Apple's New Market

http://stratechery.com/2015/apples-new-market/

by chmars • 11 years ago

129 73 11 years ago

Glyptodon• 11 years ago

So... in Star Trek Terms... if they can be the ship's computer for Earth everyone will pay loads for really nice communicators?

walterbell2• 11 years ago

HP wants to be the new mainframe for Earth, by developing memristors that they won't sell to anyone except via hosted software.

BobMarz2• 11 years ago

Reasonable assertions followed by breathless hype for the Apple watch.

IBM2• 11 years ago

I didn't get that at all. In fact he seems to be suggesting what Apple's thinking may be in terms of the Apple Watch fitting into their strategy.

BobMarz2• 11 years ago

The entire Apple's New Market section is muddled. Apple will "leave smartphones behind" for "foundational services" which are accessed...through a smartphone.

bobbles4• 11 years ago

The content of the article relating to the watch boils down to 'this is why it makes sense for Apple to make a watch' and you regard that as hype?

threeseed• 11 years ago

Actually the complete opposite is happening. Apple isn't modularising. They are unifying.

Apple has built a unified SDK for iOS and OSX that has been used in the Photos app. This means that going forward we could see a single development platform across all Apple devices. When you combine this with Continuity and iCloud and it's a pretty big deal.

Seamless movement between devices that of course only works with the Apple ecosystem.

IBM2• 11 years ago

You've zoomed in on one aspect of Apple while Ben Thompson is looking at the company as a whole. Apple has integrated on what they perceive to be the important parts of the value chain (which is why Apple designs chips but doesn't manufacture them).

bsilvereagle• 11 years ago

Apple has built a unified SDK for iOS and OSX that has been used in the Photos app.

I think the important point about modularizing was about Apple Pay, HomeKit, etc. Apple's interfaces with 3rd party components are modular. Apple is setting up the modular infrastructure for other people to take advantage, not necessarily being modular about how you develop apps for their platform.

LiweiZ2• 11 years ago

I recently think one reason that makes Apple to offer larger screen iPhone is that the Apple Watch may compensate the need for a single hand-held device experience.

alaskamiller3• 11 years ago

Technology has a delayed effect. As in what was high-tech back then is low-tech now. Computers have finally become low-tech.

Apple is top heavy, the ones in charge are the ones that scraped to the top and didn't retire or leave. They have with them the ideas that came about and pioneered in the 60's and 70's and are only finally now being in the position and getting around to implementing them.

Underneath them is a cadre of management that grew up and holding on to ideas from the 80's and 90's and only are now in a position to suggesting them to someone else with more power and abilities and getting the okay to try them.

Apple is really a stack of computing ideas from the 50's, 60's, 70's, 80's, and 90's. Starting with the Macintosh derived from the mother of all demos to now we're finally getting around to implementing the idea of a central mainframe with diskless devices accessing it.

A "cloud" with black mirrors everywhere giving you value? Oh, my, that sounds like what Larry Ellison saw as the future with the Network Computer back in 1996.

I'm old though. Accepting this new reality that this red-headed stepchild of a computer we used to argue about during elementary school recess about which is better turns out to become the most valuable company in a world and is finally in a position to push through something as magical as instant access to computing everywhere.

That is freakin' amazing.

LiweiZ2• 11 years ago

Upvoted and really appreciate your comment.

hrktb4• 11 years ago

I share the feeling, but at the same time Apple seems to be what Sony was back in the day. They have central very successful products, and are spreading their influence in numerous new markets while betting a lot on artificial restrictions keeping users in their ecosystem.

Sony wasn't the biggest company in the world I think, and the game was a lot more primitive back then, but I remember owning a walkman with a Cybershot, a Sony music compo and at the end a matching laptop because all of there where integrated. If I had the money at the time I'd bought a Handicam and a matching TV in a heartbeat.

Sony seemed unstoppable, until the pieces just crumbled; there would be way better laptops, the camera market evolved and there were far from keeping in touch with the best players in the field, then the music industry moved on, and keeping the integration going on becomes more and more compromising.

