The New Yardstick: If You’re Not Apple, You Lose

60 Comments

For 2009 and 2010, the clear winner in consumer electronics is Apple (s aapl). Its mindshare among analysts and consumers is far beyond any other company. I’d even go so far as to declare Apple the most successful tech company of this decade. That’s why I feel sorry for every other company in this space.

No matter what your company did in the past two years, Apple did it better. It reminds me of Sony (s sne) in the 80s and Microsoft (s msft) in the 90s. Companies were afraid of Microsoft in the 90s. All Microsoft had to do is decide to enter your space and you’d be out of business, if you weren’t lucky enough to be bought by the company. That’s not the case anymore. In this sense, Apple is the Microsoft of this decade.

Let’s take a look at RIM’s (s rimm) BlackBerry Torch, just released last week. Gizmodo had a great post on why the Torch launch was an utter failure, with only 150K units sold in the first week. In that article, they said:

The hordes are proclaiming the Torch a massive failure, and they’re right — but not because of how many units they sold. 150,000 handsets is a lot of phones. In fact, it’s totally in line with other major launches of the last couple of years: Sprint (s s) sold that many Evo 4Gs in its first three days, and it’s three times as many as the Palm Pre (s hpq) managed at launch.

Who it didn’t compete with, of course, is the iPhone. The 3GS and 3G both moved a million over their opening weekends, and 1.7 million people took home an iPhone 4 at launch. And that’s where RIM got into trouble.

They’re right. 150K units is a great number, but it doesn’t compare to Apple’s 1+ million numbers every time a new iPhone comes out. That’s the point. The Blackberry Torch, HTC Evo and Palm Pre all look like complete failures when measured against Apple.

Recently, Asus said they’re lowering production of netbooks due to a lower sales forecast. Nowhere in that quote did their CEO say Apple’s iPad is to blame, but it didn’t stop every blogger from making that causal link. What about the fact that netbooks have had the same Intel (s intc) Atom processors, same form factor, same low-resolution monitors and same version of Windows XP on them since 2006 as the reason for lower sales? Maybe it’s time for Asus to actually innovate instead of putting the same stuff inside a different color case and throwing a $299 price tag on it.

The specifics of how other companies are doing doesn’t really matter. The issue is that, no matter what any tech company does, they’ll be compared to Apple in some way. Tech companies can’t release a mouse, display, keyboard or television-connected device without being compared to Apple. I’d like to see Microsoft release a battery charger at this point without drawing a negative comparison. Wait, never mind, they have one of those.

My point is, Apple is the yard stick by which all others are measured. There are better products out there with zero visibility and meager sales. In fact, the next Apple is probably out there somewhere. Let’s hope manufacturers don’t just throw up their hands and scale back in the face of stiff competition from Cupertino, and as consumers let’s keep an eye out for the next little guy swimming bravely upstream.

Related GigaOM Pro Research: Apple Company Analysis

60 Comments

JR

Actually, Adam, I AM an Apple enthusiast. But, I would very much like to read and article from you about Google’s strategy of “giving it all away” to gain market share vs. Apple’s well-thought out marketing plan. Is there a chance that “giving the shop away” strategy can work in the end on the smartphones? How long would you have to give it all away for? And will the “open” source work as well? What about viruses in an open source environment?
Would love to read the comments re ALL of these topics re the two diverse strategies.

Money

Article is money.

Apple wins.

MSFT is dead.
Android is dead.
Blackberry is dead.
Netbooks are dead.

fjpoblam

As Michal Sevcik says, “everything good will sometime end.” SJ/AAPL in their hubris have grown slack in their responsiveness and innovation of late, if I hold their attitude correctly. Someone like Axon will come along to steal thunder from the iPad.

shorebreeze

I’ve had too many problems with Apple products hardware-wise over the years to even consider an iPhone.

But dealing with Windows and its Registry and its antiquated approach to installing and maintaining software (not to mention the ugly screen presentation and graphics) is an even more horrible thought, so I stick where I’ve been for a long time — with Apple computers, even though I’ve only ever had one (an Apple Powerbook 190cs from the mid 1990s) that did not need warranty service.

