Ours is a world of ecosystems, of single companies hoping to own and
operate as many parts of your life as possible. And it looks more and more
like there are only three real players: Apple, Google, and Samsung.
Apple’s forever going to do Apple things, keeping its products premium and
exclusive and tightly integrated with each other. Samsung and Google, on
the other hand, are increasingly competing to offer the alternative open
platform. Each wants to own the foundation that everyone builds on; the hub
on which we all place our spokes.
Just this week, Samsung spent $200 million to acquire SmartThings, one of
the many companies competing to be the foundational platform for the
smart home. That puts it head-to-head with Google one more time: Google
just bought Nest to do the exact same thing. And the tension between the
Android Google wants to ship and the Android that comes on Galaxy phones
got so heated that Google sold off Motorola in order to bring Samsung back
in line. This is a relationship with power issues.
So who’s going to win? Turns out that’s an argument that’s hard to settle.
By Nilay Patel
I have a Grand Unified Theory of Samsung. I’ve been thinking about it for a
Here it is: Samsung’s success isn’t about phones or TVs or refrigerators or
ocean liners or ballistic missile systems or whatever final product it is that
It’s about owning factories that can produce big, cheap screens.
Making bigger screens more cheaply is how Samsung killed Sony in the TV
business years ago: as consumer demand for flat-panel HDTVs skyrocketed,
Samsung was there with lower-cost LCD TVs that didn’t look as good as
Sony’s but were definitely cheaper. People weren’t buying image quality,
they were buying fancy flat screens to hang on the wall, and Samsung
offered the biggest flat screens for the least money. And as the most popular
sizes in the market changed over time, Samsung was able to optimize its
LCD production quickly and pump that extra margin back into marketing,
erasing Sony’s brand advantage.
“Samsung’s success isn’t about making things people buy”
This arrangement was so devastatingly effective that it didn’t even help
Sony to be in a joint venture with Samsung to build LCDs — they sold their
chunk back to Samsung in 2011 for nearly a billion dollars and have been
flailing to regain a footing in the electronics business ever since.
Samsung ran the exact same play in phones: the company produced an
insane variety of screen sizes to get ahead of the market, and when
consumers moved towards larger screens, it quickly responded with gigantic
OLED screens that offered ultra-bright colors but fairly middling overall
quality at first. (They’re pretty decent now.) No one else ships OLED
displays at Samsung’s scale, and the company is able to pump the savings
from that efficiency right back into marketing — a strategy so devastatingly
effective that Samsung is Apple’s only real competitor in mobile.
The only problem with this strategy is that Samsung always relies on
someone else to make those big cheap displays valuable. It’s Hollywood and
Netflix and Comcast on Samsung TVs, not Samsung Media Hub, and it’s
Android and Google Play on your Galaxy S5, not Samsung S App Bazaar or
whatever the hell it’s called. Samsung can stick a giant display on a
refrigerator, but until someone else makes it valuable it’s just kind of weird.
And now that the early advantages of owning the display factories are
leveling out, Samsung’s growth in mobile is stalling fast — it needs another
differentiator, and it’s struggling to find one that isn’t more big screens.
“Samsung makes software to sell big screens; Google makes software to
rule the world”
Samsung has never demonstrated the software chops or platform dedication
to do anything but ship giant displays faster and cheaper than the other guys.
It can buy interesting companies like Boxee and SmartThings, but it’s never
managed to follow through and turn potential into execution — there’s more
money to be made faster chasing the next trend.
Which is a totally fair game to play. The world needs Samsungs; they’re fun
to watch. But there’s just no chance Samsung will ever slow down and
invest in the sort of grind-it-out platform building that Google spends
almost all of its resources on. Google makes its money gathering and
organizing information to sell ads against; the more information it has, the
more money it can make. That’s a huge incentive to slowly but surely build
platforms and systems that interconnect and work seamlessly for
consumers; it’s a little creepy sometimes but the progress is obvious and the
services are useful and good. Samsung is just never going to compete with
that; it doesn’t have that same motivation or set of incentives. Samsung
makes software to sell big screens; Google makes software to rule the
Google’s going to win.