Has Apple slightly adjusted its line, or cut the entry price for an iPhone by $200?Read More
When we say 'mobile' we don't mean mobile just as when we said 'PCs' we didn't mean PC. This isn't about the screen size or keyboard or location or use. Rather, the ecosystem of ARM, iOS and Android, with 10x the scale of Wintel, will become the new centre of gravity throughout computing.Read More
By financing iPhones directly, Apple locks in iPhone users to a rolling subscription, enters the second-hand market in a big way and removes a piece of mobile operators' relationship with usersRead More
Cars are going to change a lot in the next few decades. Electricity on one hand and software on the other change what a car is, how it gets made and who might own one. Bu that changes everything else.Read More
As I wrote here at the end of last year, tracking precisely how well Apple and Google's mobile platforms are going has ceased to be very interesting. They both won, and both got most of what they wanted, more or less, and at this stage iPhone or Android phone sales announcements are really just victory laps. That's reflected in the fact that Google hasn't given a new Android sales statistic since last summer.
Meanwhile, it's too early to tell how the Apple Watch is going to do. Apple implies 2-3m unit sales and something over $1bn in revenue in less than a quarter, which clearly kills the 'flop' stories, but as this chart shows, that's not a strong indication of what will happen next.
Hence, rather than analyzing the results in detail (what as a sell-side analyst we used to call 'maintenance research'), here are a few notes I scribbled in the margins of Twitter, together with an essential emoji summary.
As a company moves from insurgent to incumbent, and gets big and complex and involved in lots of different things, it tends to end up with lots of different objectives, tactics and strategies. At that point, trying to understand it from outside, it can be useful to think not about what it's trying to do but what it's afraid of. This company want to do lots of things, but what's the existential threat? What does it want not to happen? What scares it, late at night?
For Google, the fear is around reach. Google is a data company, and a machine learning company, and everything it does is about reach - reach to get data in so that it can understand everything better, and then reach so that it can serve that understanding out to the users. And so Android exists partly to enable the expansion of the mobile internet, but also, and more fundamentally, to ensure that no-one (meaning first Microsoft and later Apple) would be able to block Google from reaching those users, both to give them each results and to see what they are doing. Google is afraid of going blind.
For Apple, I'd suggest the fear is that the developers leave. This is what happened in the 90s and it was a key part of the company's near-death experience (and arguably Apple only survived because the web made the lack of Mac apps matter less as a reason to buy a computer). Once developers start leaving you're in a vicious circle that's very hard to reverse (this is where Windows Phone is now). Today the iOS ecosystem is smaller than Android in absolute users and downloads, but has 7-800m live device, which is three times the size of the PC install base in 1995, and twice as much app store revenue per user as Google Play. More importantly, perhaps, the users are highly concentrated in key locations - Chase isn't going to abandon its iPhone app because there are 500m Android users in China. So right now the ecosystem looks sustainable, but that could change. Developers can leave. That's Apple's existential fear.
This is a useful lens to apply to the announcements at WWDC and IO. Google, this year in particular, always seems happier and more comfortable talking about the great stuff it can do with its own unmatched cloud intelligence - Now on Tap, for example. Losing that intelligence is what Google's afraid of. Apple is happiest talking about the new platforms and technologies that it wants developers to use - Apple Pay, iBeacons, Extensions or App Search. And losing that developer adoption is what Apple's afraid of.
Apple and Google both give headline statistics of how well their respective app stores are doing, generally at their summer developer conferences. These are rounded numbers at scheduled events and they're not always comparable, but they do give us a sense of what's going on.
Last summer, at their developer events, both Apple and Google gave numbers for the money they had paid to developers in their respective app stores: $5bn in the previous 12 months for Google Play and $10bn for the iOS App Store. Given Android has double the user base of iOS, this meant that the average iOS user was worth around 4x the average Android user in app store revenue.
This year Apple gave the same number - $10bn (more precisely, it gave a cumulative figure of $30bn this WWDC versus $20bn last WWDC). The lack of growth may be partly due to rounding but still implies that people are spending less on average, since the user base is still growing. Google gave no number at Google IO but it gave one earlier in the year of $7bn. It looks as through Play is growing faster than iOS and might overtake it this year (unless Apple is rounding down very aggressively - certainly the uneven shape of the graph in 2013 is due to rounding).
Since Google Android has close to double the number of users, this implies that the average user is spending perhaps half as much as the average iOS user - a change from 1/4 a year ago but still a big gap.
Meanwhile, this was the first year since 2013 that we could compare downloads.
Google Play had 50bn app downloads in the last 12 months and iOS had 25bn, with Play appearing to be growing faster. Since, again, Play has more users, this implies roughly the same downloads per user on Android and iOS.
Incidentally, these numbers show annualized consumer spending on apps of around $25bn, and 75bn apps downloaded in the last 12 months.
Unpicking WWDC: maintenance releases, proactive analysis of user data and two aggregation and curation platforms, News and Music.
I did a podcast with Steven Sinofsky talking about the Apple watch, a month after launch.
A gold smart watch is an interesting experiment, but it’s also marketing and positioning - a way to shift perception away from the ‘nerd wart’ image of wearable tech and turn it into a lifestyle product. Whether people buy it is less important than whether it stops people calling these ‘gadgets’Read More
Apple we are told, is working on cars, and there's enough smoke that some fire somewhere seems likely. Apple has enough cash (over $150bn) to do this, if it wants, and this prompts all sorts of investing questions, but I've been wondering how one should think about the market opportunity it might be able to secure, and how that fits into the other incursions of the tech industry into cars.