With today's Apple, while they are spreading, the same cracks seem to appear to me.

They still have very competitive products on each market, but these are more and more compromised as deep design decisions are made and the competition is getting better.

As an anecdote, a year ago I broke my iPhone and decided to go android for a few month waiting for the iPhone 6, and surprisingly to me it didn't really matter much in my day to day use, except for the artificial limitations (no iCloud, no iMessage) on the integration. But these limitations instead of being a deal breaker, really forced me to go into Google/third party centric services on my laptop/ipad/other family members devices. In a Apple heavy household there is now one device that forces the others to change service providers for central things like email, messaging, calendar, online storage, and the thing is it's not really difficult nor handicapping, the pros and cons balance very well.

Interestingly enough, with Apple Pay, Apple is starting to step on the feet of the new Sony who've been investing in payment processing and ecosystem for so many years now.

TLDR; I think Apple has started playing a game that put them in a position where they have to be better than everyone else at basically everything. Right now I don't think they are at the top of their game, especially in giving options to their customers or software quality/reliability. So, while they have a ton of money and are super successful, I think there is even bigger pitfalls waiting for them ahead. Hope they don't fall.

bobbles4• 11 years ago

Sony absolutely couldve continued to own the portable media player market.

They decided to use smaller, more expensive storage, with no discernible reason to choose their players over existing ones that used standard storage like SD cards.

I worked for an electronics retailler around the time that the iPod came out (our store didnt sell Apple products at all) but it was obvious that Sony would burn out their loyal customer base just from the number of people we had coming in complaining about their memory costing 2-3x for the exact same storage size.

People got turned off the brand due to bad experiences

dasil003• 11 years ago

Apple improved on Sony's success by understanding how to integrate open or semi-open ecosystems which Sony still doesn't really comprehend.

Apple's analog is web services, which, to their credit they have tried harder to figure out then Sony ever did with open ecosystems, but which they likely will never be able to compete with Google.

That said, I'm still not seeing the cracks yet since their software/hardware integration UX combo and ongoing mindshare with creatives is setting a bar that no one else has the vertical integration to approach. Google's services are clearly superior to Apple, but that only puts Android on equal footing with iPhone, it's a long way from a knockout blow.

alaskamiller3• 11 years ago

I'll tell you the secret why: Sony aggressively expanded in the 80's and got into the media business.

The values couldn't and didn't align.

The idea is the synergy of Sony electronics and Sony entertainment would create something amazing but the reality was Sony electronics and Sony entertainment couldn't, wouldn't, and didn't play together.

Whatever the electronics side made, even if technically better than anything on market, had to be locked down to appease the entertainment side.

But the entertainment side didn't get big enough to be making such demands.

Sony also didn't make the jump to digital as fast as it could so upstarts were able to come in. I remember the transition from minidisc to MP3 player. THAT WAS PAINFUL and did not need to happen. Nor the subsequent jumps of oh hey, buy content again and again as different formats to fit into your playstation or your TV or your walkman.

There's a massive treasure chest, massive inertia, massive momentum, and again... it's freakin' amazing to me how much we clutch our little black mirrors and how central everything has been.

I'm rooting for a Wintel underdog comback.

Touche• 11 years ago

There is perhaps no idea this blog has litigated against more fiercely than the idea of low-end disruption and the inevitable doom of the iPhone.

They have been disrupted in markets where phones compete on price. Their most successful market, by a wide margin, is the one where phones are capped at $200. The comparison to BMW that is often made is laughable. If only BMW sold to dealerships who then turned around and sold the car for the same price as a Toyota. It's a droll-worthy position to be in, that's for sure.