In the end, what counts is software and service. Apple’s advantages in these departments on traditional computing is overwhelming. With mobile devices, they’re still learning. The real defining features in the mobile market are Apple’s insistence on making customers stand in line at their stores for device repair and replacement rather than delegating to carriers’ often excellent advance exchange service; and RIM’s failure to modernize and standardize their OS to enable efficient platform-wide app development and a better web browser. Note how Android has neither of these disadvantages. Apple can easily correct their disadvantage. RIM has a more difficult task.

Hans Peter Brondmo

No question that Apple has grabbed mind share. They have done a masterful job at capturing people’s attention and the have a good product. That said, the average iPhone user has an annual income of $100k.

When evaluating the space consider that Nokia builds and sells 1.1 million phones per day, 365 days per year. The world of mobile is bigger than the niche segment that Apple and RIM are exclusively focused on. People’s lives are changing because of mobile phones, and the vast majority of them are buy anything but iPhones or Blackberrys.

(disclosure: I work for Nokia)

Kevin

That’s what the General Motors management said when other companies began encroaching on their territory. Explain to me how Nokia will wind up with a better result if they keep doing what they’ve been doing.

Edwin

Other than the fact that Android has stolen Apple’s phone mojo, your article is real good.

Wodster

I like that somebody tried to make a simple lemonade analogy, and it just falls apart under simple scrutiny-

Because the Apple/Google business models are very different-

Or maybe we should just continue to make the analogy more and more complex, draw attention to the fact that Apple is selling both the lemonade and the cups. But Google is involved in a different business, clicks and advertising, so that’s why they are practically giving away their lemonade for free, they are printing ads on the sides of those cups!

jbelkin

Notice that google calls it ‘activations’ and not sold – why as the last quarter results are in – Apple has 55% market share of the profits in the ‘smartphone’ category – this with 3% of phones sold while every Android handset maker either reported low margins or a loss so there’s market share and there’s market share. Google is tap water, Apple is bottled water, they are both technically in the drinking water market share game but one is a pennies on the dollar while Apple is FULL MARGIN – $500 return per handset sold times 50 million in 2010 – Google’s return – essentially a few pennies when you tap on an admob ad … minus the $750 MILLION they just paid for admob plus the billion they spent developing Android (after buying it).

Google was able to beat back MSN & yahoo with a free search bar and make money on ads – after sitting in on Apple’s board meetings, they figured they could take out Apple by undercutting their phones but the Android Os is not iOS – it’s a fine free OS that can take on and take out Smbian, WIN Palm and even RIm but not iOS – Android will duke it out in the low end winning low end market share but Apple is simply smarter than Google … and in a few more years, would you rather just search your apps like YELP instead of Google?

Google so far is a one trick pony – 97% of revenue is from search – are they the new MS – welded to one money cash cow – incapable of really branching out? Will Android be like Ms’ XBox – $40 BILLION spent to make $25 BILLION …

martin rivard

wow jbelkin i couldn’t have said it better myself thanks.

besides, i remember back in the old days, when Apple was only a 3% marketshare computer company: Apple always said they didn’t really care about being the top marketshare holder in computer sales, they only wanted to make the best, most innovative, most fantastic, most enjoyable computers possible, and hopefully make enough profit on computer sales to stay in business and continue their core mission:
To Innovate (ie: to continue “making a dent in the Universe”).

of course when it comes to current smartphones i suppose Apple happens to own the space, or at least the space’s mindshare and profitability. nevertheless, they keep their business model closely focussed on their core mission statement: To Make a Dent in the Universe.

Jerome

I’d re-write the title as, …If you’re not Apple, you lose.

I love Apple products for everything they stand for – but I’m not averse to any other company’s products that are as innovative and useful.

Chark

Hmmm… I wonder what happens to Android sales when the following 2 events happen?
A) Apple and AT&T end their exclusivity deal in the US and (hopefully) move to Verizon and others. (The more the merrier) I predict Android sales will plummet and iPhone sales will skyrocket. This is the case where iPhone is sold by multiple vendors elsewhere.
B) Oracle wins their patent infringement lawsuit against Google for blatantly copying Sun’s Java that is used extensively in Android. Google took way too many shortcuts in rushing Android out that they were very sloppy.

