Monday, March 17, 2014

Platform Wars Get Scorecard

The terms "ecosystem" and "platform" may be overused, but they are useful to describe today's market. That's because today's top tech competitors all seek a perfect lock-in where their customers love their experiences so much that they want to stay with their vendors as long as possible.

Apple has almost 600 million iTunes accounts; Amazon boasts over 200 million shoppers/customers. Google's Android has more than a billion users, and its search business has twice that number. Microsoft perhaps has the most polarized user base -- billions of desktop software users, a paltry mobile user base, and 50 million Xbox gamers.

Among a second tier of rivals, Facebook has a billion users; China's Tencent has 800 million QQ account holders and 400 million WeChat users; while Samsung and Sony are nurturing growing bases of users and services

Each ecosystem has its most valuable users. Among the more than 200 million shoppers on, the Amazon Prime members and its Kindle product users are the crown jewels for the e-commerce giant. The 19.5 million Amazon Prime members spend three times more than an average Amazon shopper, according to Parks Associates' third-quarter 2013 estimates.

Microsoft's Xbox users are the software giant's saviors in the digital media battle. Out of the more than 50 million Xbox Live account holders, about one-half pay $60 per year for a Gold membership that gives them access to premium features. They spend more on games and other media content than all other account holders, making them the primary targets for Microsoft to converge the Xbox experience with its mobile initiatives.

One metric illustrates each platform's power -- the average digital content revenue per platform user (ADCRPU), a measure of digital content and service revenues excluding hardware sales. For 2013, Microsoft's ADCRPU is almost three times higher than Apple's and 10 times higher than Google's. However, Google's ADCRPU grew the fastest from 2012 to 2013, followed by Apple's and Amazon's. If Microsoft does not increase its platform revenues by expanding its paid user base and/or diversifying revenue sources, Google's and Apple's earning power will catch up with Microsoft's quickly.

Facebook and Tencent have to grow out of their service or geographical niches to become true global competitors, whereas Samsung and Sony must find a way to build or rebuild their media empires to supplement their device businesses. They are all searching for their most valued customers and trying to find that unique combination of service features, user experience, and revenue models that will reinforce and extend that core group of valuable users.

From the article, "Platform Wars Get Scorecard" by Harry Wang.

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