The Apple’s Ecosystem: A Systemic Incentive for Adoption and Diffusion for Apple Products
In this YouTube video created by Marques Brownlee, Brownlee discusses the importance of the Apple ecosystem; in technological terms, the ecosystem is a set of objects that interact with each other. Brownlee lauds the efficiency of the Apple’s ecosystem for two factors. First, the Apple “objects”—such as iPad, Mac, iPhone, etc—interact with each other in a superior way. Simply stated, there is a “positive incentive” to use different Apple products at the same time. Second, the “walls” built around Apple’s ecosystem are “built up high” (Brownlee). In other words, there is a “negative incentive” to use other tech products other than Apple. Because of these two simple but pertinent factors, the fandom of Apple consumers has reached to the level that it is today, where nearly half of Apple consumers have more than one Apple device (Cybart).
Although such findings are surprising enough, a further analysis by using the Network Coordination Game we learned in class can explain the supremacy of the Apple ecosystem. In a Network Coordination Game, let’s consider a simple network of 7 nodes:
This is a graph where there are two new competing technologies, Apple (red) and non-Apple (Android, denoted by green), and these nodes have a pre-existing Apple device that would incentivize them to use Apple products (in other words, they are in the Apple ecosystem). Amongst all the nodes, let’s say that nodes E, F, and G have “initially switched” to a non-Apple device. Let’s consider node D’s payoffs, and determine what technology node D should decide to use. Node D has a total of 3 edges, 2 non-Apple edges (D-E, D-F), and only one Apple edge (D-C). Then, the proportion of players playing A, denoted by p, must be ⅓. Consequently, the payoff when D chooses non-Apple (N) should be n + n; the payoff when D chooses A should be a.
According to the threshold rule we learned in class, the decision eventually boils down to the payoffs; based on the payoffs, what would be the decision of node D? As mentioned above from Brownlee’s video, there is a “positive incentive”—a better payoff for a—for users to keep using Apple products once they are in the ecosystem bubble. Furthermore, there is a negative incentive—a worse payoff for n—for users to switch to a new non-Apple device. Therefore, we could note that the threshold rule in this situation to be the following:
As noted above, even though D was in a situation where D had more edges that chose N, D was able to choose A because of the increase (and decrease) of A’s (and N’s) payoff. The increase and decrease of the payoffs can be applied to many instances in the real world relating to Apple’s ecosystem. For example, people could buy a set of AirPods, as opposed to other wireless bluetooth devices, because of the ease of connectivity to the iPhone and the MacBook compared to when using other headphones. Furthermore, the ability to use Apple’s exclusive applications, iMessage and FaceTime for example, across multiple Apple devices can provide a positive incentive for Apple users to keep buying their products and prevent Apple consumers from buying products from other brands. Because of the well-established ecosystem, Apple is still able to be one of the most successful premium tech companies in the world, and the network coordination game analysis provides one of the justifications of why we buy Apple products despite such a hefty price tag.
However, one must not ignore the limitations of the power of the Apple ecosystem; such an ecosystem is only prominent in the Western hemisphere, especially in the United States. For other countries, there might be a cluster that exists where Apple’s prominent ecosystem is not a big incentive enough for users to switch to Apple. One prominent example of this is South Korea; according to the Statcounter, the leading mobile brand in this country is Samsung: 64% compared to Apple’s significantly smaller share of 26% (“Mobile Vendor Market Share”). In Korea’s case, not only was the Apple’s ecosystem a minuscule advantage, but such a reason could also be explained by a high cluster of density; the cluster of density of Samsung users in the Republic of Korea was larger than the threshold of the users to switch, resulting in only a small proportion of Koreans to use Apple compared to a giant share of Samsung.
Works Cited
Brownlee, Marques. “The Apple Ecosystem: Explained!” YouTube, YouTube, 7 Mar. 2018, www.youtube.com/watch?v=KB4_WIPE7vo.
Cybart, Neil. “The Secret to Apple’s Ecosystem.” Above Avalon, Above Avalon, 22 July 2020, www.aboveavalon.com/notes/2020/7/22/the-secret-to-apples-ecosystem.
“Mobile Vendor Market Share Republic Of Korea.” StatCounter Global Stats, gs.statcounter.com/vendor-market-share/mobile/south-korea.