John Cipolletti

I have programmed iPhones for 4 years. I have to admit that at first Apple was way out front but in 1915 the Ford Model T was also out front. Guess what, the Ford was overtaken by other companies and this is happening with the iPhone. If you want to see what is beating the Apple phone try the Nexus 1 or the HD 2 and the Evo from HTC. Now the Samsung Galaxy is out there with Android 2.2. If Apple doesn’t work harder it will go the way of the Model T

Dubc

None of the phones you just listed are even close to outselling or beating the iPhone.

If you add all the android phones on all the networks they are but… Yah, that is comparing one phone to a platform of phones. Silly comparison.

Allan

Gee, I seem to remember a different standard when the Wintellians ruled the Earth. Pundits were eager to insist that companies/technologies that could not sell as much as M$ should shutter their businesses as sales volume and profit were the only true measures of a company’s products.

I hope Apple buys Dell just so they can shut it down.

iphonerulez

I don’t feel sorry for the other companies. They can easily move into another direction instead of trying to mimic Apple. The pundits claim that Apple devices are no better than any other brand and another brand will be much cheaper for consumers to buy. The pundits say that Apple products bear the Apple logo which supposedly isn’t worth anything.

Apple as one company can only handle so much market share of iPhone, iPod Touches and iPads. It won’t be that easy for Apple to keep up with demand and other companies can take advantage of that. Just last year everyone was saying how wonderful netbooks were. Why should that change all of a sudden? Rival companies could just build better netbooks and they won’t bump into Apple at all. What happened to all those MIDI-class computers that were going to take the world by storm? Rival companies could try to revive that sector. Other companies say that Apple doesn’t know what it’s doing, so they should just avoid building any similar devices that Apple is building and see what happens.

That Google appears to be a really stupid company. What the heck did they build Android for if they’re just giving it away freely? Since when did they become a not-for-profit company? Google has to take the responsibility of maintaining it and distributing it and whatever associative costs that are involved. I have never seen such a retarded business model and yet the analysts and pundits think Android is better than sliced bread. I’d love to see this grand plan of Google’s to get revenue from Android. Are they going to force users to click on an ad every time they pick their smartphone up or the OS will shut down? I’ve read that many of the Android fanbois say that they hate ads, so if they don’t click on them, how will Google get any ad revenue.

Android might be good for users and smartphone vendors, but the business model absolutely sucks for Google. With search and ad clicks down due to the economy, Google seems to be steadily losing money and shareholders aren’t pleased at all. Google doesn’t appear to be selling lemonade. It’s just letting people walk up to the stand and take the lemonade, the cup and all the ingredients for free. It seems like a surefire way to go out of the lemonade business in a hurry.

voxpo

iphonerulez:

“Google seems to be steadily losing money”

What makes you think so? I assume it’s not their Q2 numbers since those showed profit.

InnocentEd

“Android might be good for users and smartphone vendors, but the business model absolutely sucks for Google. With search and ad clicks down due to the economy, Google seems to be steadily losing money ”

The fact that Google mobile search is the 3 largest search engine that exists, behind Google and Youtube and that Google had staggering profits in Q2 seem to tell a different story mate :)

Ed

Its great what months of leaks and hype plus a couple of million fan-bois can do for sales.

Ed

Its great what months of leaks and hype plus a couple of million fan-bois can do for sales!

John Dingler

If your thesis is correct, that MS was then like Apple is now, and that other other companies are not releasing competing products because of fear from the mentioned two, then there are two kinds of fear: Fear of MS stems from the release of a juggernaut of bad quality products while fear of Apple stems from a fear if inability to surpass quality products.

Scopie

“There are better products out there”

Very broad statements like this one that are not completely self evident should have additional prose written to back them up.

Snafu

Isn’t this a bit Apples vs Oranges? For example, you compare Apple vs. Asus Netbooks instead of Apple vs. plain whole Asus which has several other product lines. The netbook issue is not just about iPads but other netbook manufacturers too and the peculiarities of that market (a market that Asus invented and became a worldwide phenomenon, so kudos to them, really).

Also, you compare Apple, a consumer electronics-oriented company to others that have important Enterprise business units and sometimes vertical markets ones. Their diversification makes it impossible to be so lean and mean and focused in a single market.

