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Profit-share is STILL a stupid, vanity metric. This is the metric that says, "If a well-funded competitor steals your market-share at the cost of running a los

Profit-share is STILL a stupid, vanity metric. This is the metric that says, "If a well-funded competitor steals your market-share at the cost of running a loss, that is actually good for you." Edit to add: This is the metric that says that life is awesome for taxi companies because Uber runs enormous losses. Profit is a useful metric (and Apple has awesome profits). Market share is a useful metric (and Apple has a small minority of the smartphone market share). Profit-share is something that somebody made up to make Apple's market share not seem as small.

oldmanjay 11y ago
You assert that iPhone market share is the important metric, but never actually demonstrate why. Care to put some reasoning behind it? Your taxi analogy is unsatisfying for a number of reasons, not the least of which is the utterly unrelated market conditions between that and the mature consumer electronics industry, but feel free to expand if you think it will go somewhere. edit: clarity
- aetherson 11y ago
  The only reasonable answer to you is: No, of course I won't try to justify why market share is a meaningful metric, and I particularly won't try to justify why this utterly standard metric is meaningful in the context of someone coming up with a ridiculous vanity metric and asserting that it has some value utterly divorced from any argumentation. But what the hell, I'm feeling unreasonable today: Market share is meaningful because it demonstrates the size of the market that Apple could potentially reach. Market share is meaningful because if Apple's market share falls below a critical percentage, people will not target the iPhone for app development (as happened with the Mac and is currently happening with, say, Windows Phone).
  - ghaff 11y ago
    In the case of app development targeting, I'd agree that Apple's market share is probably more important than Apple's profit share. However, the most relevant metric is probably iOS share of wallet vs. other mobile OSs. $MOBILE_OS can have an arbitrarily large market share but if people don't pay for apps on it, it's not going to be very interesting to app developers. That said, market share is, of course, at least one of the relevant metrics but the market needs to be defined. Companies don't typically target the largest theoretically possible market for their products. They target a subset for a variety of reasons.
    - aetherson 11y ago
      I think that's a slightly dated view. I don't think that the app market is mainly defined by "I'll pay $1 for an app" anymore. In a few fields, perhaps. But the most important apps are at this point free ones, and their users are monetized in other ways.
      - ghaff 11y ago
        In-app payments and other forms of monetization are still monetization that require users to pay money. That said, I agree there's a balancing act. If a hypothetical "luxury smartphone" had a tiny market share, it wouldn't be an attractive development target in general even if its buyers spent a lot of money on certain types of apps. But the iPhone isn't really in that position. Certainly, it seems to have no trouble attracting developers and companies creating apps to target travel, subscription, and other services.
        aetherson 11y ago
        There are plenty of forms of monetization that don't require users to pay money (ad supported being the obvious one), and there are even more forms of monetization that require the users to pay money, but not pay money for an app (think Uber or Grubhub), and while it does seem to be the case that Android users are less likely to pay money for an app than iPhone users, I'm not aware of any sign that they are less likely to pay for a physical good or physical service through an app. But clearly iPhone is not in that position, I agree!
        alwillis 11y ago
        and while it does seem to be the case that Android users are less likely to pay money for an app than iPhone users, I'm not aware of any sign that they are less likely to pay for a physical good or physical service through an app. You mean like last year's holiday shopping numbers? From "Apple's iOS Has Once Again Decimated Android When It Comes To Data That Matters": http://www.businessinsider.com/ios-android-shopping-data-2014-11 http://www.businessinsider.com/ios-android-shopping-data-201... >Adobe, which is tracking online shopping, reports the following: "iOS users drove four times as much mobile sales revenue as Android users, 79 and 21 percent respectively."
  - MaysonL 11y ago
    The relevant market would seem to be the handset market. Hasn't Apple's share of that been growing? It sure hasn't dropped much, if at all, while they've ramped production faster and higher than any product in history.
  - oldmanjay 11y ago
    Just so we are clear, you mainly reasserted your opinions and gave a hypothetical about a market erosion that Apple clearly isn't in, given the fact that their absolute sales have risen. I remain unconvinced.
metric10 11y ago
It means that if Apple where to lower their prices then they'd only be hurting their own profits. Apple (and all scrupulous companies) are trying to maximize profits, not wipe out the competition.
- aetherson 11y ago
  "It" doesn't mean that, no. I mean, that may or may not be true, but profit share has no explanatory power here.
  - metric10 11y ago
    Profit share means that when you total up all the money that's been made as profits for the industry, 92% of that money went to Apple and 8% went to "other." If Apple where to wipe out the competition as you suggest, then they would gain that final 8% of profits[1]. But if they had to, say, lower their prices by 20% to achieve that, then they wouldn't come out ahead. And that's ignoring the anti-trust issues that would spring up. Thus, that's why I'm saying they are doing the right thing and pursuing a "scorched Earth" policy would be ill advised. [1] Unless people won't buy from Apple even if they're the only game in town. But I doubt there's enough of those people to make a difference. edit: formatting.
    - aetherson 11y ago
      As a point of order, I didn't suggest that Apple wipe out anything. But, no, you're wrong, and the way you're wrong is doing an excellent job of demonstrating the problems with profit share. There's not an amount of "profit" out there. There is sort of an amount of "revenue" out there. But Apple takes in a small minority of the revenue associated with smart phones, as demonstrated by their market share, which is something on the general order of 14%. The fact that other vendors are inefficient at turning their revenue into profits is neither here nor there. Of course, the actual analysis is far more complicated than that, since the market isn't in fact a static thing. If Apple turned say half of their unit profits into price reductions, it would have enormous, chaotic effects on the smartphone market. I don't have the ability to predict what the end result would be, and neither does anyone here. But profit share doesn't tell us that Apple has no opportunity, and in fact it is a metric crafted to draw attention from the fact that Apple has a low market share, which does a better (though certainly imperfect) job of showing the opportunity.

