Ecosystems and anchors

by Peter Rojas

There's lots of talk today in the tech world about ecosystems and how users can get locked into them. Typically what we're talking about is how consumers can be incentivized to keep buying or using one company or platform's products and/or services over another company or platform's because there is some cost in terms of time, money, or simply hassle to switching to something else.

This kind of customer lock-in is very desirable thing to build when you're a tech company, not just because it (usually) helps you make more money, but also because it makes your business seem a lot easier to protect against competition. Competitors don't need to just have better products, they need to attack that other thing that's keeping your customers in place.

That other thing is what I like to call an "anchor". An anchor is whatever it is about an ecosystem that draws someone in and then helps keep them there, holding them in place like an anchor keeps a ship from drifting away.

Every successful ecosystem has its own anchor or set of anchors. An anchor can be a lot of things: a specific app, a collection of media, a device, a user identity, etc. It's not always the same one for all users in a given ecosystem and just like ecosystems can overlap, anchors can overlap in all sorts of ways. But whatever it is, it's usually something that people find a great deal of value in and often continue to value or prioritize even as the quality of the product or service declines (think about how many people dislike Facebook but keep using it because "all of their friends and family" are there -- that social graph is Facebook's anchor).

A few years ago Apple's anchor was iTunes, which they used to cement the iPod as the dominant portable media player. It's easy to forget that having access to a massive legal catalog of music and being able to easily transfer it to a portable media player was a big deal. They've since rather gracefully transitioned to the App Store as their anchor, with many iPhone users citing their investment in paid apps or the lack of availability of key ones as a reason for not switching to Android or Windows Phone.

Kindle e-books and Prime have been successful anchors for Amazon. Though Amazon makes very little money from selling hardware, offering cheap e-ink readers and tablets, while also offering Kindle reading apps on everyone else's platforms, has been an effective way to keep even iPad owners within Amazon's ecosystem when it comes to buying e-books. I know there are lots of people like me who even though they own an iPad will only buy e-books from Amazon because they can read them on a Kindle e-ink reader as well as any iOS or Android device. Despite its huge installed base of devices, Apple's iBooks store sells considerably fewer e-books than Amazon does.

Google has invested heavily in recent years in extending its ecosystem, notably with Google Plus, but for me, and I suspect many others, it's Gmail that is the anchor keeping me within their ecosystem. Whether or not I can get a good Gmail experience has become a major factor in my gadget purchasing decisions and the primary reason I use an Android phone rather than an iPhone.


An anchor is in essence, something that you can use to get people to buy your stuff over someone else's stuff. And that means you better make sure you have one before you base your strategy around it. Microsoft made a very serious strategic mistake in thinking that it had an anchor that would draw people into its mobile ecosystem: Office. Microsoft was a few years late in coming up with viable responses to the iPhone and iPad, but they figured that the presence of Office on Windows Phone and the Surface RT would offer a big point of differentiation and would appeal to users enough to get them to chose Microsoft's mobile offerings over the competition's. That meant keeping Office off of iOS and Android and focusing much of their marketing efforts around promoting the inclusion of Office (and just the general idea of productivity and how their mobile devices enabled it).

It hasn't worked. Office just isn't an anchor for very many consumers and not something that locked in consumers in a way that would compel them to purchase a device offering it over one that didn't. It's possible that if Microsoft had moved aggressively to make Office available on iOS and Android that they could have made developed it into a multiplatform ecosystem which they could have then leveraged into adoption of Windows Phone and Surface. But the reality is that whatever Office is, and however valuable it might be at the enterprise-level, it has not on its own been enough to lure consumers into Microsoft's mobile ecosystem. The reality is that "productivity" isn't much of selling point for the average person buying a tablet or smartphone.

That leaves Microsoft in a tough spot, because this lack of an anchor has kept them from gaining a strong foothold in the mobile space. What's funny is that they got this right when it came to gaming, and were able to build Xbox Live into an anchor that not only kept users within the Xbox ecosystem, it drew in their friends in as well (since if you want to play online with your friends you all have to be on the same platform). I don't know if this means that they should have entered the mobile market with a portable Xbox and used that to get established with consumers -- it's not easy to say with any certainty how that would have worked -- but what is clear is that in the battle of ecosystems, you better not go to war with the wrong anchor.