It would be interesting to see how the U.S. market changed if there were no subsidies. My guess is that payment plans would be more common so it wouldn't be such a tremendous blow. But I always wonder if "good enough" Nexus style devices would become more popular and the Galaxy Ses and iPhones a little bit less.

m_mueller• 11 years ago

One of our networks in Switzerland (Sunrise) has a really innovative subscription model: They give you a cheapish subscription that's completely independent of the phone (~25-40$/m depending on whether you need unlimited free calls etc.) and which you can cancel/modify with every month. Then they offer you a leasing contract for your phone where you choose yourself how many monthly payments you'd like to make (payment per month inverse proportionate to the contract duration). At the end you can have about the same total cost of ownership as before, but you're much more flexible. The leasing contract amounts to ~5-8% interest on the upfront price for the whole duration and it's not dependent on how you set it up.

So, I wonder how many people will opt to just buy it up front now, when the subsidy isn't hidden anymore. It could also have a negative impact because some people will find it too complicated, however the widely trusted consumer review and comparison sites all give it a big thumbs up, so I think many will figure out why it's better.

colechristensen• 11 years ago

T-Mobile in the US is pretty similar. The service plan is no-contract and can be changed every month (perhaps intra-month, I have done some dynamic changes and it seems to take effect in the middle of billing cycles). The hardware payment is separate with a fixed no-interest cost spread over 2 years. The hardware is the same cost if you buy it up front or spread payments out over the 2 year period.

bambax• 11 years ago

"Free Mobile" in France works the same way; but I don't know the proportion of iPhones on their network.

exprL• 11 years ago

Finnish telecoms have mostly abandoned tying the phone to a mobile plan, just a few years after they were given that right by law. My personal guess as to why, is that they want to offer longer financing plans than the maximum of 24 months allowed for carrier-locked phones – with plans up to 36 months common.

Apparently the seller of an expensive phone like iPhone gets a decent chunk of money at market prices, because it's common for carriers not to take any interest with their financing plans – i.e. the phones costs the same bought upfront as they do over 36 monthly payments. The phone itself is in no way locked to any specific network.

dntrkv• 11 years ago

Carriers in the US are already moving away from the subsidized model. Verizon has the Edge program where you make monthly payments on the phone for the duration of your contract, but interest-free. Your payments are setup to last the full length of the contract, if you would like to leave the contract, all you have to do is pay the rest of the balance you owe on the phone.

cwp2• 11 years ago

T-Mobile does the same thing.

You can also buy unlocked iPhones directly from Apple. I've done it 4 times - 3G, 4S, 5C and now the 6. I bet Apple sells millions of them at full price, even in countries where subsidies are available.

Steko• 11 years ago

Where have they been disrupted? There are places they've always done worse at but they aren't making 90% of industry profits last quarter just becuase of one region.

We've heard the tired argument before that Apple won't be able to sell in places like China that don't have a subsidized market. How's that prediction actually working out?

mikeyouse2• 11 years ago

They have been disrupted in markets where phones compete on price.

Just not true.. Here's how they're doing in China: http://i.imgur.com/cVKCJmO.png

And their global marketshare is dramatically increasing in spite of nearly ubiquitous dirt-cheap android competition: http://i.imgur.com/QbUmJkk.png

(From Benedict Evans' excellent blog: http://ben-evans.com/benedictevans/2015/1/27/chart-dump-appl...)

prapam2• 11 years ago

This link(http://www.reuters.com/article/2014/01/17/us-apple-chinamobi...) indicates subsidy model is present in China. In India we don't have any subsidy, i think Apple is share is less then 5%. They even tried to sell few year models at cheap rates to increase share. IPhone6 cost around $900 here. At those rates would it be a big hit anywhere without subsidies?

squozzer• 11 years ago

What the article doesn't explain or maybe cannot is that apple's strategy, if correctly stated, depends upon two factors: 1) the willingness of others to produce things that integrate with the iPhone; 2) how much trust end users are willing to place in apple.

npalli4• 11 years ago

Strange that he thinks Xiaomi is the company of reference for this gigantic new market, when Google has very good alternatives for each one of the services. Whatever you might think of the Google versions, hard to see how Xiaomi will get more traction than Google outside of China.

