Why Apple is focusing on users not units? Because units aren’t growing like they used to. I will say though seeing Apple become a company focused on extracting more money out of existing users is kind of depressing. Not nearly as exciting as the great product reveal on stage.
Checks gross margin %.... exactly the same for almost a decade.
MMmmm.
Interesting point.
So higher component prices across the board, and/or higher manufacturing costs.
Apple is using the same strategy with investors as it did with the Battery Reporting in iOS 12 - give them a whole lot of useless data and sell the new narrative hard as ‘this is what’s really important’ - hoping nobody notices the 1 piece of data people really want, is gone. And the only persons with access to that data is Apple.
The investors who were mad about not having unit sales data were given a low ball price to sell their shares and they did. They don't matter anymore unless they want to take a hit and get back in on a company that still isn't going to report unit sales. Good luck finding another one!
Why Apple is focusing on users not units? Because units aren’t growing like they used to. I will say though seeing Apple become a company focused on extracting more money out of existing users is kind of depressing. Not nearly as exciting as the great product reveal on stage.
As per usual, it's like you didn't even read the article.
Two basic points the author was making:
User retention. User growth.
Sadly, but not unexpectedly, you missed them both.
These kind of articles miss the forest for the trees. The business cycle is a repeatable pattern that happens thousands of times over to thousands of companies, including Apple:
Stage #1) A company invents a revolutionary product or service, like the iPhone, or Facebook, or Amazon, etc. The invention is enough by itself to move massive sales, account signups, brand loyalty, whatever your metric is. The company becomes a leader in the stock market and otherwise.
Stage #2) Over time the novelty of the product wears off, competitors catch up and market saturation slowly creeps in. The net result is slowed sales.
Stage #3) Faced with slowing sales, heightened shareholder expectations and increased operating costs (due to having more staff, etc.), companies compensate by increasing prices and increasing the number and range of available products to try and keep growth from slowing too much. Sound familiar??
4) The increased prices compensate for reduced sales over a short period due to customers being locked in, brand loyalty, etc., but over time the higher prices reduce demand even further and the company starts to trend downward on multiple fronts. What happens from here depends on many factors. Sometimes the company can find a new product or service to start the cycle again, sometimes they can't and just continue to service a reduced user base. Sometimes another company invents a new product that effectively outdoes the original company (kind of like what Apple did to Palm and the other smartphone providers originally).
Apple is in stage 3. Everything they are doing is textbook business cycle economics. This idea about people vs. units and such, you see a lot of this kind of news/opinions for companies around stage 3. The reason being people, websites (like this one) etc., are invested in and dependant on the original companies success, and try to do whatever they can to help stem the tide. I will work for a time...
Sounds familiar because we've been hearing it for 10 years now about iOS. Except that Apple has outlived every pre-iOS platform, outlived American Android, and is outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$300 phones that are a terrible business to be in. Apple is now selling +200M iPhones a year at ~$800, which is the best it has in all its years of trying. Are you saying that isn't sustainable, because people are suddenly going to run out and get a $400 OnePlus? If so, why haven't they done that for the last 5 years, and why did the $1,000 iPhone X turn into Apple's last hit?
Rather than iPhone going away as promised, Apple introduced iPad and again outlived every pre-iOS tablet, outlived American Android tablets, and is now outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$300 tablets that are a terrible business to be in.
And then it introduced Apple WAtch and outlived every pre-Watch wearable, outlived American Android Wear, and is outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$100 wearables that are a terrible business to be in.
The problem Apple faces is that the needs of their customers are changing faster than Apple can realize it and add features to enable it.
Heh.
No, that's not the problem.
Apple realised that it's core customer was evolving into a highly-mobile creative individual, working in a much smaller open-plan space (or Starbucks, if you will) and who spends more time outdoors and doesn't actually want to spend any time at all fiddling with his hardware (fnar fnar).
These kind of articles miss the forest for the trees. The business cycle is a repeatable pattern that happens thousands of times over to thousands of companies, including Apple:
Stage #1) A company invents a revolutionary product or service, like the iPhone, or Facebook, or Amazon, etc. The invention is enough by itself to move massive sales, account signups, brand loyalty, whatever your metric is. The company becomes a leader in the stock market and otherwise.