I’ll admit that brand value-wise, comparing Apple’s with Sony’s, Philips’ and such is perfectly fair, though.

tbowick

Yes, but Apple, not matter what it says, is prevalent throughout the stack. They design hardware, OS, laptops, desktops, mobile devices, software applications, streaming, TV, rentals, cloud computing, etc., etc.,. And they are leading (or seriously competing) in just about every area. Most other companies are stuck in one or two layers of that stack of technologies. Apple has a hand all the way up and down the line, so they don’t have to rely on innovation or total dominance in one area. Apple wassn’t worried about an iPod killer when they first released the iPod because THEY MADE the iPod killer – the next iPod. Then they make the iPhone killer, by creating the iPhone4. I don’t have a particular love for Apple, but love ’em or hate ’em…they’re dominating the stack by controlling or seriously influencing the culture and technology all the way up and down the line.

MattF

What’s notable is all the companies that see what Apple has done, but can’t get over the ‘stickiness’ of their own corporate culture. Innovation, design for the user experience, continuous improvement, be the best in class– are all bywords, but Apple seems to be the one that actually does all of it.

Hamranhansenhansen

Apple doesn’t have any special magic, they are just one of very few companies that are trying to make the best products for users, that is why they are appreciated by users. Other companies are trying to make platforms for hardware makers (Microsoft) or platforms for advertisers (Google) or settling for being a customer of those platforms, even if that means making lousy products (HP, Dell, Lenovo, Asus, Motorola, HTC, others) so they make terrible products and they are not as appreciated by users.

InnocentEd

You know you usually have some great posts, but the Apple love affair is a bit much sometimes…I gotta say.

The fact that Android activates 200,000 handsets a day means nothing or the fact that HTC has several other handsets selling very well also means nothing?

Lets take a look at it from a 10 year olds perspective before you start saying you can only compare 1 phone to another 1 phone.

1. Kid A has a Lemonade stand with Type A Lemonade and sells 100 cups in 1 day.
2. Kid B has a Lemonade stand with Type A, B & C Lemonade and sells 50 cups of A, 50 cups of B and 50 cups of C in 1 day.

– Now you tell me, which kid made out better for that day?

Ya…it’s pretty straight forward

Dubc

Android is a platform with dozens of phones on multiple networks. The iPhone is one phone. Compare apples to apples. The point is, no one android phone can compare from a sales standpoint. I’d argue that most consumers don’t even know who HTC is at this point. They know android is an alternative to the iPhone and there are a host of reasons to not switch to AT&T given a usable alternative which Android presents.

It seems every article published not raving about android or talking about some apple weakness gets a host of negative comments screaming bloody murder, “what about android?”

I get it. The only thing more appealing than a hero is a fallen hero. Are these the same people people that said the iphone would never succeed without a qwerty keyboard? Strange how all the top android devices are using touch screen keyboards a la iPhone. That’s ok. The vocal minority is just that, the minority and I hope apple continues to filter out this noise.

And to your lemonade stand comparison. If kid A has 50% of the overall market profit, but 3% of market share, who wins? If Kid B has to start 2 for one sales to gain market share in a demographic that doesn’t really want to pay for lemonade who won?

Guess which kid Apple is…

Brian

Apple is the kid using forced child slave labor to keep their 800% margins on $1.50 products with massive design flaws. Apple is the master of marketing. They suck at making products though.

Hamranhansenhansen

You left out profitability in your lemonade stand. This is the profitability in phones:

– Apple: 50%
– Nokia: 25%
– RIM: 15%
– other: 10% (including Android)

So which kid do you want to be again?

> 200,000 handsets a day

There is a carrier in China that uses the Android kernel in their own non-Android operating system. They account for a very large part of that 200,000 per day but their phones would not be recognizable to you as Android, and do not run Android apps, and do not even have Google apps on them.

Actual Android phones are a much smaller number, and almost all Android phones are on the closed US carriers, Verizon and Sprint, where they don’t have to compete with open phones, which is more than 90% of the world’s phones.

But even if you take the 200,000 number at face value, that is fewer than the iOS units per day. You forgot that kid A has 2 other lemonade stands that sell the same lemonade: iPod and iPad. Android and iOS are operating systems, comparing Android to iPhone is a cheat for Android.