Homekit -- Google Nest with Android Home.

Carplay -- Android Auto, not to mention what crazy things the self driving cars research will provide.

Apple Pay -- Google Wallet

Siri -- Google Now

HealthKit -- Google Fit

EDIT: BTW, I see that his refutation of Christensen hinges on the nebulous "user experience". It is not clear what "user experience" or the often repeated most Apple-like quality "design" actually entails. For a very good analysis of the pitfalls of just using “design” as a strategy to create market-defining products at Path, Dropbox, Square, Medium is by a designer

http://mokriya.com/designer-duds-losing-seat-table/

Why Apple is successful today, when its core principles have remained pretty much constant over the entire history is to be found outside Apple.

schoolixer• 11 years ago

I'd hazard to say that the nebulous "user experience" advantage for Apple boils down to consistently committing to integration of a handful of products.

Google seems to have an iterative sink or swim approach with many products (often overlapping) and to a lesser extent, so does Amazon.

npalli4• 11 years ago

I'd hazard to say that the nebulous "user experience" advantage for Apple boils down to consistently committing to integration of a handful of products.

This is a good example of what I'm talking about. You have redefined user experience to mean something that most people will not think of. Even giving you that, look at the current iPhone setup. Leaving aside the carrier aspect, you can buy worldwide a new

iphone 4s,5c,5s,6,6plus in multiple colors and sizes.

basically 3.5", 4", 4.6" and 5.5" screen for a phone. With prices points from $250 to $1000 in minor increments. In contrast, Google has only one phone currently on sale the Nexus 5. The 'focus', 'handful of products' mantra is repeated but is not true. Frankly, the only thing missing is the stylus and adding it would cover the entire gamut.

bobbles4• 11 years ago

User experience is difficult to measure, which means companies that focus on it from a numbers perspective often miss the point.

cwp2• 11 years ago

You should read Thompson's article "Xiaomi's Ambition" (http://stratechery.com/2015/xiaomis-ambition/ and linked from this article).

Basically, he argues that Xiaomi is built around serving a market that neither Apple or Google are serving: young people that are technically savvy but don't have the funds to be early adopters. There's a whole generation of them in China that have grown up during China's boom. There aren't many of them in the US, but that's not the same thing as "outside of China." Xiaomi will probably find a lot of fans in South Asia (particularly India), South America (Brazil) and Africa (Nigeria, South Africa).

npalli4• 11 years ago

Wasn't Xiaomi temporarily banned in India because of concerns that it is uploading data to China? This lack of confidence is going to be a roadblock if the end goal is take over the home. My understanding is that Xiaomi sells very little in India (some flash sales in tens of thousands of units). I know it is a smash hit in China. We'll just have to see.

minthd• 11 years ago

It's really hard to build a case against disruption theory, using a single product, especially when the competition has only been "good enough" just since the last year or so, with kitkat and apps using its design language, while there are other strong factors keeping iPhone strong, be it strong brand, stronger app ecosystem, and various lockup effects.

But I'll be happy to be proven wrong with other examples for Thompsons theory.

monkbent2• 11 years ago

Turns out actually meeting a market need is important (Path), having a functional business model (Square), knowing your target customer (Dropbox), and we'll see with Medium.

User experience is a differentiator. It's not the only thing.

AdeptusAquinas2• 11 years ago

While technically the iPhone keeps getting better and better, and Apple has all these other initiatives that make it and its ecosystem impressive, I would doubt that this has anything to do with their massive profits.

It might be why a lot of techies buy the phone (though I'm still loyal to my Lumia :)) but surely the primary reason remains the fact that the iPhone is a premier fashion item and/or has most of the apps?

adamlett• 11 years ago

the primary reason remains the fact that the iPhone is a premier fashion item

But what does that mean? _Why_ is the iPhone a fashion item and other phones are not? Why does the iPhone command such a high degree of customer loyalty compared to its competitors?

