Market Externalities

Hazlett has an article in the WSJ comparing the differing approaches taken between Apple and Android in the smartphone market. He first points out how the imposition of standards by Apple can make for an easier user environment:

Now top developers, according to numerous reports in the tech press, are ditching Android for Apple—for a company that maintains dictatorial control over its content. That very coordination is yielding unmatched benefits, particularly in customer ease-of-use that drives iPhone and iPad owners to be truly massive consumers of apps and online media.

He then coins what he calls “Business Model Search,” a meta-concept where the two companies, Apple and Google, are competing in the market to see who can come up with the best model – which set of standards (tighter or looser) can best succeed in the market. In some instances, competing standards allows the most useful to win out. (Fans of Betamax know this isn’t always true…)

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