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Since when did profit become the one and true metric?

This is like wondering whether you'd be better off running a grocery store rather than a software business. Profit is the only metric. The idea that this notion started with Apple is strange.

Of course profit is ultimately the metric that counts.

But time and time again in the tech world we've seen that it's much easier to build something cheap and ubiquitous and eat your way up the value chain than it is to start at the top and try to tenaciously cling there. It didn't work for Apple last time and I think it's starting to slip for them again now.

Which companies would you give as examples of "eat your way up the value chain"?

The PC industry devouring the server and workstation market is the most salient example.

Microsoft (against IBM, DEC, Novell, SCO (the original, Microsoft's own spawn).

Sun, against IBM and AT&T.

Red Hat, against Sun.

Salesforce against bespoke business solutions.

Google Apps against Microsoft Office.

Gmail against MS Exchange.

More generally, read/refer to Clayton Christensen's Innovator's Dilemma.

What makes you include GMail in that list? It has, by all measures, failed to move up the value chain, its revenue is completely eclipsed by that of Exchange. (Disclaimer: I work at MS.)

My question in response would be: what accounts has Microsoft lost to Gmail in the past couple of years?

From my connections, I'm aware that much of the startup world is on some mix of Gmail for Domains, Google Apps, and/or Mac for desktops/laptops. Microsoft really doesn't play.

Granted, those are small accounts, but I've also seen some household name established businesses ditch Exchange for Gmail. And in a world for which changing enterprise platforms almost universally elicits dread, the announcements were met with cheers. Really loud cheers.

And to answer in part: again, read Christensen. It's not that the cheap competition generates more revenue (though in some cases it does). By that metric you're making the same strategic error as recoiledsnake. It's that by growing marketshare, disruptive innovations suck the revnue out of the market.

It's what Red Hat did to Sun. It's what Craigslist did to classified advertising.

It's what Gmail's doing to Exchange.

Looking at only the earnings reports and comparing profits is meaningless. If you follow the Gruber link it shows that Amazon's net profit is only $7M. That does not mean Amazon is having trouble making any money. It's that it's costs of expanding are swallowing the profits. Apple has a ton of cash in the bank lying around because they don't see a need for using it. Directly comparing the numbers makes no sense whatsoever except to people who's profit depends on telling people what they want to hear. i.e Apple this week is better than X in Y metric and hence Apple wins and X sucks, where X and Y are carefully picked.

Wasn't it just yesterday that Gruber was comparing revenues from a hardware business(iPhone) to Microsoft's primarily software business, instead of profits which would make more sense?

You're talking about John Gruber. I'm just talking about profit. Obviously, companies routinely defer profitability. Is that what you think Samsung, or any other Android vendor for that matter, is doing? I don't. Comparing the iPhone business with Amazon is an apples/oranges comparison. Comparing Samsung's Android business with the iPhone isn't.

Like Gruber, don't like Gruber, I don't care. But let's not introduce the meme that "profit" is a meaningless metric. It is the only metric. Companies that are optimized for something other than profit today are doing so in the service of profit, and nothing other than profit, tomorrow.

"Revenue", less profits, is money that doesn't belong to you.

If profit is the only metric, there aren't any apples/oranges comparisons; all businesses are comparable.

Apache and Linux and Wikipedia are completely valueless according to your only metric.

And here I thought we were talking about business.

"Revenue", less profits, is money that doesn't belong to you. Keeping score with it is pretty silly. Want a lot of revenue? Start a grocery store, but sell everything at a 10% loss.

iPhone's profit is larger than MSFT's profit as a whole.

Your argument is invalid.

Profit is the only metric.

Profit is not the only metric. Market share is a valid metric to compare products (as long as you have a sustainable position).

If android was selling five times as many units as apple, but with only 15% the margin, then apple would still be the most profitable, but would be losing the mindshare war.

Eventually devs would be concentrating their efforts on android first, and perhaps only for android. In the long term, marketshare is the more important metric.

This is '99-bubble "sell the eyeballs" thinking. The point of business is profit. You can defer profitability, for instance to achieve market share in a market where having the greatest share promises future profits. But for that to be meaningful, you have to have a story about how buying market share with lower profits is going to offer a return on investment in the future. What's Samsung's story?

You must have missed the part where I wrote as long as you have a sustainable position.

In the case of Apple vs Samsung, the smart phone market is at a different level of maturity that lack of market share is not going drive developers away from iOS, but if we were much earlier in the market then it would be a significant issue for them.

What's Samsung's story?

I don't know what sort of margins Samsung is making on their devices, but they don't have to make as much per device as Apple to still be a success.

He's wondering why Gruber, who supported the "losing" side in Apple vs Microsoft (as measured over any timeframe besides the last 12 months or so) had such a damascene conversion. I doubt he'd have any issue with a weirdo that consistently supported the most profitable corporation in any market. It woukd still be weird, but at least consistently weird.

You do understand that businesses exist to make money, right? Profit share is one of the few metrics that matter.

But Android is not there to make money, it is there to stop Apple taking over mobile and so cutting out Google from that business, so Google as a whole makes money.

> I chuckle every time I hear this. How much profit of the > web server market does Microsoft take with IIS vs. the free > alternatives like Apache and Nginx? > > Who wins in the Server OS market of Windows Server vs. > Linux/BSD? Who dominates the web dev tools market of Visual > Studio vs. Eclipse/etc. ?

In the not-to distant past (early 2006), I worked on a system which hosted millions of domains on Linux and Apache hosts. Microsoft called our company and offered them mega-bucks to switch the system to Windows and IIS so that they could increase market share. You can confirm this with netcraft - http://news.netcraft.com/archives/category/web-server-survey... . And we weren't the only shop they called with similar deals.

In this case, the one with the profit bought themselves 15% marketshare. I had real fears around that time that web stacks were going to start looking an awful lot like the desktop ecosystem.

Don't discount the power money can have.

Say company X sells 200 phones and makes $1000 profit.

Company Y sells 150 phones and makes $10,000 profit.

In this case we are comparing apples with apples. So it is a valid metric of comparison. In the same reasoning, if company Z sells 200 phones and loses money then obviously that is bad and company Z could potentially go bankrupt.

Well, company X is shipping its phone with an almost free (as in beer) software stack. If their entire stack was paid software, there would have been some more margin for profit. I cannot even guesstimate on how much would their profit share increase (given that higher price would mean lower sales), but it might be significant.