Apple, Meta, and the Epic Tech Battles

This episode breaks down the historic competition between Apple and Facebook (now Meta), framing it as a series of "battles" that have defined different technology eras:

"Maybe we'll break it down into three fights... battle number one was web, that's when we were young. Battle number two is mobile... and now there's a new battle perhaps that's brewing."

The hosts position these battles as learning opportunities for founders today, exploring what past tech wars can teach us about the current competitive landscape.

Browser as Neutral Territory

During this period (2002-2009), the web browser became the dominant platform for software distribution and user acquisition:

"The browser was the platform and the browser was kind of neutral territory, strangely. And whereas Windows had dominated the application world before, app developers were really really happy during this phase."

Why Web Was Revolutionary:

• No need to install desktop software
• Easier distribution compared to physical media
• Lower barrier to entry for users to try new applications

Apple's Position:

• Steve Jobs had just returned to Apple
• Company was recovering from near-bankruptcy
• Microsoft had previously invested in Apple to keep it afloat
• Apple was not seen as a major player in the web era

Facebook as Platform:

• Facebook attempted to become a platform for third-party applications
• Successes included Zynga (Farmville), helped Spotify's US launch, and boosted Pinterest
• However, Facebook was "torn" about its platform role, fearing competition
• Platform initiatives were frequently launched then "neutered"
• The hosts assess: "Microsoft was clearly a better platform provider than Facebook"

Clear Winner: Facebook

"In battle one between Facebook and Apple I might even argue people didn't even feel like Apple was playing."

Apple Changes the Game

Before the iPhone, smartphones existed (Motorola Razr, Palm Treo, Blackberry) but had limited app ecosystems requiring difficult installations of Java bundles or JAR files. Sam Altman's pre-iPhone startup "Loopt" was building applications for these feature phones.

The App Store Evolution:

• iPhone initially launched without an App Store
• Steve Jobs was reportedly reluctant to open the platform
• The winning argument: Apple could only build so many apps themselves
• Apple's approach: "This phone belongs to us... you're renting time on it"
• Revenue sharing model with strict rules and approval process

Facebook Plays Catch-up:

• Facebook was late to mobile, initially betting against native apps
• Had to acquire their way into mobile dominance
• Key acquisitions: Instagram (14-16 people) and WhatsApp (~100 people)
• These small teams leveraged Apple's platform to achieve massive scale
• These acquisitions would likely be blocked today

"WhatsApp was doing significantly more telephony than AT&T and AT&T was employing like 250,000 people and WhatsApp was employing like 100 people."

Clear Winner: Apple

"Apple won. The App Store won."

Diminishing Innovation Returns

The hosts note that smartphone innovation has slowed considerably:

"I remember iPhone X... I'm thinking that might have been my Peak excitement and then there was like a slow drawdown, and that was a long time ago."

Evolution of iPhone Upgrades:

• Early upgrades offered major new functionality (3G, video capability)
• Middle period focused on camera improvements
• Latest upgrades are minimal (USB-C charging port)

The AI Twist:

• Chat GPT is now the #1 app in the App Store
• Doesn't require the newest phone hardware to provide value
• Unlike Facebook in the web era, ChatGPT is likely paying Apple a significant cut of subscription revenue

"When Facebook was taking off, they were certainly not paying Netscape or Internet Explorer a percentage of the revenue."

Mature Market Signs:

• App Store feels mature
• Phone hardware is highly mature
• Upgrade cycle is lengthening
• Apple continues to dominate this phase

Companies & Products Mentioned:

• Napster: Referenced as being "as popular as ChatGPT is today" in its era
• Microsoft: Invested in Apple during its financial struggles
• Zynga/Farmville: Built on Facebook's platform
• Spotify: Benefited from Facebook's platform when launching in the US
• Pinterest: Gained traction through Facebook's platform
• Motorola Razr: Pre-iPhone smartphone
• Palm Treo: Pre-iPhone smartphone
• Blackberry: Business-focused smartphone with limited app capabilities
• Loopt: Sam Altman's pre-iPhone smartphone app company
• Instagram: Acquired by Facebook with only 14-16 employees
• WhatsApp: Acquired by Facebook with approximately 100 employees
• AT&T: Mentioned as having 250,000 employees but handling less telephony than WhatsApp
• ChatGPT/OpenAI: Currently the #1 app in the App Store

