Wednesday, May 24, 2006

Forrester: Apple-Nike -- A Lesson In Network Externalities

Ted Schadler at Forrester Research posts at the Devices, Media, And The Future Of Everything blog about the Nike+iPod news.

I already posted my thoughts on what this means from a runner's perspective, although I do stand corrected that the foot pod is part of the $29 Nike+iPod Sport Kit. If there is a way to use this with non-Nike running shoes then this is a great deal, barring that it actually works. Might be my next review project.

Schadler points out the following three things are cool about the announcement:

  1. The iPod is now an application platform for personal information. Okay, it could always store contacts and photos. But now it can log your miles, calories, and exercise time. This is just the latest in a long line of iPod as application platform," following in the footsteps of Duke University syllabus, radiologist medical image viewing, and museum tours.
  2. Apple (AAPL) locks up another huge brand. It began with BMW putting iPods in cars. Now Nike (NKE), the biggest brand in sports apparel is in Apple's marketing team. Talk about getting leverage out of your marketing dollar!
  3. More companies will now "get it" -- Apple's a good partner for commercial ventures. What's perfect about this deal is that any CMO can take the concept to their CEO and they'll get the benefit: Apple+BrandX = Good Stuff. The result will be more CMOs knocking on Apple's door.
Schadler then points out that:
All of these things showcase the power of network externalities -- unreasonable returns accruing to the company with the biggest reach and most partners. It's the rich get richer and the poor get poorer all over again. Now here's the punchline. Nextwork externalities in application and developer support used to be Microsoft's biggest asset -- but now Google and Apple have taken on the mantle of most connected or biggest center of the universe.