As far as producing well-defined ecosystems, there are essentially only three companies that have succeeded: Apple, Google, and Amazon (NASDAQ:AMZN). Although they tend to monetize their ecosystems in different manners, the three companies can count on immersive experiences for competitive advantage.
For Apple, the company generally uses its ecosystem to profit from high-margin device sales. Google, on the other hand, profits from the data it extracts from its ecosystem in the form of ads and search-related revenue. Amazon's monetization method is similar to Google's, as in non-device focused, but takes the additional step of performing the sale itself instead of marketing.
In the process, Amazon's now the No. 1 online U.S. retailer, and a lifeline for third-party sellers with its Marketplace service. But its reign as top online retailer hasn't been without some controversy: Some small merchants have accused the giant of using its ecosystem to establish an unfair advantage by collecting data on popular items, then offering those items directly for less money using its scale to drive down product costs. Once again it seems Amazon is using its status as a retailer to help itself at the expense of competitors.
Apple TV and Google Chromecast lose a distribution outlet
According to Bloomberg Business, Amazon will no longer sell devices that are not "easily compatible" with its Amazon Prime Video service. Apparently, that means Google's Chromecast and Apple TV. The site told Marketplace users it will allow no new listings, and existing ones will need to be off the site by October 29. This was curious timing, of course, with Google recently releasing its next-gen Chromecast dongle, and the newest version of Apple TV shipping later this month.
While the debate has seemed to center on which company will suffer the most from Amazon's decision -- with many expecting Google will take a larger hit than Apple due to the latter's strong retail presence -- this is an asterisk to all three parties in terms of financial performance.
Neither Apple nor Google report direct revenues on these products, and Amazon's core business of retailing will be affected to such a minute degree, it becomes a footnote of a footnote. However, using a macroeconomics term, one wonders if enforcing an ecosystem embargo is in the best interest of all participants.
Is this a smart path to go down?
The risk for Amazon is that this turns into a full-fledged ecosystem turf war. In the end, it seems shortsighted to pick a fight with the two companies that control a massive 95%-plus market share of all smartphone mobile operating systems for a complementary product -- at best.
Right now, you can access Amazon's host of content and shopping through its app on both Google and Apple, essentially making the app a portal to their ecosystem and monetization plans. Amazon tried to challenge the two with its Fire Phone and supporting ecosystem: It didn't end well. Imagine if Apple or Google returned the favor by pulling Amazon's app?
According to Amazon, the impetus behind this decision was to avoid consumer confusion, as the company claims Prime Video has become an important part of its $99/year Prime bundle of services. While that may be true, wouldn't the easiest way be to educate potential customers instead of barring the product completely?
Jamal Carnette owns shares of Apple. The Motley Fool owns shares of and recommends Amazon.com, Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.