Stage #2) Over time the novelty of the product wears off, competitors catch up and market saturation slowly creeps in. The net result is slowed sales.
Stage #3) Faced with slowing sales, heightened shareholder expectations and increased operating costs (due to having more staff, etc.), companies compensate by increasing prices and increasing the number and range of available products to try and keep growth from slowing too much. Sound familiar??
4) The increased prices compensate for reduced sales over a short period due to customers being locked in, brand loyalty, etc., but over time the higher prices reduce demand even further and the company starts to trend downward on multiple fronts. What happens from here depends on many factors. Sometimes the company can find a new product or service to start the cycle again, sometimes they can't and just continue to service a reduced user base. Sometimes another company invents a new product that effectively outdoes the original company (kind of like what Apple did to Palm and the other smartphone providers originally).
Apple is in stage 3. Everything they are doing is textbook business cycle economics. This idea about people vs. units and such, you see a lot of this kind of news/opinions for companies around stage 3. The reason being people, websites (like this one) etc., are invested in and dependant on the original companies success, and try to do whatever they can to help stem the tide. I will work for a time...
Sounds familiar because we've been hearing it for 10 years now about iOS. Except that Apple has outlived every pre-iOS platform, outlived American Android, and is outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$300 phones that are a terrible business to be in. Apple is now selling +200M iPhones a year at ~$800, which is the best it has in all its years of trying. Are you saying that isn't sustainable, because people are suddenly going to run out and get a $400 OnePlus? If so, why haven't they done that for the last 5 years, and why did the $1,000 iPhone X turn into Apple's last hit?
Rather than iPhone going away as promised, Apple introduced iPad and again outlived every pre-iOS tablet, outlived American Android tablets, and is now outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$300 tablets that are a terrible business to be in.
And then it introduced Apple WAtch and outlived every pre-Watch wearable, outlived American Android Wear, and is outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$100 wearables that are a terrible business to be in.
Sound Familiar?
In ten years time, the usual suspects (the ones that are still alive) will be complaining how Apple is all about the Apple Watch and VR and AI and self-driving cars and services, and has completely forgotten about the iPhone and the Apple faithful that supported it.
Yes, 2nickelstripper is right; that is the standard life-cycle for a company, but he has forgotten that Apple is the master of reinvention. Computers Then music players Then phones Then tablets Then Watches Then Health Then Energy Production Next VR Next transport.
And with each reinvention, it increases the installed base for the entire ecosystem.
Why Apple is focusing on users not units? Because units aren’t growing like they used to. I will say though seeing Apple become a company focused on extracting more money out of existing users is kind of depressing. Not nearly as exciting as the great product reveal on stage.
In 11 years, the smartphone market has peaked.
There isn’t much going on technology wise for any manufacturer, at least not enough to upgrade. That’s why most people are replacing their batteries on iPhone 6 and newer.
The increased pricing for the X line is, IMHO, a stopgap solution for technologies to mature enough to be cost effective to implement on a new device.
The uncertainty of the US economy is preventing customers from upgrading because it’s not a necessity. It had gotten Apple’s attention to the extent that Apple is offering more money for trade ins for older iPhones (6 and up).
Apple is pushing “Today at Apple” hard and this is going to be the catalyst to keep revenue somewhat stable while new hardware and software are in development.
This isn’t an Apple problem exclusively, the whole tech market is going to be flat in the short term.
Technology-wise Apple radically upgraded everything with Touch ID on the surface and 64-bit underneath. Then the size/format. Then camera ISP, waterproofing, computational photography, and most recently Face ID and OLED full face displays.
Most people are not upgrading every year, but the point of the article is that when you have a billion premium users who are largely not shopping around and content with your product and platform, you can keep offering new products and only sell them to a 1/5 or so of your base each year, and you're still selling +200M iPhones and making all the profits in the industry. Plus you can also sell them other products, from tablets to notebooks to home and wearables.
Apple is still increasing the size of that installed base!
iPhone 6 is going on 5 years old. The number left is dwindling simply due to screen breaks and physical wear. There is not some huge % of Apple's base that's turned into an Amish-like camp that won't ever leave 2014. According to Mix Panel, there's only about 11% of users remaining on an iPhone 6 model.