Web Era (2002-2009): • Facebook dominated while Apple was rebuilding • Web browsers created neutral territory for developers • Facebook attempted to be a platform but struggled with consistency • Clear winner: Facebook

Mobile Era (2009-2020): • Apple revolutionized mobile with the iPhone and App Store • Apple established strict control and revenue sharing model • Facebook had to acquire Instagram and WhatsApp to catch up • Small mobile teams leveraged Apple's platform for massive scale • Clear winner: Apple

Late Mobile Era (Present): • Smartphone innovation has slowed dramatically • Longer upgrade cycles as improvements become incremental • AI applications like ChatGPT don't require latest hardware • Apple still dominates through platform control and revenue cuts • Setting the stage for the next potential battle in AI

Meta's Strategic Repositioning

The hosts observe how Facebook (Meta) appears to be learning from its mobile-era mistakes by aggressively positioning for the next technology wave:

"When I see Facebook now investing in AI and especially open source AI and investing in glasses or a new platform, it feels like Facebook is learning the lessons of the last battle and saying like 'if the platform's not going to be neutral browser then I want to own it.'"

The Open Source AI Strategy:

• Surprisingly, Meta has become the most open company in AI
• They are "all in" on advancing open source AI more than anyone else
• This represents a complete strategic reversal from their mobile approach

Two-Front Strategy:

• Meta is pursuing both AI and AR/VR glasses
• The hosts frame it as a military strategy: "they don't know which front's more important"
• With glasses, they're likely to be "pretty close" to owning the platform

Apple's Position:

• Apple doesn't want the mobile battle to end
• They may see AI as a catalyst for "another 10-year phone upgrade cycle"
• Apple's strength depends on continuing mobile dominance

"I think Apple doesn't want the mobile battle to end. I think Apple wants AI to perhaps be the reason why we have another 10-year phone upgrade cycle."

Apple Vision Pro:

• Hosts question whether Apple's VR headset represents a serious platform play
• "You have to judge it based on its second or third revision of hardware"
• First generation doesn't appear to have "made a big dent"
• But revisions are likely coming

Consumer Products Face Higher Standards

The hosts reflect on how much harder it is to launch successful consumer products today compared to the early web era:

"Back in the day, in the early 2000s, you could launch a website that did like anything and people would click on it because they were bored and there was nothing on the internet."

Today's Challenges:

• Consumer products require much more polish
• Distribution barriers are significantly higher
• TikTok and YouTube function as "infinite black holes for people's time"
• These platforms are "addictive substances" that capture attention

The Innovation Question:

• While TikTok and YouTube are compelling, are they truly innovating?
• Short-form video doesn't feel "as magical as when we got smartphones"
• Established platforms seem focused on serving "the most addictive content" rather than meaningful innovation
• This creates both challenges and opportunities for startups

"Those things while they're interesting, are they innovating? The content is, I don't know... maybe the content is, but like a short form video versus a video doesn't feel like as magical as when we got smartphones."

AI Creates New Possibilities

Despite the high bar for consumer products, the hosts note that today's tools enable previously impossible experiences:

"I used an app the other day that called up a local business, asked a bunch of information, summarized that information, provided it for me, and summarized the entire phone call. And it was an AI agent that was doing the whole phone call."

The AI Revolution:

• AI can navigate complex systems (like phone menus) that previously required human intervention
• Can create personalized, one-on-one experiences at scale
• Contrasts with the web era, which "gave everyone an experience but the same experience"

Voice as a Platform:

• The technology for voice interfaces has matured significantly
• Good enough latency for real-time interactions
• Enables "scary good, human-simulating stuff"

Open Platforms:

• Voice, email, and SMS are more open than mobile app stores
• Represent potential opportunities for AI startups
• Less controlled than the iOS App Store or Facebook's platform

Strategic Opportunities:

• New iOS features (like RCS capabilities) offer potential advantages
• "Smart founders go look for under-exploited features"
• Platforms with "huge install base that works globally" offer the most potential
• Caution advised for closed platforms with limited distribution

"If you think of SMS as a platform, if you think of voice as a platform, if you think of email as a platform — those seem to be the platforms that the AI companies are doing fantastic on."

