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This is a short term strategy at best. Apple generates 7bn from services with 700mn active phones. Without "planned obsolescence" the 700mn number would be muc

by aleem 9y ago

This is a short term strategy at best. Apple generates 7bn from services with 700mn active phones. Without "planned obsolescence" the 700mn number would be much higher as would services revenue. Edit: services is iTunes, music, App Store, iCloud, etc. 7bn for comparison is bigger than Netflix (2.5bn) and aws (3.5bn)

rifung 9y ago
Why do you say that? People seem to still be buying Apple products regardless. I'd argue the strategy seems to be working for them because now you're both paying for services and new devices.
- aleem 9y ago
  Amazon for example values market share above all else, re-investing all it's earnings back into infrastructure and expansion. Google/Android also valued market share. Apple valued profitability. This has meant that Android has something like 2bn daily actives vs Apple's 700mn across devices. Apple's profits are mostly sitting in cash -- a pretty poor use of capital. And it's a lot of cash, some 250bn of it. It's ridiculous and the opposite of Amazon's strategy. Especially if Apple intends to move to services, it only makes sense to have more active subscribers. Furthermore, hardware monetisation is upfront but services revenue is recurring (user lock-in, inertia to switch, better forecasting, etc). Supposing Apple had 1.5bn active devices, their services revenue would be considerable higher than the current 7bn quarterly recurring. That would surpass hardware profits in the long run and Apple wouldn't sit on idle cash. As the market starts to saturate, customer acquisition becomes costlier. A good example of this is AOL Internet when they were printing so many free Internet CDs (for giveaways) that they took up 70% of the world's CD production capacity. Their rationale was that acquiring customers would never be this cheap again (Microsoft and others were entering into broadband). So if they acquired the customers for cheap today, they could monetise them much more easily (the LTV was considerably favourable in terms of SAC). It's hard to say what could have been. But what's certain is that Apple is less of a hardware company now and more of a services company as is clearly apparent now from their earnings reports. At a time when Facebook, Amazon and Google are all vying for market share, Apple seems to take pride in hoarding cash through profits. You have to wonder if it's the right strategy.
  - rifung 9y ago
    I might just have misunderstood you because I thought we were talking about how Apple chose not to make their devices easy to repair? I don't see how making their devices easier to repair would have at all made them get more market share. I really don't think it affected it a statistically significant amount. If anything I'd argue their focus on making the phones more "stylish", at the expense of repairability, probably was beneficial for their market share. Also market share doesn't tell the whole picture since iOS users are known to be more willing to spend money so don't forget to factor that in. I do see how it might be good for them to consider making less in hardware if they are going to be more profitable by selling more services, but it's not as though iPhones are more expensive than Android phones as far as I know. I work for Google but opinions are my own.

by aleem 9y ago

rifung 9y ago

Why do you say that? People seem to still be buying Apple products regardless. I'd argue the strategy seems to be working for them because now you're both paying for services and new devices.

aleem 9y ago
Amazon for example values market share above all else, re-investing all it's earnings back into infrastructure and expansion. Google/Android also valued market share. Apple valued profitability. This has meant that Android has something like 2bn daily actives vs Apple's 700mn across devices. Apple's profits are mostly sitting in cash -- a pretty poor use of capital. And it's a lot of cash, some 250bn of it. It's ridiculous and the opposite of Amazon's strategy. Especially if Apple intends to move to services, it only makes sense to have more active subscribers. Furthermore, hardware monetisation is upfront but services revenue is recurring (user lock-in, inertia to switch, better forecasting, etc). Supposing Apple had 1.5bn active devices, their services revenue would be considerable higher than the current 7bn quarterly recurring. That would surpass hardware profits in the long run and Apple wouldn't sit on idle cash. As the market starts to saturate, customer acquisition becomes costlier. A good example of this is AOL Internet when they were printing so many free Internet CDs (for giveaways) that they took up 70% of the world's CD production capacity. Their rationale was that acquiring customers would never be this cheap again (Microsoft and others were entering into broadband). So if they acquired the customers for cheap today, they could monetise them much more easily (the LTV was considerably favourable in terms of SAC). It's hard to say what could have been. But what's certain is that Apple is less of a hardware company now and more of a services company as is clearly apparent now from their earnings reports. At a time when Facebook, Amazon and Google are all vying for market share, Apple seems to take pride in hoarding cash through profits. You have to wonder if it's the right strategy.
- rifung 9y ago
  I might just have misunderstood you because I thought we were talking about how Apple chose not to make their devices easy to repair? I don't see how making their devices easier to repair would have at all made them get more market share. I really don't think it affected it a statistically significant amount. If anything I'd argue their focus on making the phones more "stylish", at the expense of repairability, probably was beneficial for their market share. Also market share doesn't tell the whole picture since iOS users are known to be more willing to spend money so don't forget to factor that in. I do see how it might be good for them to consider making less in hardware if they are going to be more profitable by selling more services, but it's not as though iPhones are more expensive than Android phones as far as I know. I work for Google but opinions are my own.