Another problem is Android has been sued by Apple, Oracle, and Microsoft over patents. Microsoft settled and now collects royalties on Android phones. Microsoft has made more money on Android than Motorola, which isn’t hard because Motorola has made $0. If even one of Apple’s patents wins then no Android hardware, and if even one Oracle patent wins then no Android software. So Google took but can’t necessarily keep.

So it’s not nearly as straightforward as you think. Android has had very little impact. The most significant thing it has done is to inspire the profitable handset makers to start their own ad networks since Google is not an unbiased ad partner, which is very bad for Google.

Frumius

I think Kid A is Apple and Kid B is… everyone else, right?

If so, you have to divide all those sales that Team “Kid B” made amongst all the team members.

Kid A is doing the best. I’d much rather be Apple than any of the members of Team “Kid B.”

Matt

InnocentEd is right! I mean the innocent part.

As others have alluded to, Android is open-source and Google doesn’t make the hardware in most cases. So there are really lots of different Kid Bs selling variations of the same thing, dividing up it’s own market. Apple makes their own hardware AND software AND are the gatekeepers of their own app store. That means Kid A is cleaning house while the others are groveling for scraps.

As a New York Times article suggested a while back, Steve Jobs doesn’t want to dominate the market, just THEIR market, and Apple is doing that just fine.

Frumius

Oh, I didn’t notice that he qualified his assessment as “a 10 year olds perspective” [sic]. I can see that.

Yacko

“Lets take a look at it from a 10 year olds perspective…”

Poorly constructed analogy.

Try this. Kid A sells 100. He also has a couple of partners also selling his lemonade and the price is the same at all locations. We won’t count those other outlets.

Kid B has some lemonade concentrate which he gives away to Kid C, Kid D, Kid E. These three kids dilute it as they feel and and use a pitcher of their choice and add as much ice as they feel. The three kids now decide to share a lemonade stand and have to compete. Kid C sells his lemonade 2 for the price of one. Kid D sells his lemonade at 75% of the average going rate of lemonade in the area. Kid E splits his lemonade into two pitchers adding raspberry juice to one and tea to the other. Since he considers both actions to be a lemonade upgrade, he sells full price, near Kid A’s price. Kids C, D, E sell 50 cups each.

Now which kid made out better?

Kid B did not get any money.

Kid C sold the equivalent of 25 at full price.

Kid D sold 38 (or so) at full price.

Kid E sold 50 at what was essentially full price.

Kid A sold 100 units without any discounting.

“Ya…it’s pretty straight forward”

That’s what I thought!

apexofkryptos

InnocentEd,

At least you proved the author correct in one major respect: no matter how well a competing product does, it ultimately gets held up for comparison against an Apple product.

All iProduct bashing aside, that’s saying something. There are scores of competing phones out there that may or may not be great, but a new phone on the market is always branded a potential “iPhone killer” by iPhone haters. When was the last time you heard “HTC Killer”, or even “Android Killer” for that matter?

Thompson

JW

If Kid A sold 100 cups at $1 a cup and Kid B gave away 150 cups to Kid C, D & E, on the hopes that customers of C, D & E would somehow return the revenue someday, I’d rather be Kid A.

InnocentEd

You are all missing the point.
Firstly he was comparing sales #’s, not revenue and how much money they were making.

I was simply speaking to the way the market is shaping out. Android handsets will easily take over Apple in units in the market in the next 6 months and there is no looking back.

I don’t care that Apple margins are huge and that their stock is rising.

Android will own the mobile market, go ahead and keep trying to deny that.

Adam Jackson

Thanks Ed. http://theappleblog.com/author/adamjackson/

That’s a link to all of my posts. The two prior to this were very skeptical of Apple’s tactics in marketing batteries and the future of iPad. People there gave me hell for being too anti-apple. I try to keep it balanced. I can’t love / hate apple all of the time.

Thanks for reading.

Steve

But Kid B made $0 selling all that lemonade.

So how could they possibly be doing better than Kid A?

It ain’t nearly as straight forward as you make it out to be.

And looking at Google’s most recent earnings call, they spend billions on Android and have said they will increase that spend which will affect their profits. That’s NOT what investors want to hear hence their plummeting share price.