The largest slice (31%) are using a phone from last year, with iPhone X being the most popular, but 8/8+ both being narrowly behind. Another ~27% are using an iPhone 7 model, even though it has been sold for two years plus and has been discounted twice. And iPhone SE, despite being the cheapest iPhone ever, is less than 5% of users.
It's pretty clear that tech is driving iPhone sales, and not price discounts. And phones simply don't stick around for +5 years.
So "all" Apple has to do is build faster devices capable of new things and the industry will continue to lose money while doing the hard work of expanding smartphone sales in to new regions and subsidizing the buildout of networks, and then Apple can incrementally enter those markets and upsell affluent users on its premium gear. That's been working for 10 years, and there's no real change occurring to stop that from continuing.
It says that part of Jobs' strategy of Apple was moving to standards used on PCs. It doesn't say Apple moved to both simultaneously, unless you pull a quote out of context disingenuously.
At the time Apple moved to USB Apple was all in on PowerPC, and the "only" reason why they left PPC years later was because IBM was not particularly interested in meeting the low power requirements Apple had for processors in their portables. It became a (painful) necessity rather than seeking to move to standards PCs.
That's not true. IBM failed to deliver a G5 notebook chip and was making no progress in desktops. The whole PPC industry was shifting toward embedded, while Intel was about to launch its new Core architecture with better performance efficiency. Apple gained a number of things from moving to Intel; the ability to run Windows natively, which helped sell lots of Macs to new users; a closer partnership with Intel, which resulted in LightPeak/Thunderbolt; and adoption of other chipset level features, including affordable embedded graphics for entry-level models.
As with the move to USB, it was partly because the road ahead for what Apple was using (ADB and PPC) was dead, and the rest of the industry was on the verge of moving to a new standard. So Apple jumped and aligned the Mac with what was obviously going to be the future of PCs in both cases.
"churning out ever-increasing volumes of hardware units" isn't exactly what Apple have been doing for the Mac lately. In many ways they have gone to lengths to sabotage their own ecosystem and user base for macOS over multiple years.
Seen in that light, the narrative on focusing on users rather than units is not particularly trustworthy. I believe the investors understand that. Cause and Effect!
Mac has been growing, profit (people vote with their wallets) and units over the years. So what on earth are you on about?
Why Apple is focusing on users not units? Because units aren’t growing like they used to. I will say though seeing Apple become a company focused on extracting more money out of existing users is kind of depressing. Not nearly as exciting as the great product reveal on stage.
Nope, you just failed to comprehend the article, probably due to your irrational hate for DED.
Apple is now, and has always, focused on "users not units". Because tech players focused only on selling the most units come & go, as he cited in the Android world. It is only by building better products revolving around the *user* and not the *unit* that gives Apple its staying power.
How can you fail to grasp this, over & over?
And despite your silly bullshit, Apple products are *cheaper today* than they used to be, especially in the Good Old Days of Yore (tm). You're just whining because things aren't free.
"churning out ever-increasing volumes of hardware units" isn't exactly what Apple have been doing for the Mac lately. In many ways they have gone to lengths to sabotage their own ecosystem and user base for macOS over multiple years.
Seen in that light, the narrative on focusing on users rather than units is not particularly trustworthy. I believe the investors understand that. Cause and Effect!
I don't feel like you read the editorial.
I did and it is partly based on inaccuracy, lost history and wishful thinking.
Sentences like "At the same time, Apple also worked to adopt Intel chips, USB, and other technologies that ..." is cringeworthy. USB was introduced with the original iMac on System 8.1 in 1998 on a PowerPC based machine, almost 8 years before Intel processors .
No, your post is just based on nonsense. His sentence was that Apple worked to adopt cool tech. He didn't say they happened sequentially in that order.
"for every Mac user there are 18 iPhone and iPad users" - Yes there is, but nothing goes down as fast as a fashion company the gets uncool.
Combine that with a company that increasing is pricing themselves out of the market in country after country, that don't bother to renew hardware so they lose their highest paying and historically most loyal customers.
Look, Apple can focus all they want on fashion customers, group identities, virtue signaling, and production of toothless moves and curated news. I say GOOD LUCK with all of that, because it is a recipe for moving the company into something people easily can turn agains and away from.