First, can Apple create new value in the industry in the way that it did in phones? With the iPhone, Apple created a new price segment and (with Android following) made the phone industry's revenue much bigger - the average price of a phone sold has more than doubled since 2007. But cars are, pretty obviously, more expensive than phones. Many people can find $400 for a better phone or, this year, a smart watch, if they're persuaded that they really want one, but rather fewer can find an extra $40,000 for a better car, or to replace their car every two years instead of every 4 or 8. If you're in the market for a $20,000 car, there is very little that anyone can do to a car that will put you in the market for a $60,000 car. Cars do not come out of discretionary spending.
That is, lots of people never thought they'd spend the extra to get an iPhone or one of its imitators, but they did, and it wasn't actually that much money. A billionaire and a teenager have the same phone. Conversely Jonny Ive could invent a car that flies and makes perfect espresso, but if it costs $60k or $80k then people driving second-hand Corollas aren't going to buy one.
In addition, Apple created a premium segment in phones, but there's already one in cars - Apple could take share of that, but it's ipso facto too late to create it.
So, it seems, at the very least, much harder to increase the overall size of the market than it was for phones. This isn't necessarily a problem. The major premium brands BMW, Lexus, Audi and Mercedes Benz sold 5.5m units in 2013, and had revenue of around $220bn. (The total market was around 65m cars, with a further 22m commercial vehicles). Taking a share of $220bn a year, even without changing the overall market size at all, would be just fine.
Meanwhile, there's certainly scope to change the product and take market share - indeed, we are now rethinking what a car is for the first time in generations. Electricity leads to different manufacturing economics, allowing (potentially) lower costs and lower maintenance costs. It also allows the car to be reconfigured, at least to some extent, though obviously less than a self-driving car with no manual controls at all. And the experience of driving the car itself about adding more and more software - one wonders what one would do with a dashboard if one started from zero as a software company? It seems that there might be quite a lot that could be done to reinvent the experience. And though we should assume Apple will retain a premium experience, we can make too many assumptions about the price - remember that the iPad was certain to cost $1000.
However, there are other reasons besides electricity for the reinvention of the car - the rise of on-demand and the possibility of self-driving cars. These do have the potential to change the size of the market, but by making it smaller, not bigger.
Both on-demand and self-driving cars would appear to drive a reduction in car ownership and certainly car use (which means slower replacement), to the extent that they become a major part of the urban landscape. That obviously means fewer car sales. They also change what cars get bought. If you don't own the car yourself, and don't even see it before it arrives, the brand and styling matter less than efficiency. That effect is probably strengthened if we move to a fleet model (as many taxi systems work) rather than owner-operators - a fleet manager will choose the vehicle based on metrics, not the fit and finish. That is, the car market would be both smaller and might look more like the corporate PC market. It might also start to bifurcate - people buying $15k and $30k cars substitute $20-25k on-demand vehicles, while the high-end is less affected. Or, high-end sales might be affected most, if those people are best able to afford going entirely on-demand. We don't know, but there are lots of moving parts and will be many unanticipated consequences. Who looked at the Model T Ford and predicted Wal-Mart?
On the other hand, self-driving cars might support both an on-demand model and an AirBnB model for cars - does your car drop you off at work and then roll off into the city to earn you some extra money driving other people around? Would people want to do that? Would that reduce the opportunity for 'dedicated' on-demand vehicles? Who knows. Of course, it's also possible that self-driving technology, said to be a decade away now, will remain a decade away indefinitely, as so many other AI projects have done.
In a sense, all of this is the unbundling of public transport. Instead of large vehicles aggregating passengers on fixed routes, you have many small vehicles, with many different ownerships, on almost infinite routes - packet switching instead of circuit switching, if you like.
The challenge for Apple and anyone trying to make premium cars in all of these questions is that they are matters of AI and routing and algorithms - they are matters for Google, not Apple. They shift the value away from the hardware to the cloud, and turn the car into a generic commodity - dumb wheels instead of dumb glass. Apple doesn't really do algorithms (though it does do privacy, which may become a lot more relevant). And meanwhile a shift to self-driving and on-demand is focused precisely on the urban 18-35s who are its best customers.
There's a counter-argument to all of this, of course, that the correct place for intelligence is in the device you hold in your hand, take everywhere with you and replace every two year, not the large piece of moving metal that you replace every 5 or 10 years. Cars are for car makers, and though Apple could make a nice one with all its design skills and capital, it could also make a nice retail bank, or chain of restaurants. This is especially the case without self-driving. On this view, the car should be dumb glass, with all the intelligence in the smartphone.
This of course is the real problem, which I talked about here - forecasting how the tech will evolve is often easier than how it will be used. Agatha Christie supposedly said that when she was young, she could not imagine being rich enough to have a car or poor enough to have no servants. The ways that both would change in the next half-century were totally opaque. Now we're reinventing the car again, but it's much easier to see what might be possible than what people would choose.
When you try to work out the market potential for something fundamentally new, you’re actually trying to resolve two, linked problems.
First, you have to look past what it is now, and see how much better and cheaper it might become
Second, you need to think about who would buy it now, and who else would buy it once it is better and cheaper, and how it might be used.