The Real Reason Apple Hates Flash (Google)

Posted on: February 3, 2010
Posted in Mobile, Strategy

Adobe’s Flash is a big deal – it powers animated display ads (the Toyota ad with the wheels spinning) and it’s also the technology that enables YouTube and Hulu videos.

Despite Flash’s proliferation on the web, Steve Jobs has stopped it from running on the iPhone and iPod Touch (and iPad). Publicly he’s berated it for crashing and called it out as a performance and power hog.

But are these the real reasons that Apple / Jobs won’t allow Flash on the iPhone and upcoming iPad?

If we dig deeper there are economic reasons which explain why Apple hates Flash

  1. mobile users consume content more and more via apps and less through the web – e.g. NYTimes or Wall Street Journal iPhone apps. This takes users away from websites (which basically live off of Flash based ads).
  2. these sites are now erecting pay-walls (WSJ has one now, NYTimes announced they will within a year). On Apple products, these premium sites / services can be purchased through a micropayment (iTunes) subscription model. Simple for consumers & works.
  3. on mobile there’s a higher propensity for this “subscription” micropayment model to work than there was on the web – i.e. consumers will pay for mobile content. Mary Meeker the Morgan Stanley analyst covered this here. Therefore on mobile devices, content providers can make $$ through creation of valuable differentiated content (see Dave Mcclure’s rant that “the internet wants to GET PAID on Fucking Friday just like everybody else!”).
  4. if #3 holds, the content providers can rely less on impression based advertising (static display and Flash ads) than they used to…
  5. to supplement #3, Apple can also provide content providers with an in-app ad supported model (courtesy of their Quattro purchase) which – here’s the clincher – gives the content owners a much greater cut of the ad revenue than Google currently gives. This is fine for Apple because at the end of the day they make money off device sales and benefit from an ecosystem, but this weakens Google, which gets 90%+ of revs from advertising (admittedly most of this is from search, not display, but you get the picture).

So, my hunch is that Apple is keeping Flash off their platform as a way to shift the power balance away from Google and Adobe (recall Adobe bought Omniture to get better analytics with which to monetize Flash ads).

Whether this works in the long run will depend on whether there is something “different” and sustainable that will allow content providers to charge on mobile devices. It’s too early to tell. But before we even know, Adobe Flash may be severely weakened or dead.

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