James

It’s not that straight forward Ed. What did Kid A sell those cups of lemonade for and what did Kid B sell them for? Don’t buy into the “I’ll make it up in volume” myth. The other phone companies may sell more phones, but Apple is making way more profit.

mac_fan

Problem with yoru analogy is that you forgot to mention that Kid A offers better lemonade so charges $1.00 a cup. Kid B lemonade all looks the same to the onsumer so they can only complete on price so charges 1 cent a cup. Looks like Kid A made out better for that day.

Jaysweets

Well well said I couldn’t have said it any better , to be sure ignoble fall of palm , blackberry seems to be heading down the same path , if nokia doesn’t do something ultra radical it’s not a matter if but when they will be usurped, Microsoft will remain in the business no matter what they have the money to burn , I think it’s too late in the game for Microsoft to matter any more

Lucian Armasu

The reason why netbooks have been so stagnant is Intel. Intel forced the hand of every netbook manufacturer to not include any other CPU or graphics card besides theirs. Why do you think EU fined them and they had the same kind of trial in USA, too?

At this point I don’t think there is anyone left who actually makes chips for netbooks besides Intel. They took everyone out of the market. This is why I hope Intel will never have any significant share in the mobile devices market.

Hamranhansenhansen

ARM tried to get into netbooks, which would have meant iPad-type size, weight, and battery life, but netbook makers resisted because Adobe FlashPlayer did not run on ARM. So it is not just Intel’s monopoly practices, but also Adobe’s and others that are ruining the PC industry.

mr-crash

Oh please. The vast bulk of netbook sales after the initial round of Eee PC’s still use some form of windows based OS.

The lack of uptake of arm processors is because they don’t run the operating system the consumer is familiar with.

cak

Wow, you are really wrong. Intel were fined by the EU and the US for other misbehavior, relating to unfair tactics to AMD, nothing to do with netbooks. If there is an investigation into Intels tactic, look for it in the next few years. These sorts of things do not happen so fast, it takes years.

mark

What about Google? They just copy everything Apple does and give it away for free.

Moe

Mark, how about sharing some of that Kool-Aid that you are drinking.

Hamranhansenhansen

I second that. What about Google? What have they done in the past 5 years that didn’t suck? How have they improved upon the stuff they did before that such as Search and ads and Gmail? Why hasn’t Search evolved to become more consumer-friendly? Why doesn’t Google Docs look like Word v5.1, which is what everyone wants from their word processor? Have the benefits of Android been good enough to offset Apple and RIM and Nokia (who collectively take 95% of the profit in phones) getting their own ad networks because they don’t want a competitor doing their ads? That is the opposite of what Android was supposed to do.

> Kool-Aid

Kool-Aid is what they are drinking at Google.

cak

Of course search has evolved, so well you don’t even notice it. I has gotten a lot better, a lot less spam, but it is a big area. You can’t compare it to a revolution like the iPad, but google is making big improvments. And android is amazing and very popular. To deny that is stupid. Sure, they give it away free, and don’t make anywhere near the return that Apple does (partly since they only do software).

Apple is king, but that doesn’t mean all other companies are crap.

I think the big mistake a lot of people made was just going with Microsoft, and people are getting sick of Windows now. They want something that works, and Apple products do. They do not want a virus scanner slowing their machine down. They do not want an inferior OS with a fancy GUI. Lets hope this continues.

Howie Isaacks

Why feel sorry for the other companies? If you produce crap, it will sell like crap. Apple is achieving such great sales numbers because they know how to produce products that people want. Sure, there are some people who don’t do well with cutting edge products. These people like the clunky, plastic slide out keyboards. Apple was very wise eliminate the physical keyboard, and not give former Blackberry users the security blanket of having a slide out keyboard. Microsoft wouldn’t have been so dominant if Apple had not canned Steve Jobs in 1985, and also if they hadn’t clung to the Apple II. Apple didn’t get behind the Mac full force as they should have, and they axed the driving force behind the company’s creativity, and innovation. Fortunately, Steve went on to found NeXT which became Apple’s OS savior. The OS innovations pioneered at NeXT are in every Mac, every iPhone, iPad, and iPod touch. In a way, Apple didn’t take over NeXT. NeXT took over Apple.

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