Apple used to be the pride of the industry, the beacon everyone looked up to while they stole it's technologies scrambling to keep up. – Not so any more.
Jesus so much nonsense.
Apple is over 40 years old. What other PC companies of their era have this staying power, not to mention mind-blowing historic success?
They aren't pricing themselves out of anything -- despite you whiners, the X was the best selling model offered since it came out. And they're still killing it. Raising the price of the Mini to accommodate inflation and switch from mobile to desktop components isn't pricing themselves out of the market either.
Apple used to be the scorn of the industry, until their maddening success proved otherwise. And their designs are still ripped off every year. Get real my guy.
Apple is using the same strategy with investors as it did with the Battery Reporting in iOS 12 - give them a whole lot of useless data and sell the new narrative hard as ‘this is what’s really important’ - hoping nobody notices the 1 piece of data people really want, is gone. And the only persons with access to that data is Apple.
What on earth are you talking about? The power reporting is awesome, and not useless at all.
So many people have absolutely no clue about Apple...including those that read and post about it every day.
If I knew nothing about Apple, and only read the comments section on tech blogs, I would come to the conclusion that Apple was some mediocre tech company, formed maybe 15 years ago, that just happened to stumble upon a product that they called "iPhone", and threw it out into the market to see what would happen, aided by some smooth talking sales hack named "Jobs". Just purely due to luck, this product became successful, and through no effort at all, this mediocre company "Apple" just rode this product line up to fame and fortune. Alas, now that the smartphone market has peaked, this company full of bumbling fools has absolutely no clue about what to do next.
"Tim, units have peaked, what will we do?" "I don't know, raise prices I guess (as he gazes into a business cycle for dummies book, fearful that everyone will realize he knows nothing about business, the company, or its markets)".
I know, it's hilarious. These people know enough about Apple to read AI, but they have no comprehension about what makes its products so good or what they're setting out to accomplish. This really boggles the mind...It's like they're Dell users and continually upset that Apple isn't doing what Dell does.
So when are we actually going to have a REAL MacBook Pro that is made FOR US, not for units...
Define "us"? Define the use cases. As a software developer, Apple's #1 pro user per Craig, I find the MBP awesome. It's lightweight, fast, great battery, great display.
The problem Apple faces is that the needs of their customers are changing faster than Apple can realize it and add features to enable it.
Heh.
No, that's not the problem.
Apple realised that it's core customer was evolving into a highly-mobile creative individual, working in a much smaller open-plan space (or Starbucks, if you will) and who spends more time outdoors and doesn't actually want to spend any time at all fiddling with his hardware (fnar fnar).
Why Apple is focusing on users not units? Because units aren’t growing like they used to. I will say though seeing Apple become a company focused on extracting more money out of existing users is kind of depressing. Not nearly as exciting as the great product reveal on stage.
In 11 years, the smartphone market has peaked.
There isn’t much going on technology wise for any manufacturer, at least not enough to upgrade. That’s why most people are replacing their batteries on iPhone 6 and newer.
The increased pricing for the X line is, IMHO, a stopgap solution for technologies to mature enough to be cost effective to implement on a new device.
The uncertainty of the US economy is preventing customers from upgrading because it’s not a necessity. It had gotten Apple’s attention to the extent that Apple is offering more money for trade ins for older iPhones (6 and up).
Apple is pushing “Today at Apple” hard and this is going to be the catalyst to keep revenue somewhat stable while new hardware and software are in development.
This isn’t an Apple problem exclusively, the whole tech market is going to be flat in the short term.
What is isn't incorrect but also keep in mind Android is 85% of the smartphone market while iOS is 15%. There's still a good amount of room for Apple to grow iPhone unit sales via Android switchers.
Why Apple is focusing on users not units? Because units aren’t growing like they used to. I will say though seeing Apple become a company focused on extracting more money out of existing users is kind of depressing. Not nearly as exciting as the great product reveal on stage.
Exactly the strategy Sculley used and look how well that turned out? When you focus on extracting every last dollar out of your customers instead of making the best products, it’s a race to the bottom.
Comments
Interesting point.
So higher component prices across the board, and/or higher manufacturing costs.
Probably never, because YOU are not Apple's target audience. So what YOU need to do is get yourself a PC.
