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Post-keynote Apple event San Francisco – September 8

 

I will be presenting my latest analysis of Apple at the Sustain event in San Francisco on Thursday Sept 8th, the day after Apple’s keynote, along with Ben Bajarin, Carolina Milanesi who will alsob equipped with their latest market insights.

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There is a time to disrupt and there is a time to sustain.

Sustain event is about understanding Apple’s levers of control to sustain the iPhone as it moves into direct competition with Android. We will also examine positions of top five technology brands: Apple, Amazon, Facebook, Google, and Microsoft.

Learn more about the event at Airshow.io. Given he short notice, we are keeping this event on the small side so reserve your seat soon.

Mini Me

Horace and Henri go for a drive.

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Source: The Critical Path #186

The Critical Path #185: Lithium Iron Phosphate

Horace gives an update on his EVW electric car project, listener-contributed battery technology information and listener questions in this extended episode.

Source: The Critical Path #185

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Counting Apple’s Customers

Berkshire Hathaway, led by Warren Buffett, now owns about $1.4 billion of Apple. Occasionally we hear about various “celebrity investors” taking positions in the company or exiting those positions. The last one I remember was Carl Icahn. He seems to have exited Apple before Berkshire entered. There are some who will act because of these decisions. You should not be one of them.

Nor should the management of the firm act in response to investor decisions or concerns. Management is specifically distinct from ownership in the corporate construct precisely in order to bring professionalism to the role. The manager must set priorities as they see fit, irrespective of what the transient owner might prioritize. The separation of ownership and management is one of the greatest innovations in commerce.

There are many opinions on what priorities should be. Delivering a specific financial ratio, achieving a certain market position, changing the world for the better. These have all been cited as top priorities. I happen to believe that what matters most is the creation and preservation of customers. That is because I see customer creation as causal to the other desirable outcomes and it is therefore the more important priority.

And this is why, whenever possible, I try to deduce how well a company is performing on this metric. The greatest companies (by market capitalization) today are certainly examples of achievement in customer creation. Facebook, Microsoft and Google are members of the “billion user club” or companies that crossed a billion active users.

But do they really have a billion customers? Microsoft has over 1.2 billion users but many (most?) of those users are using computers that their employers provide on which Microsoft software was installed. They may not have made the choice to purchase the tools they are using. Microsoft certainly has millions of customers in the form of “accounts” purchasing its products and services, but It’s not likely that there are a billion people who have directly chosen to buy a Microsoft product.

Facebook has over a billion daily users. Facebook users are certainly using the service of their own accord but they are not paying for the service. Quite the contrary, the actual customers of Facebook are companies buying an advertising service offered in the form of exposure to those billion users. The Facebook users are the product being sold, not the buyers. Thus Facebook’s total number of paying customers is probably only in the tens or hundreds of thousands.[1]

Same with Google. We don’t know how many accounts Google send invoices to but the number is very likely not even in the 100 million range. Its billions of users are beneficiaries of services but they are not paying Google/Alphabet.

Amazon has many millions of customers, if not billions. Prime membership is above 50 million but not above 100 million. Amazon may some day have a billion customers but there are limits to how quickly that can happen. The growth potential is governed by logistics and that’s as much an issue with atoms as it is with electrons.

Which brings us to Apple. Apple does not offer a figure on its specific user count, but we have some viable proxies:

  • iCloud accounts reached 782 million in February 2016.
  • iTunes accounts reached 885 million in September 2014
  • Active devices reached one billion in January 2016. That number is likely above 1.1 billion now. (Includes all devices, hence Macs and Apple TVs).

These figures are also parts of patterns (shown below) which offer an indication of predictable growth.

Screen Shot 2016-08-17 at 9.23.26 PM

Screen Shot 2016-08-17 at 9.27.38 PM

In addition to the absolute figures and their growth there is also the question of loyalty (frequently cited by the company), switching from other platforms (also frequently cited) and revenues. The company publishes specific figures on service revenues for consumer attached devices showing a run rate of $41 billion/yr in services for their device base.

