#4 – The fragile landscape of wearables, the future of Direct-to-Consumer (DTC 2.0) and the Google Squeeze (?)

We really get into a discussion on Apple’s, Google’s, Nike’s, Fitbit’s and Garmin’s strategies. We talk about the evolution of Direct-to-Consumer (DTC 2.0), the “Google Squeeze”, and we end up disagreeing a couple of times, although no co-hosts were harmed in the making of this episode. Finally, we talk about the new Macbook Pro (Bertrand is a real fan), Apple’s foray into AR and VR, the new Moto RAZR and the “General Magic” movie. Navigation: Apple’s Vertical integration strategy (01:57) Peak Google or the Google Squeeze (08:49) Nike (really) goes Direct-to-Consumer (15:35) Cracks in Amazon’s Armor (16:06) Fitbit & Garmin in opposite directions (25:37) Macbook Pro (34:30) Apple going into AR/VR (41:17) New foldable Moto RAZR (44:46) General Magic - The Movie (46:47) Resources: Apple Insider, A6: How Apple's custom silicon and iOS optimized each other - http://bit.ly/2Um4bsn WSJ, Nike to Stop Selling Directly to Amazon - https://on.wsj.com/3d76W9x Stratechery, The Google Squeeze - http://bit.ly/2xGnGUJ  Business Insider, Google offer to buy Fitbit - http://bit.ly/2U9FMGg Fortune, Why Garmin’s Shares Are Hitting Record Highs As Rival Fitbit Sinks From View - http://bit.ly/2QeyiAw Daring Fireball, New MacBook Pro 16 - http://bit.ly/3d3qfjZ  Monday Note, Apple AR/VR: Reality Bites Virtual Reality - http://bit.ly/2U1TTgw Yanko Design, 2019 MOTO RAZR foldable phone - http://bit.ly/2UdkZ4q General Magic, The Movie - http://bit.ly/2WcFocF   Our co-hosts: Bertrand Schmitt, Tech Entrepreneur, co-founder and Chairman at App Annie, @bschmitt Nuno Goncalves Pedro, Investor, co-Founder and Managing Partner of Strive Capital, @ngpedro  Our show:   Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news.   Subscribe To Our Podcast Full transcription: may contain unintentionally confusing, inaccurate and/or amusing transcription errors Bertrand: Hello Nuno, how are you today?  Nuno: I am. Well, how are you Bertrand?  Bertrand: Pretty good, pretty good.  Nuno: Today we're going to talk quite a bit about strategy, and how some very significant players Apple, Nike, and Google are thinking through their integration in terms of business model. Also in terms of tech, we're going to leave some of the content discussion to another episode. In particular around some of the movements that Google, Apple, Facebook and others are doing around content, around gaming, et cetera.  Apple Vertical Integration Strategy (01:57) But maybe just start with a really fascinating article around the A6, and on how Apple has really innovated around the system on chip space, and how that really is linked to it's almost dominant position around the operating system stack as well.  Bertrand: Yes, I think there was this fantastic article on Apple Insider talking about how the A6, the Apple CPU that was launched  in 2012 is representative of how Apple works differently from other tech companies. And myself, I remember one of the first time I was surprised by how Apple was working, is when I heard that story about how they cornered, the aluminum  market for laptops: they will buy in advance most of the sources of aluminum to make sure nobody else could make a MacBook . And apparently that story was not just a wake up call for me, but a wake up call for execs at other tech companies, including Microsoft, when suddenly they fully realized what they were up against in term of vertical integration.  I think that the traditional PC space was not about this vertical integration. That's for sure. That was about Intel and Microsoft creating that ecosystem where everyone compete pretty aggressively and the profit goes to Microsoft and Intel at the end of the day. Apple has a different approach. Apple is Apple, so they don't have an ecosystem as wide, and they focus very clearly about keeping the profits for them, not sharing with another one big strategic partner, or on another ecosystem - you could argue that actually there is some profit sharing with the app ecosystem. And that's probably new for Apple.  But going back to this A6 story, and that's interesting because it's bringing us back to memory lane in a way, years ago. And that's where you see Apple has been very fast understanding and from there strategizing what to do, from that initial leadership position in the smartphone space, because to launch that in 2012, you had to prepare that a few years ago. So it was relatively early  in the iPhone history that they started preparing a much bigger play around a much fuller vertical integration, that nearly no one, even today, maybe barely Samsung has truly deployed.  