Big Tech Implications

The first takeaway from this analysis is that Google’s strategy truly is unique: they are, as Nadella noted, the Apple of AI. The bigger question is if this matters: as I noted above, integration has proven to be a sustainable differentiation in (1) the consumer market, where the buyer is the user, and thus values the user experience benefits that come from integration, and when (2) those user experience benefits are manifested in devices.

Google is certainly building products for the consumer market, but those products are not devices; they are Internet services. And, as you might have noticed, the historical discussion didn’t really mention the Internet. Both Google and Meta, the two biggest winners of the Internet epoch, built their services on commodity hardware. Granted, those services scaled thanks to the deep infrastructure work undertaken by both companies, but even there Google’s more customized approach has been at least rivaled by Meta’s more open approach. What is notable is that both companies are integrating their models and their apps, as is OpenAI with ChatGPT.

The second question for Google is if they are even good at making products anymore; part of what makes Apple so remarkable is not only that the company is integrated, but also that it maintained its standard for excellence for so long even as it continued to release groundbreaking new products beyond the iPhone, like the Apple Watch and AirPods. It may be the case that selling hardware, which has to be perfect every year to justify a significant outlay of money by consumers, provides a much better incentive structure for maintaining excellence and execution than does being an Aggregator that users access for free.