oldmanjay 11y ago

You assert that iPhone market share is the important metric, but never actually demonstrate why. Care to put some reasoning behind it? Your taxi analogy is unsatisfying for a number of reasons, not the least of which is the utterly unrelated market conditions between that and the mature consumer electronics industry, but feel free to expand if you think it will go somewhere. edit: clarity

aetherson 11y ago
The only reasonable answer to you is: No, of course I won't try to justify why market share is a meaningful metric, and I particularly won't try to justify why this utterly standard metric is meaningful in the context of someone coming up with a ridiculous vanity metric and asserting that it has some value utterly divorced from any argumentation. But what the hell, I'm feeling unreasonable today: Market share is meaningful because it demonstrates the size of the market that Apple could potentially reach. Market share is meaningful because if Apple's market share falls below a critical percentage, people will not target the iPhone for app development (as happened with the Mac and is currently happening with, say, Windows Phone).
- ghaff 11y ago
  In the case of app development targeting, I'd agree that Apple's market share is probably more important than Apple's profit share. However, the most relevant metric is probably iOS share of wallet vs. other mobile OSs. $MOBILE_OS can have an arbitrarily large market share but if people don't pay for apps on it, it's not going to be very interesting to app developers. That said, market share is, of course, at least one of the relevant metrics but the market needs to be defined. Companies don't typically target the largest theoretically possible market for their products. They target a subset for a variety of reasons.
  - aetherson 11y ago
    I think that's a slightly dated view. I don't think that the app market is mainly defined by "I'll pay $1 for an app" anymore. In a few fields, perhaps. But the most important apps are at this point free ones, and their users are monetized in other ways.
    - ghaff 11y ago
      In-app payments and other forms of monetization are still monetization that require users to pay money. That said, I agree there's a balancing act. If a hypothetical "luxury smartphone" had a tiny market share, it wouldn't be an attractive development target in general even if its buyers spent a lot of money on certain types of apps. But the iPhone isn't really in that position. Certainly, it seems to have no trouble attracting developers and companies creating apps to target travel, subscription, and other services.
      - aetherson 11y ago
        There are plenty of forms of monetization that don't require users to pay money (ad supported being the obvious one), and there are even more forms of monetization that require the users to pay money, but not pay money for an app (think Uber or Grubhub), and while it does seem to be the case that Android users are less likely to pay money for an app than iPhone users, I'm not aware of any sign that they are less likely to pay for a physical good or physical service through an app. But clearly iPhone is not in that position, I agree!
        alwillis 11y ago
        and while it does seem to be the case that Android users are less likely to pay money for an app than iPhone users, I'm not aware of any sign that they are less likely to pay for a physical good or physical service through an app. You mean like last year's holiday shopping numbers? From "Apple's iOS Has Once Again Decimated Android When It Comes To Data That Matters": http://www.businessinsider.com/ios-android-shopping-data-2014-11 http://www.businessinsider.com/ios-android-shopping-data-201... >Adobe, which is tracking online shopping, reports the following: "iOS users drove four times as much mobile sales revenue as Android users, 79 and 21 percent respectively."
- MaysonL 11y ago
  The relevant market would seem to be the handset market. Hasn't Apple's share of that been growing? It sure hasn't dropped much, if at all, while they've ramped production faster and higher than any product in history.
- oldmanjay 11y ago
  Just so we are clear, you mainly reasserted your opinions and gave a hypothetical about a market erosion that Apple clearly isn't in, given the fact that their absolute sales have risen. I remain unconvinced.

metric10 11y ago

It means that if Apple where to lower their prices then they'd only be hurting their own profits. Apple (and all scrupulous companies) are trying to maximize profits, not wipe out the competition.

aetherson 11y ago
"It" doesn't mean that, no. I mean, that may or may not be true, but profit share has no explanatory power here.
- metric10 11y ago
  Profit share means that when you total up all the money that's been made as profits for the industry, 92% of that money went to Apple and 8% went to "other." If Apple where to wipe out the competition as you suggest, then they would gain that final 8% of profits[1]. But if they had to, say, lower their prices by 20% to achieve that, then they wouldn't come out ahead. And that's ignoring the anti-trust issues that would spring up. Thus, that's why I'm saying they are doing the right thing and pursuing a "scorched Earth" policy would be ill advised. [1] Unless people won't buy from Apple even if they're the only game in town. But I doubt there's enough of those people to make a difference. edit: formatting.
  - aetherson 11y ago
    As a point of order, I didn't suggest that Apple wipe out anything. But, no, you're wrong, and the way you're wrong is doing an excellent job of demonstrating the problems with profit share. There's not an amount of "profit" out there. There is sort of an amount of "revenue" out there. But Apple takes in a small minority of the revenue associated with smart phones, as demonstrated by their market share, which is something on the general order of 14%. The fact that other vendors are inefficient at turning their revenue into profits is neither here nor there. Of course, the actual analysis is far more complicated than that, since the market isn't in fact a static thing. If Apple turned say half of their unit profits into price reductions, it would have enormous, chaotic effects on the smartphone market. I don't have the ability to predict what the end result would be, and neither does anyone here. But profit share doesn't tell us that Apple has no opportunity, and in fact it is a metric crafted to draw attention from the fact that Apple has a low market share, which does a better (though certainly imperfect) job of showing the opportunity.