In combination, a picture emerges which shows that Apple has nearly a billion customers. I can’t say how many with any precision but it’s certainly above 500 million (on the basis of iCloud and iTunes accounts). It’s below one billion because some users have more than one device.

Even though it has not happened yet, the trend is pretty clear. Apple will at some point in time have a billion paying customers.

What is more significant than the specific count is that these customers mostly chose to be customers individually. Some may have been given the products as gifts, but the vast majority bought the items for themselves. Apple benefitted from hundreds of million of individual purchase decisions.

Furthermore, having made the decision to purchase, chances are that they will do so again. Apple customers are a recurring revenue stream. In fact, it’s fairly easy to calculate that being an Apple customer is equivalent to spending about $1/day on its products and services, indefinitely.

Apple is not there yet, but a billion dollars a day from a billion customers is not inconceivable. That would be quite an achievement.

Notes:
  1. Orr Sella @orrsella pointed out that Facebook has stated that they have 3 million businesses actively advertising on their networks. []

Asymcar #35: We Are Germans

Can utility companies be recruited to help sell Electric Vehicles when they reward their customers for using less electricity?

This plus the paradoxes of innovations in distribution, sales, regulation and the 1959/1960 Henney Kilowatt.

Source: Asymcar #35

The Critical Path #183

Horace and Farshad discuss Apple’s recent milestone of one billion iPhones shipped. They also answer a slew of #CriticalQuestions.

Source: The Critical Path #183

The most popular product of all time

The following is a list of the best-selling products across several categories:

Car model: VW Beetle 21.5 million
Car brand: Toyota Corolla 43 million
Music Album: Thriller 70 million
Vehicle: Honda Super Cub 87 million
Book Title: Lord of the Rings 150 million
Toy: Rubik’s Cube 350 million
Game console: Playstation 382 million
Book series: Harry Potter Series 450 million
Mobile Phone: iPhone 1 billion

The iPhone is not only the best selling mobile phone but also the best selling music player, the best selling camera, the best selling video screen and the best selling computer of all time.

It is, quite simply, the best selling product of all time.

It is that because it is so much more than a product. It is an enabler for change. It unleashed forces which we are barely able to perceive, let alone control. It changed the world because it changed us.

And it did all that in less than nine years. One has to wonder what it will enable in the next nine.

My favorite questions

  • What is an innovation? What is the difference between ideas, inventions, novelties, discoveries and creations?
  • What is a disruption, formally-speaking? Also, what is it informally speaking? Why the distinction?
  • What is Performance (or P-space)? How does Performance relate to utility, quantity, price and other microeconomic concepts?
  • What is a new market? How do we distinguish a new industry from a new market.
  • Do firms matter? Are firms causal to economic growth?
  • What is the role of technology in innovation? Can we innovate without technology? Can we fail to innovate with technology?
  • Do firms have life in the biological sense? If not how do we measure their existence?
  • What are entrepreneurs? What do they do that’s different than what managers or business leaders do?
  • How do you navigate P-space? How do you think about your business and economy in performance terms.
  • What is a diffusion? Is adoption a good measure of technological progress? What is the connection between diffusions and disruptions?
  • How does Capital map to P-space?
  • How can we maximize economic growth? Is there a growth algorithm? What is the role of government policy in growth? What about the role of the creation of customers?
  • What is the difference between consumption and non-consumption? What is non-production?
  • What are the known forms of disruption? Can there be forms we don’t yet know about?
  • Why do customers buy solutions? Understanding the causes of purchase decisions.
  • Are profit motives necessary for growth? What motivates individuals, if not profit?

If these questions are of interest to you, join the conversation at DisruptiveInnovation.org.

The Critical Path #180: Asking the right questions

Horace and Anders discuss the numbers from WWDC, what didn’t come from WWDC.  And cars!

Source: The Critical Path #180