Nuno: Yes, and I think there was a couple of interesting elements here that the article does mention, which is how Android became effectively unbundled because obviously Google is trying to bring as many OEMs to the table as possible. And in some ways, Android has become the dominant operating system globally, but the experience of Android in some ways has historically lagged some of the aspects of iOS. I would argue maybe today it's less visible, but certainly if we go back 2012, 2014, 2015, that's certainly visible. It also manifests itself in the quality of the apps, and the quality and the revenue that's made in the app store space. But for me, there was  a more fundamental issue here, and I go back maybe to 2005 / 2004, when I was still with the GSM association. We're having all these fascinating discussions with MIT professors and a few early stage startups that were really saying the future is going to be system on chip. We're going to have more and more integration down stack, and it does make sense if you have a really, really well framed stack around the hardware pieces, around the operating system and then around , basically the processing power, to actually do and pass more and more stuff to system on chips. So in some ways, I think what Apple is doing is really the playbook that we've been discussing probably now for a decade and a half, even longer, that you're going to have more and more integration downstream, on the one hand, but also basically you're going to have a lot more integration into the chip, right? And that will get you performance, that will get you a level of customization linked to operating system that basically was unheard of, even in the times of Microsoft and Intel.  Bertrand: Yes, and for me, what's really impressive is that this article is sharing a window in a sub-part of the full Apple vertical integration. Because again, it goes from having a near controlling side on some output from some mines in some specific type of minerals, to an integration of hardware. And at the time, let's remember in 2012 they had not yet integrated the GPU, the GPU for the iPhone designed and manufactured by Apple was a few years after, around 2016 if I remember well, that's when they drop  their partner. But it goes beyond that, it goes not just to the app store that everybody knows, but it goes even to the programming tools and ecosystem. They have X-Code, very good programming tool, but they also have launched their own programming language. They always have had Objective C, but then they move to Swift, we're at Swift five now, and the latest one , the one I got actually very, very excited was  Swift UI. That was announced at WWDC in June, and has been released as part of iOS 13, the new MacOS Catalina, and this Swift UI is very impressive in term of how it lets you develop easily across all the Apple ecosystem in a way that puts shame, honestly shame to everybody else in the industry because no one has such an efficient set of tools, from A to Z. And not just that: all of their tools are fully optimized to their CPUs, their GPUs. Metal, Apple's own 3D engine truly leverage their GPUs and CPUs combined, and their machine learning libraries and developer tools are also fully integrated with their hardware. And now obviously the talk of everyone is around Apple services: the last layer, from mining aluminum to providing you TV shows, you have the full stack coming from Apple.  Nuno: And if you look at the Android devices, for me the realization is in effect, the best Android devices are not really the Google flagship devices anymore. We've heard some mixed feelings around the Pixel 4 and the Pixel 4 XL, even with the Pixel 3 XL, which was actually a really good device, it was clear to me at that point that there were better devices in the market. I think One Plus has done an incredible job of being ahead of the curve in many of these trends and almost keeping up to par with some of the things that we're now seeing with Apple. Right. Like the nightscape on the One Plus 7 Pro has been around since March, obviously now with the iPhone 11 Pro we have that as well in the Apple ecosystem. So I think that there's a lot of interesting things around how they've attached to the devices, and how the devices have provided this incredible experience to end users. Where Android is seems to be playing catch up and certainly Google doesn't seem to be sort of the clear innovator anymore. Maybe it was early on with the Nexus series, but certainly, probably not with the Pixel series in the last few years.  Peak Google or the "Google Squeeze"? (08:49) Maybe changing to Google and talking a little bit about Google, this fascinating Stratechery article on "the Google squeeze", where there's this admission, you know, I called it peak Google. It's not peak Google, apparently they're still doing really well.  And it just sort of illustrates this really interesting thing that people have sort of been noticing, which is you really are getting a lot of stuff now to just searching Google. You're getting flights,...