Benedict Evans: Does Apple have market dominance?

That depends, says the independent analyst, formerly at Andreessen Horowitz, on how you define the market.

From “Market definitions and tech monopolies” posted last week on his website:

One of the basic building blocks of any competition case is market definition. If you’re claiming that a company has market dominance, and that it’s abusing that dominance, what market are we talking about? Very obviously, the company being prosecuted tries to draw the definition as widely as possible – ‘we compete with the entire planet!’ – and the prosecutor tries to draw it as narrowly as possible – ‘Ferrari has a monopoly of rear-engined Italian sport cars with horse logos!’

The fun part of this is that both of these definitions are true, and so you have dig rather deeper and work out what problem you’re trying to solve to work out what definition to use, because very often, picking the definition decides the outcome of the case, before it’s even started…

apple benedict evans market dominance Apple is on the other side of a lot of these conversations. An Apple lawyer would say that it sells perhaps 15% of all the phones sold on Earth each year and that clearly doesn’t look like market dominance. However, about 25% of all the smartphones actually in use today are iPhones – there are about 1bn iPhones in use and 3-3.5bn Androids (iPhones have a longer average life). Is the global market what matters? If you’re a US retailer, or a developer trying to reach US consumers, Apple doesn’t have 25% of the installed base – in the USA, it has over half. Google told the DoJ that 60% of its US mobile search traffic comes from iOS devices, and you will hear similar numbers from other companies and indeed the mobile network operators themselves. Taking this further, Piper Sandler’s survey of US teenagers reports that over 80% of them have an iPhone.

So, if you’re trying to sell to American teenagers, the fact that Apple has 15% of global handset unit sales is as meaningless as the fact that Amazon has 1% share of global retail. What matter is the install base of your customers, and in that market definition, Apple has 80%. Again – pick your market. Ironically, you can see Apple itself doing this – it uses the high numbers when it talk to developers and the low number when it talks to lawyers.

My take: Not the first time Evans has said this. See, for example, Is Apple a monopoly?, posted here last summer.

14 Comments

  1. Jerry Doyle said:
    “…. Is this a search market case or a smartphone OS market case? And what happens next year? If Apple makes a search engine and uses the market dominance of iOS to create competition in search, what market definition is that?”

    Perhaps I am too naive, but I have difficulty understanding why Justice is making such an issue over Google’s payment to Apple for being the default search engine. It would be a simple process in setting-up the newly purchased iPhone for the user to be asked to choose from existing search engines, Bing, Yahoo, DuckDuck Go or Google. As the consumer of the new iPhone selects his or her desired Search Engine, a sentence below alerts the consumer “you may change your Search Engine selection at anytime.” What is it about this remedy I am missing? And by the way, even if this proposal was implemented then I suspect Google still would be selected and be the dominant (but user chosen) Search Engine.

    5
    November 5, 2020
    • Gregg Thurman said:
      Don’t know how this witch hunt will play out, but continuing to make Google the default search engine, while giving an option to change it at set up probably won’t change usage in the slightest.

      User preference for Google is well established and a legal decision isn’t going to change that.

      0
      November 5, 2020
      • David Emery said:
        Yeah, I can’t see someone saying “I duckducked that” replacing “I googled that”… 🙂

        1
        November 5, 2020
      • John Konopka said:
        I’ll push back a little on that. I 100% agree that for most professional people Google is the standard for search. For lots of other people it doesn’t matter so much. I have several family members who wouldn’t know the difference if you switched out their search engine. (Reminds me of those old TV commercials where they served some odd brand of coffin the restaurant.)

        So if Apple randomly assigned you a search engine at start up I’ll bet a big group of people would immediately switch to Google and the rest wouldn’t care.

        1
        November 6, 2020
  2. Steven Philips said:
    Like politicians, Google makes its money by betting that people are too stupid or lazy to change the default. Politicians don’t like that and must protect the people from themselves – except from politicians!
    (Sorry if that’s political.)

    3
    November 5, 2020
    • Gregg Thurman said:
      Not political at all. No political affiliation can deny the obvious.

      0
      November 5, 2020
    • Fred Stein said:
      @Steven: Double “like” 1) the sentiment; 2) the irony

      0
      November 5, 2020
  3. Joe Murphy said:
    @ Steven Philips
    Treating all parties the same, simply as politicians isn’t political.

    I don’t think any of us take offense at broad observations.
    We may get excited about someone claiming their side is
    better, smarter, etc than our side.

    I gave you a thumbs up for your comment.

    0
    November 5, 2020
  4. Kirk DeBernardi said:
    Evans’ intellect and market observation skills lean towards simplifying and concurrently explaining otherwise confusing or broadly debatable subjects such as this “ monopoly” brouhaha.

    Here he provides such simplification in the conundrum that is Apple in it’s various marketplaces — not explicitly dominant, but explicitly preferred.

    Long runway for continued success in my eyes.

    0
    November 5, 2020
  5. Gregg Thurman said:
    Long runway for continued success in my eyes.

    Ever since the judiciary’s handling of Apple’s book anti-trust case I no longer have faith in the court’s ability to interpret law.

    Completely ignoring Amazon’s clearly anti-trust, below cost, book strategy that destroyed book resellers around the nation, then finding Apple’s agency relationship (which is perfectly legal) with publishers anti-competitive still rankles.

    2
    November 5, 2020
    • Kirk DeBernardi said:
      @ Gregg Thurman —

      Agreed.

      Remember — the judge in that case (name escapes me; fancy that) didn’t appear to make a judgement.

      On one half she had it in for Apple, and on the other half, was blind to Amazon’s entrenchment.

      Also, she assigned an court monitor a**hole to then oversee operations at headquarters (with heavy impunity) for an obnoxiously long term.

      0
      November 5, 2020
      • Alan Birnbaum said:
        Her name is Denise Cote.
        What doesn’t kill you makes you stronger

        0
        November 5, 2020
      • Gregg Thurman said:
        Also, she assigned an court monitor a**hole to then oversee operations at headquarters (with heavy impunity) for an obnoxiously long term.

        Yeah, and after a few months Apple essentially ran him out of town.

        1
        November 5, 2020
  6. Bart Yee said:
    Well, today, Nov. 6, 2020 should be historic. Apple takes preorders for its best iPhone 12 Pro Max and its groundbreaking back to the future iPhone 12 mini. Both are destined to be big sellers and keep Apple moving to a big quarter. Plus the HomePod mini also goes on sale.

    And on Tuesday Nov. 10, the One More Thing event for Apple Silicon Macs, another step forward for Apple.

    But just Apple’s luck AGAIN, overshadowed yet another time by external events. I hope someone will notice what Apple is doing!
    🙂 🙂

    0
    November 6, 2020

Leave a Reply