A Rising Tide Lifts all Ships

It’s true innovation when a business builds something for themselves and then realizes there’s a potential application beyond internal needs.  

Take, for example, a company like Apple that started predominantly as a hardware company making computers and other peripherals. Years later, when they created the App store it was originally conceptualized as a platform to deliver programs directly developed by Apple. But they realized that there was a much bigger opportunity here to create a marketplace model and the App store of today was born. In 2019, this line of Apple’s business contributed over a half a trillion dollars in billings and further reinforces the stickiness of their hardware business. If Apple had kept this ecosystem truly closed for fear of losing control, then their market penetration would be significantly less.  

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Alibaba – An Alternative to Amazon

As Amazon took off here in the US, another similar startup business took its sights on the Far East.  Alibaba may look similar to AMZN but under the hood they are very different. While AMZN handily beats BABA on top-line, BABA  wins by a large measure on opex margins. This is inherent in their business model which is more similar to Ebay than to AMZN. Whereas AMZN primarily owns warehouses and inventory, BABA is lighter and collects a merchant fee as a middleman between buyers and sellers.

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