Perhaps it's not what you meant, but when I read the argument that the iPhone is only/primarily successful because it's a fashion item, I feels like what is implied is that the iPhone as a product is similar to it's competitors and is only differentiated by better marketing. Which I think is BS. But if it were true, it would be even more astounding, considering Apple spends only a fraction of the amount Samsung does on marketing.

ttty• 11 years ago

status

tonyedgecombe• 11 years ago

There is no doubt when the original iPhone came out it was streets ahead of the competition, the likes of Nokia and Blackberry had become complacent, Apple turned the industry upside down.

The competition hasn't stood still since then though, the difference between a Lumia a Samsung and an iPhone much.

So why do people continue to pay a large premium for a small increase (if any) in functionality?

Shivetya• 11 years ago

its marketed as a hip, cool, and high tech, with a hint of luxury (emphasis on aluminum cases and such), that the average person can afford. Remember the stereotype of the pretentious twits sitting in Starbucks with their Macbooks?

Once your sold on their product its not simple to leave, let alone the simple fact that their products just work and do not require of you much to continue to do so.

bad_user• 11 years ago

Apple spends only a fraction of the amount Samsung does on marketing

Apple doesn't need to spend that much on marketing when it has an army of fanboys with blogs.

AdeptusAquinas2• 11 years ago

No that's not what I meant. There is much about it that's amazing - its screens are certainly better than my 920 for example. What I was saying is that the technical aspects of the phone are (mostly) irrelevant when it comes to its sales.

Most people, I would assume, don't go out and decide between the phones based on which has the best performance or interface merits. They just go out and get an iPhone.

mattmcknight• 11 years ago

To some extent the iPhone is a Veblen good, whereby its price conveys some status.

fpgeek• 11 years ago

It probably doesn't hurt that some of Apple's design choices reinforce that conveyed status: https://www.techdirt.com/articles/20150211/05455029985/green...

saturdaysaint• 11 years ago

a premier fashion item

Especially now that screen sizes are in the same ballpark, the iPhone and its interface don't look markedly different from competing Samsung/HTC/Nexus phones. People like how iPhones work.

kh_hk• 11 years ago

Hey, that's Google's new market too!

They foresee a dystopian future with driverless cars, intelligent ads, perfect synergy and communication between our brains through implants. It's dystopic not because of what it promises, but how much control these providers will get over public services. Pure Philip K. Dick.

Welcome Google, Apple and Amazon, the companies of the future, the companies that help us on our most mundane and daily tasks. From waking up, drinking coffee, conmuting, working and going to bed. Of course, this keeps their stock value high, not doing it, but reaching for it. Cannot really blame them.

bobbles4• 11 years ago

You don't have to use their services or products

ceejayoz2• 11 years ago

Not yet. A few years/decades after self-driving cars become common, though, I wouldn't be shocked to see manually driven cars banned or strictly limited for safety reasons. What then?

tim3332• 11 years ago

The Steve Jobs quote mentioned about bicycles for the mind is cool https://www.youtube.com/watch?v=ob_GX50Za6c . I know it's old but I hadn't seen it before. The rest of the article is kind of intellectual mush starting from saying "litigated against" in the first sentence when he hasn't and continuing in a similar vein.

monkbent2• 11 years ago

Perhaps I should litigate against people that say I haven't when they can't be bothered to follow the very next link in the next sentence: http://stratechery.com/2013/clayton-christensen-got-wrong/

Or this one, linked a few paragraphs later: http://stratechery.com/2013/obsoletive/

Here's another one, for good measure: http://stratechery.com/2014/best/

So actually, I have. Mush indeed.

peteretep2• 11 years ago

You know that when a dictionary calls a definition of a word "archaic", they mean "no longer correct", right? Using "litigate" to simply mean "argue against" or "dispute" is to confusingly misuse the word.

benwen• 11 years ago

Apple Pocket Phone

http://blog.benwen.com/opinion/product/2015/01/29/apple-pock...

Apple's New Market

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