Too Early to Call

The hosts debate whether the AI landscape has a clear winner yet, or if we're still in a pre-iPhone equivalent phase:

"Do you think it's obvious who the winner is or do you feel like we're still in that Palm Blackberry kind of messy pre-iPhone world?"

Historical Parallels:

• ChatGPT/OpenAI could be "the Netscape of the era"
• First to popularize a technology but not necessarily the ultimate winner
• Microsoft, Google or others could follow the Internet Explorer playbook
• Apple could "bundle all these features into iOS" as part of iCloud

Key Differences From Previous Eras:

• Many large, powerful players already in the game (Google, Microsoft, Amazon, Apple)
• Limited incentive for these companies to work together
• Much higher stakes than previous technological shifts

"Someone was saying that there's basically so many fast followers to OpenAI and ChatGPT right now from very big companies, there's a chance this could be the Netscape of the era."

Key Takeaways for Founders

The hosts summarize their perspective on the current state of play and what it means for startups:

1. Learn From History:

   "At YC we're always trying to help people understand the past because man, it's a lot easier to build a strategy for the future if you know what happened."

2. Timing Is Critical:

   "We're at a really interesting time. Like this video would have been irrelevant a year ago."

3. Open Platform Opportunity:

   "There are these open platforms that the newest AI tools seem pretty able to exploit that the big guys seem kind of not quite able to completely regulate, so maybe there's an opportunity there."

The conversation concludes with the suggestion that the current moment presents a unique window of opportunity for founders willing to build on open platforms with AI capabilities, before larger players fully consolidate control.

Companies & Products Mentioned:

• Meta/Facebook: Investing heavily in open source AI and AR glasses
• Apple: Positioned to extend mobile dominance through AI
• Apple Vision Pro: Apple's VR headset mentioned as a platform attempt
• TikTok: Described as an "infinite black hole for people's time"
• YouTube: Alongside TikTok, creating attention capture challenges
• OpenAI/ChatGPT: Compared to Netscape as potentially first but not final winner
• Netscape: Historical reference for first-mover that didn't ultimately win
• Microsoft: Mentioned as potential competitor to dominate AI
• Google: Potential major AI player
• Amazon: Listed among major players in AI space
• Palm: Referenced as part of the pre-iPhone smartphone era
• Blackberry: Referenced as part of the pre-iPhone smartphone era
• Internet Explorer: Implied reference to Microsoft's browser strategy against Netscape
• iOS/RCS features: New messaging capabilities in iOS updates
• iCloud: Mentioned as potential vehicle for Apple to bundle AI features
• YC (Y Combinator): Organization helping founders understand technology cycles

Strategic Positioning: • Meta is betting on open source AI and AR/VR glasses • Apple wants to extend mobile dominance through AI integration • Major tech companies (Google, Microsoft, Amazon) all competing aggressively • No clear winner yet in this early phase

Startup Challenges & Opportunities: • Consumer product bar much higher than in early web days • TikTok and YouTube create massive attention competition • AI enables new personalized experiences at scale • Voice, email, and SMS are emerging as important AI platforms • Open platforms offer more opportunity than closed ecosystems

Historical Context: • ChatGPT/OpenAI could be "the Netscape of the era" - first but not final winner • Current phase resembles pre-iPhone "Palm/Blackberry" era of uncertainty • Large companies could bundle AI capabilities into existing products • Knowledge of past tech cycles helps founders build better strategies

Window of Opportunity: • Existing platforms can't yet fully regulate or control AI capabilities • Smart founders should explore underutilized features in existing platforms • Focus on platforms with global scale and open access • Current opportunity may be temporary before consolidation occurs