Lock-In and Ecosystems

On an earnings call in 2009, Tim Cook was asked how the company would fare when it inevitably lost Steve Jobs in the CEO post, and he responded by delivering a now-famous explanation of how he views Apple’s core values. It was, typically for Cook, an efficient and profound monologue that, among other statements, captured core truths for what sets the company apart:

[…] We believe that we need to own and control the primary technologies behind the products that we make […] We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.

I trimmed a fair bit of this, but these two statements complement each other beautifully. The tight integration of the company’s hardware and software — and the individual teams within those disciplines — have come to define the company’s key products: the Mac, iPod, iPhone, iPad, Watch, and AirPods. An arbitrary set of Bluetooth headphones cannot replicate the ease of pairing, connectivity, and device switching that Apple can achieve by building both the hardware and software sides of the AirPods.

Internet services have not been an exception to this, as they are universally better on Apple’s own platforms, but they have offered an opportunity to see what the company will offer on a cross-platform basis. iCloud — as with its MobileMe predecessor — has a Windows client; Apple Music is available for Android phones. The company is bringing the Apple TV Plus service to virtually every platform — including some television hardware. All of these services can be accessed through a web browser, too. But iMessage, Apple Arcade, and Apple News are all stubbornly limited to products with an Apple logo on them.

And so is the Apple Card. Damon Beres of Medium’s OneZero publication sees all of these things — but particularly the card — as egregious examples of lock-in:

In fact, Apple’s most fascinating hardware release in ages arrived last month, a thin slab of titanium with accompanying software that — yes — you can use to order clothes while in the tub. The Apple Card connects to your iPhone’s Wallet app and can pop up as a default option whenever you use Apple Pay. It makes monitoring your finances kind of pleasant: A digital representation of the card is rendered on-screen and stained with colors (blue for transportation, orange for food, etc.) related to how you’re spending money. And the card, like so many other Apple products in recent years, has been developed not just to provide a good service to consumers but to increase the gravitational pull of the technology brand itself.

Others have certainly noted its major value to Apple: In being such an appealing payment option, and by only working with an iOS device, the Apple Card could be understood less as a typical credit card and more as a trojan horse. It will keep you in orbit around a Cupertino blackhole that sucks in cash for annual iPhone upgrades, new Apple TV+ shows, Apple Music, video games, MacBooks, and AirPods.

Throughout this piece, Beres seems to insist that Apple’s credit card is somehow stickier than that from any traditional financial institution, but I don’t think it is. It’s well-integrated throughout iOS, but so is any card that works with Apple Pay. You can use it with a new iPhone, of course, but it still works with any iPhone that has Apple Pay, all the way back to the iPhone 6. I guess it looks nicer than most credit cards, and the physical version is classy as hell. Is that really “lock in” in a way different from any credit card?

But Beres doesn’t stop at the Apple Card. This article points to all of Apple’s services — including TV Plus, which is, to reiterate, available on virtually all platforms independent of use or ownership of other Apple products or services — as evidence of a giant spinning lock-in machine.

Beres compares this to the approaches of other companies:

Any tech giant worth its salt is doing the same thing. Amazon may not have enough pull in the hardware game to make Prime streaming exclusive to something like the Fire TV Stick, but its Prime credit card, at least, will keep you shopping on Amazon, giving you 5% back on Amazon and Whole Foods purchases. And it has expanded its Alexa service to proprietary tablets, security cameras, and alarm clocks. If you’re into the Amazon Echo, there’s no way you’re going to switch to Facebook’s Portal, which itself hooks into a shared universe of messaging apps like WhatsApp and Messenger. Samsung is trying — and struggling — to establish a line of Galaxy products that tap into its Bixby A.I. Buying a gadget today is rarely a one-off choice; it’s an opportunity for a company to keep you on a platform.

Here’s where I have the most disagreement with Beres, and these arguments of Apple’s ostensibly severe lock-in more generally. I don’t think Apple’s products are necessarily sticky because of an ecosystem effect, but I do think the ecosystem becomes stronger as more users are retained. Apple routinely has one of the highest customer retention rates in the industry, and they regularly report some of the highest customer satisfaction rates. I wonder if there’s a correlation.

To compare this to the lock-in activities of other companies is at its most effective only at a shallow level. Apple’s stuff works better when it’s used in conjunction with other Apple things, of course, but if you want to stop using the company’s products and services, you can do that almost piecemeal or wholesale, if you wish. You cannot say the same about any other major technology company, as Kashmir Hill discovered earlier this year:

Critics of the big tech companies are often told, “If you don’t like the company, don’t use its products.” I did this experiment to find out if that is possible, and I found out that it’s not — with the exception of Apple.

These companies are unavoidable because they control internet infrastructure, online commerce, and information flows. Many of them specialize in tracking you around the web, whether you use their products or not. These companies started out selling books, offering search results, or showcasing college hotties, but they have expanded enormously and now touch almost every online interaction. These companies look a lot like modern monopolies.

No matter how powerful Apple seems to be, it is entirely possible to never use a product or service from them again. It is, I grant you, expensive and time-consuming to change your computer, phone, streaming music service, encrypted messaging platform, and anything else you use from them — your Apple News Plus subscription, I suppose — but it’s not out of the question. It is virtually impossible to stop interacting with non-Apple tech giants. You can’t escape Facebook, either, as their beacons and scripts keep track of you as you browse most popular websites. Google is trying to replace HTML with AMP, and is globally dominant in various horizontally- and vertically-integrated product categories. You can stop shopping at Amazon, but you’re not going to be able to rid yourself of the infrastructure of the modern internet. Apple’s power comes at a platform integration level; their competitors have absorbed themselves into the web and internet. If you wish to participate in the web today, you have little choice but to accept the use of — and tracking by — the services of Apple’s competitors.

That is, I think, true lock-in that makes Apple’s interconnected services, hardware, and accessories look comparatively banal.

One other thing in Beres’ piece I’d like to mention is this paragraph at the top:

Apple’s certainly something different now than it was even just a couple of years ago, when the iPhone X debuted with a notch and a dutifully frenzied press. Its keynote event on September 10, described by my colleague Will Oremus as its least interesting, cemented a new identity for a technology brand that no longer leans quite so much on surprising gadgets to make its name: improvements to the Apple Watch, iPad, and of course the iPhone were short of jaw-dropping. (The Apple Watch’s face is now always on — like, you know, a real watch — and the iPhone gained a third camera lens.)

This is a criticism that has been leveled at every Apple product launch that lacked a radically new hardware design language for the iPhone since the 3GS. In fact, even when there was new hardware, Apple was accused of playing it safe and boring. The iPad was known as “just a big iPod Touch” when it came out in 2010. For the past decade, analysts have called Apple’s products dull and uninspired, and the products have gone on to sell in unfathomably large numbers. Little has changed in that time except the ever-widening gulf in analyst expectation and customer reaction.