It's The Ecosystem, Stupid
In the mobile and casual computing landscape there will only be three major players: Apple ($AAPL), Google ($GOOG) and Microsoft ($MSFT). Why? Because they have and are continuing to build omni-channel, multi-device ecosystems.
Think about it. If you take a look at Research in Motion (RIM, ticker symbol $RIMM), they have hemorrhaged not only market share over the past five years (by the way, the iPhone's fifth anniversary was this past week) but also revenues through a huge drop in sales (43% year over year drop reported for this past fiscal quarter) and a subsequent 85% drop in the stock price. It is not entirely because RIM makes inferior products or that they were simply resting on their laurels, it is because their competitors are building ecosystems.
Digital Omnivores Love Ecosystems
Consumers are leveraging multiple devices to access their content consistently throughout the day. comScore studied people's digital biorhythms and the devices they used to engage in their digital world and what they discovered further underscores the need for a proper ecosystem to not only get things like email across devices, but also payment mechanisms, social networking and sharing and consumption of personal content.
Apple is the obvious example of a company feeding the digital omnivore through their ecosystem. They have hardware, software, millions of credit card numbers on file, software distribution (App Store), content distribution (App Store), computers, phones, tablets, televisions (Apple TV) and a cloud-based syncing mechanism (iCloud) to keep everything up to date and in sync with each other. In addition to all of this they have retail outlets to sell and promote their wares boasting record-breaking numbers with their stores earning an astounding $4,000/square foot (2nd place is Tiffany with $2,700/square foot).
Apple has the ability for users to access content on multiple devices, in an environment for which they are familiar and feel safe and secure using. A handset maker like RIM, has their Blackberry line of products -- and that's it. The same is the case with Nokia. They haven't a proper lifestyle ecosystem for Nokia users to plug into and Nokia's dénouement is only exacerbated by their rising handset inventories and a downdraft in accounts receivable all stemming from, you guessed it, a severe drop in sales. With $2.4 billion of cash on hand and an unprofitable business, I give Nokia 18-24 months.
Certainly an ecosystem is not what is single-handedly crushing the hearts and minds (and profits) of companies like RIM and Nokia, but for the long term, it is what will ultimately end them. Google, not directly making loads of money on Android, has invested heavily in not only Android, but in satiating the digital omnivore's appetite of a multi-device lifestyle. Sure Android is running on smartphones and tablets, but Google has integrated the likes of email (Gmail now has 425MM users), instant messaging, SMS and telephony (Google Voice à la Grand Central acquistion), social networking (Google Plus which in less than one year has amassed 250MM users, of which 60% are "active"), cloud storage and sync (Google Drive), software and content distribution (Google Play), computers (Chrome OS notebooks - not all that successful, but still an attempt at growing the ecosystem), televisions (Logitech, Vizo, and other Google TV devices) and even their own cross-device web browser (Google Chrome) to support the multi-channel experience. This is the model for success going forward and is what is pitting Apple's ecosystem against Google's whilst leaving handset manufacturers like Nokia and RIM in the dust.
Why Microsoft Survives
Microsoft, as technologically boring as a company as one may believe it is, has a solid chance of being the odd man out, or the Ross Perot or Ralph Nader depending on your perspective, to keep the seeminlgy two-horse race a triad of competition.
For years Microsoft has been dominating the PC space, yet hasn't been able to grab a solid foothold in the mobile and casual computing sector. Windows Phone has been a prototype of sorts at best and not until just recently have they even had a real contender in the tablet space; their Surface tablet is looking to change that.
However, Microsoft has been investing in their ecosystem for quite some time. Hotmail, Xbox, Kinect, Azure, Exchane, So.cl (an attempt at a consumer social network), Zune (even though it was a failure, it supported the ecosystem model), Skype, SkyDrive and now with additional hardware such as the Surface tablet, the recent puchase of an enterprise social network (Yammer), Microsoft is slowly building their ecosystem back up. In my opinion, the success or failure of the enterprise adoption of Windows 8 (consumers always adopt much more quickly), will determine whether they are truly a technological contender or simply the third wheel.
Amazon Is The Potential Wildcard
With owning content distribution, credit card numbers, devices and powering nearly half of the internet with their Web Services offering, Amazon has the ability to ultimately disrupt the competitve ecosystem space.
Amazon releasing the Kindle and its successors as yet another medium for people to access content through Amazon has been incredibly successful, capturing 50% of the Android tablet market share. But with additions like Amazon Drive, Amazon Cloud Player and their Instant Video offering, Amazon is quietly encroaching into the digital omnivore's mutli-channel lifestyle typically dominated by Apple, Google and Microsoft. Their lack of hardware beyond the Kindle franchise is made up for by their ubiquity across channels and creating new channels of their own (e.g. Kindle). Moreover, with AWS, they have the ability to scale any sort of cloud-based offering for any of their services going forward. This is a real threat to Google, Apple and Microsoft.
Apple Will Continue to Set the Bar
With Apple's walled garden approach to their ecosystem (and their relentless legal team's offense is defense strategy in patent litigation), one can expect that as Apple continues to roll out its services across their myriad devices, the experience for their traditionally affluent demographic will only continue to improve.
I would not be surprised if Apple eventually moves into cars or even the smart appliances space. Yes, this could appear as hyperbole, but to truly be a part of one's entire lifestyle experience, why would Apple not want to be involved in the day-to-day of using your refrigerator or even driving to work and back? Whilst their moves in the past may seem far-fetched (many calling for the iPhone to be a flop), they have been spot on strategically thus far and as a company; they make few mistakes. As their iCloud offering continues to mature and a true Apple Television set makes its way to consumers the effortlessness of using Apple across channels will most likely keep their nearest competitor, Google, playing catch up for the foreseeable future.