1) The document discusses how Apple, Google, and Microsoft have used competitive strategies against each other in different technology areas like internet search, mobile advertising, software, smartphones, and music players. 2) It analyzes their relationships and competitive interactions over time in these areas using principles of game theory, such as strategic foresight, understanding their own and others' strengths, and differentiating between one-time and repeated interactions. 3) However, it notes that real-world behavior is more complex than game theory assumptions due to factors like personal relationships, distrust between companies, and changing business strategies.

1. Game Theory Responses: Apple, Google and Microsoft
Music players
Company Internet ads Package S/W
Smart phone
Picture 1
Application of Game Theory in the Technology and Media Space:
Now having studied the fundamentals of Game Theory, let’s explore how the
book Googled by Ken Auletta looks at the start and evolution of Google, and how Apple,
Google and Microsoft have over the years developed a competitive eco-system using
technology, telephone and traditional media partners such as AOL, AT&T, Comcast, HP,
Time Warner, T-Mobile, Verizon, Yahoo, and others for both defensive and offensive
combat against each other. While Microsoft has been a common enemy for both Apple,
Google, and for most of the Silicon Valley, the relationship between Apple and Google
has worsened only in the past couple of years as they each have gotten deeper into the
smartphones category. Until then, these two companies shared half of the board and
key mentors such as Vice President Al Gore, Coach Bill Campbell and others.
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2. A brief historical context for the rivalry between the three companies:
1. Internet Search as well Mobile Advertising Dollars: Microsoft for the
longest time dismissed the need for search-based ad dollars and just focused
on selling software and operating systems. Only when Google went public
and disclosed how much money it was making through search ads, did
Microsoft start making overtures to Yahoo for a possible collaboration and
combining its MSN portal with Yahoo’s.
Apple has historically focused on its hardware and Mac OS, but then as it
started developing its iTunes, iPhones and other platforms, it realized through
working with Google that all these media provided Apple with a great
mechanism to generate ad dollars. So it bought Quattro Wireless in 2009 and
launched iAd in 2010.
Google’s business model started with developing search related algorithms
about 10 years ago, and ever since then, they have sought to combine
YouTube, DoubleClick, mobile phone products, cloud computing, selling TV,
radio and newspaper ads- all in an effort to sell targeted advertising more
effectively through collection of ever increasing, effective amount of data.
2. Packaged Software and Operating Systems: Microsoft and Apple
originally collaborated on the development of programs such as Chart and File
written for the Mac in addition to the spreadsheet program Excel, amongst
other things. However, their relationship worsened when the DOS-based
Windows operating system when introduced started looking a lot like Mac OS.
Google and Apple collaborated on the search related technologies and
distribution through Mac platform, but once Google started developing the
Android, they started having conflicts with Apple with Eric Schmidt resigning
from Apple Board. Google was feeling that Mac OS was limiting its choices,
and that it had to develop its own browser-based operating system (Chrome).
Google was always suspicious of Microsoft’s dominance, its limiting of choice
for customers, and its destroying of Netscape browser. So, even as it was
getting launched at Stanford, Google founders made certain that Microsoft
didn’t catch a wind of what they were working on.
3. Music Players, Smart Phones and Other Smart Devices: As technology
has evolved and more sophisticated applications have gotten developed, all
major players have realized the potential of technological convergence and
multi-channel distribution of experience, convenience and advertising
revenue. Microsoft controls the operating system on most of the desktops
and laptops around the world, so it has tried to use that dominance to try to
create a dominant mobile browser too (even though not that successfully so
far) to keep its cash flow machine humming.
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3. Ever since Steve Jobs came back after ousting John Sculley, Apple has used
its robust Mac OS and its cool Macs and other devices to create huge
following around the world by creating a solid closed system where the
hardware and software are from the same vendor and talk effectively to each
other.
In 2007, Google began to aggressively move into the mobile phone business
because of the fast growth in users, but it wasn’t until the success of iPhone
did it realize that the iPhone delivered fifty times more search queries than
the typical smartphone. But the problem was that its programs functioned
poorly on mobile phones because of the restrictions that telephone companies
put on various applications accessible to end-users. To counter these
limitations, Google decided to develop its own open-source Android operating
system.
Picture 2
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4. Primary moves the three companies have made using Game Theory:
Principle 1: Use Strategic Foresight (backward induction): Apple, Google and
Microsoft use some form of Game Theory techniques to figure out what
the other maybe working on in the future, and respond by launching
appropriate counter-products. As per Pictures 1 and 2, they each have
products in the appropriate profit-centers of the others, and are unwilling
to concede any territory as if in a chess match.
Principle 2: Know Yourself as Well as Others: Google knows that its core is search
and all the acquisitions it has done strengthen this core by adding to its
data gold mine, Apple’s main business is robust hardware and OS, and
since its customers are die-hard Apple fans, it doesn’t need to reduce
prices and compromise on margins. Microsoft’s main focus is its
ubiquitous operating system and Office software. Everything else it does
are offensive and defensive strategies to protect its turf.
Principle 3: Differentiate between One-Time and Repeated Interactions: Since
all of these 3 companies, their partners and vendors know and expect
what the others are likely to do, according to Game Theory, they should
be cooperating and focusing on their own core competencies. Instead
they fight in each product category and attack the other’s profit center.
Principle 4: Unify Minds to Promote Cooperation: Google has used this tool
effectively to recruit bright engineers with a promise of promoting cloud
computing and other open-source technologies to break down barriers
these engineers believe proprietary systems create.
Old Media companies have tried to collaborate and cooperate even with
Microsoft to defend their advertising and other distribution models from
the Google onslaught.
Conclusion: Game Theory is a very robust tool in understanding how a competitive
strategy game is played and different payoffs to be expected by each player. It
however relies on a very important assumption that firms share a common expectation
about rational behavior. In the real world, companies are paranoid and people involved
have behavioral traits that may violate and change the Nash Equilibrium. In the case
of Apple, Google and Microsoft, there’s a long history of mistrust (especially between
Apple and Microsoft), personal interactions (Steve Jobs and Bill Gates), and new
business strategies (Cloud Computing for Google) that force adaptation and revised
equilibrium level than that suggested by Game Theory.
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