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What is the War Between Apple and Android Really About?

Tien Tzuo
CEO, Zuora

With its new iOS updates and strident public announcements, Apple is waving the personal privacy flag. Cupertino is waging war against Facebook, Android, and what Tim Cook calls “the Data Industrial Complex.”

“As I’ve said before,” Cook says, “if we accept as normal and unavoidable that everything in our lives can be aggregated and sold, then we lose so much more than data…We lose the freedom to be human.”

I think he has a valid point, but I don’t think this fight is just about personal privacy. Apple is motivated by its own self-interest, just like any other company. I actually think this debate is about competing business models. I think it’s about subscriptions versus advertising.

When you study the history of Apple, its path was decided long ago, when it decided to orient its business squarely around customers, as opposed to its shiny new technology. When Steve Jobs introduced the first Macintosh, it bore a simple greeting: Hello.

The message was clear. This was a personal computer, intended to make your life easier and to help you achieve your goals. Here’s what Jobs said in 1980: “When we invented the personal computer, we created a new kind of bicycle…a new man-machine partnership…a new generation of entrepreneurs.”

The Macintosh was at your service.

Today, Apple continues to thrive as a service company. Their service revenue trails only their iPhone revenue, but when you really think about it, all of their products support a particular kind of seamless customer experience. Hence their embrace of simple, intuitive subscription services that are intended to make our lives easier and more enjoyable: music, news, applications.

Google, of course, chose another path. They chose to orient the company around advertising. Heck, for the first decade of its existence, its customers had no identity at all! If it wasn’t for Gmail, the company may have never introduced the concept of a Google ID. And Google’s subscription offerings? Nest? Paid Gmail? All died on the vine.

As Scott Galloway noted in a recent New York article called Why Subscriptions May Be the Wave of the Future, “Look, the whole world is digressing to two business constructs. And it’s either iOS, where you pay a premium and you get more privacy, a more elegant solution, kind of the premium — or it’s going to Android, where you get essentially the product for free, and they figure out a way to monetize you as a user. And by the way, the majority of the world picks Android.”

He’s right, of course. Right now the advertising model has the numbers. But as the public becomes more aware of the real consequences of a business model that runs on hype and slot-machine psychology, and as companies wake up to the fact that customers are more important than products, I think subscriptions are going to win.

Why? Because when you orient your company around customers as opposed to products, certain decisions are easy. For example, in response to the question, “Should I track my customer’s personal information, and then sell that information to advertisers?” The answer is no. Especially when your customers don’t want you to! After all, they’re the ones giving you the money, right?

The Subscription Economy benefits from the clarity of the Golden Rule. You don’t do things to your customers that you wouldn’t like done to you. Respect for data privacy is intrinsic to this model, because it’s all about developing and maintaining trust.

Unfortunately, the majority of the digital economy lacks this moral clarity. As has been widely noted, for companies like Facebook and Google, the advertisers are the customers, and we are the product. We exist to generate personal data that can be packaged and monetized.

“Subscription, whether it’s the move to Netflix, whether it’s the move to LinkedIn — more and more people like the idea of saying, ‘I don’t want my data molested. I want more privacy. I want a business model that focuses on the relationship with me’” continues Galloway. “And the smartest people aren’t pitching advertisers, they’re pitching new product ideas that enhance my relationship and make it worthwhile for me to spend $12.”

I couldn’t agree more. Folks are waking up to a simple fact that we’ve known about for some time here at Zuora: when we talk about the privacy debate, we’re really talking about subscriptions versus advertising.

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