Facebook and Apple’s core ecosystems

pictures of many different people

writer icon Victor Zanabria     Gerd Altmann   |   Business     🕐 05. Mar. 2018

In the last decade, the way of doing business has been undergoing changes. A strong bond between business and networking has been created in such a way that they cannot be treated as separate fields anymore. This has been noticed by big players in the market, who are looking beyond the traditional business models in order to gain a competitive advantage. Apple and Facebook, which once were disrupters, understand this phenomenon and have adopted non-conventional techniques that have allowed them to become two giants in the tech market. Despite them having two different core businesses, there are some similarities on the strategies both companies have applied to increase their profit.

Business Ecosystem
“The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things” Steven Elop, previous CEO of Nokia.

The idea is simple, businesses cannot be treated as isolated islands, but they must be inclusive and consider all the possible stakeholders in their plans. This can be seen in the case of Facebook and Apple who represent excellent examples of companies with thriving ecosystems.

Facebook’s core business is advertisement and it is how they generate profit. To succeed, in addition to their traditional social media and news business, they have created a network to engage more players in their game. Through a variety of apps, Facebook has opened a wide market of opportunities not just to create and deliver value to their customers, but to attract third parties who can contribute to its business. In comparison, Apple is a hardware business, who started out generating profit by selling premium devices. The subsequent introduction of an app store and a variety of product accessories boosted their ability to connect and cooperate with different stakeholders. The result of this collaboration is seen in the solid market of mobile applications they have created with around 2.2 million apps to date.

Both Apple and Facebook have succeeded in creating an ecosystem that allows them to connect different companies and people which allow them to expand their customer base. Facebook, with more than two billion users has caught the attention of handset makers, telecom operators, media companies brands, developers and smartphone platforms. Likewise, Apple is a widely consumed brand whose products are used by millions of users. This has attracted accessory makers, telecom operators, brands, software developers, to name but a few. It is important to highlight the massive user reach and the community of developers that have created a strong defence for their business. Both Apple and Facebook have had good results offering people and companies an attractive environment which continues to obtain more and more followers.

Asymmetric business models
Asymmetric business models are those who adopt products/services - which are complementary to the main ones – as an extension to the core value proposal. The idea is to commoditize the price of the complements in order to create demand for the core product.

This method is based on complements. These are goods that are usually consumed together, for example, cars and petrol, printers and ink cartridges or pasta and pasta sauce. Each of them depends on its complement and vice-versa, therefore, when you reduce the value of one good, the demand for the complementary good increase. Apple and Facebook understand this concept very well and have adopted it to their businesses.

Apple creates value by providing software developers a platform where they can build and distribute apps easily. This has created a competitive market where apps have been commoditized. With an affordable price for the apps, the demand for Apple’s core products tend to increase, which boosts the company’s competitive advantage over its competitors. Likewise, Facebook creates value by providing a free instant-messaging service, as well as free calls and file sharing. This has commoditized the telecom industry and have disrupted the business that telecom operators once used to monopolise. This allows Facebook to gain more users, which means they can capture more information about their customers. This collection of information contributes directly to Facebook’s core business: advertising.

All in all, traditional business models are no longer enough to compete in the global market. Some organizations have started applying different strategies that have helped them to succeed. It is important to observe that in order to succeed in this globalized world companies cannot longer see themselves as isolated entities. They have to consider the importance of building an ecosystem around them not just to diversify their offer but to create a barrier to defend their business against competitors. In any case, they application of alternative business models like the one based on complements can be beneficial for getting more customers and increase a company’s competitive advantage.

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