Right, this may be the phrase I've been trying to think of for the past six years.
As per usual, it's like you didn't even read the article.
Two basic points the author was making:
User retention.
User growth.
Sadly, but not unexpectedly, you missed them both.
Rather than iPhone going away as promised, Apple introduced iPad and again outlived every pre-iOS tablet, outlived American Android tablets, and is now outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$300 tablets that are a terrible business to be in.
And then it introduced Apple WAtch and outlived every pre-Watch wearable, outlived American Android Wear, and is outperforming Samsung/LG and all the companies in China in every metric apart from sales of <$100 wearables that are a terrible business to be in.
Sound Familiar?
Heh.
No, that's not the problem.
Apple realised that it's core customer was evolving into a highly-mobile creative individual, working in a much smaller open-plan space (or Starbucks, if you will) and who spends more time outdoors and doesn't actually want to spend any time at all fiddling with his hardware (fnar fnar).
It was you who failed to change; not Apple.
Yes, 2nickelstripper is right; that is the standard life-cycle for a company, but he has forgotten that Apple is the master of reinvention.
Computers
Then music players
Then phones
Then tablets
Then Watches
Then Health
Then Energy Production
Next VR
Next transport.
And with each reinvention, it increases the installed base for the entire ecosystem.
Most people are not upgrading every year, but the point of the article is that when you have a billion premium users who are largely not shopping around and content with your product and platform, you can keep offering new products and only sell them to a 1/5 or so of your base each year, and you're still selling +200M iPhones and making all the profits in the industry. Plus you can also sell them other products, from tablets to notebooks to home and wearables.
Apple is still increasing the size of that installed base!
iPhone 6 is going on 5 years old. The number left is dwindling simply due to screen breaks and physical wear. There is not some huge % of Apple's base that's turned into an Amish-like camp that won't ever leave 2014. According to Mix Panel, there's only about 11% of users remaining on an iPhone 6 model.
The largest slice (31%) are using a phone from last year, with iPhone X being the most popular, but 8/8+ both being narrowly behind. Another ~27% are using an iPhone 7 model, even though it has been sold for two years plus and has been discounted twice. And iPhone SE, despite being the cheapest iPhone ever, is less than 5% of users.
It's pretty clear that tech is driving iPhone sales, and not price discounts. And phones simply don't stick around for +5 years.
So "all" Apple has to do is build faster devices capable of new things and the industry will continue to lose money while doing the hard work of expanding smartphone sales in to new regions and subsidizing the buildout of networks, and then Apple can incrementally enter those markets and upsell affluent users on its premium gear. That's been working for 10 years, and there's no real change occurring to stop that from continuing.
As with the move to USB, it was partly because the road ahead for what Apple was using (ADB and PPC) was dead, and the rest of the industry was on the verge of moving to a new standard. So Apple jumped and aligned the Mac with what was obviously going to be the future of PCs in both cases.
Nope, you just failed to comprehend the article, probably due to your irrational hate for DED.
Apple is now, and has always, focused on "users not units". Because tech players focused only on selling the most units come & go, as he cited in the Android world. It is only by building better products revolving around the *user* and not the *unit* that gives Apple its staying power.
How can you fail to grasp this, over & over?
And despite your silly bullshit, Apple products are *cheaper today* than they used to be, especially in the Good Old Days of Yore (tm). You're just whining because things aren't free.
Apple is over 40 years old. What other PC companies of their era have this staying power, not to mention mind-blowing historic success?
They aren't pricing themselves out of anything -- despite you whiners, the X was the best selling model offered since it came out. And they're still killing it. Raising the price of the Mini to accommodate inflation and switch from mobile to desktop components isn't pricing themselves out of the market either.
Apple used to be the scorn of the industry, until their maddening success proved otherwise. And their designs are still ripped off every year. Get real my guy.
I know, it's hilarious. These people know enough about Apple to read AI, but they have no comprehension about what makes its products so good or what they're setting out to accomplish. This really boggles the mind...It's like they're Dell users and continually upset that Apple isn't doing what Dell does.
Define "us"? Define the use cases. As a software developer, Apple's #1 pro user per Craig, I find the MBP awesome. It's lightweight, fast, great battery, great display.