market with a cheap device that accommodates low bandwidth and intermittent service.

Something also needs to be said about walled gardens.  Apple’s music store is nice but Google will probably win the app war. Google (GOOG) has more back-end services that make apps useful, specifically Google Earth.  I’d like to see a head-to-head comparison of apps that manipulate embedded imagery or geographic data to prove my point, but I suspect Google would be the winner.

Full disclosure:  No position in AAPL or other companies mentioned at this time.

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