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Month June 2011

Entries 5 Total

How much is an iOS user worth to Apple? About $150. Every year.

Jun 30, ’11 9:04 AM

During the last WWDC Apple revealed that there were 54 million active Mac users. If we look at the history of the product we can see that it took about 5.5 years to sell 54 million Macs. If we assume therefore that the average lifetime of a Mac is 5.5 years and knowing that Mac sales generated revenues of about $73.8 billion then we can estimate the average revenues/year/mac user: $250.

Repeating the exercise with 180 million current iOS users who purchased about 200 million iOS devices and assuming a life span of 3.5 years gives the average revenue/year/iOS user of about $150.

These are recurring figures. If we assume these users are loyal then they will likely spend this amount indefinitely and each additional user will be worth a similar amount.

So, for example, if we assume that the number of Mac users reaches 100 million then we can also assume that they will generate about $25 billion/yr in recurring revenues.

Likewise, if we extrapolate growth of iOS to 500 million users then we can assume they will generate $74 billion/yr in recurring revenues.

Adding these together gives a potential recurring income level of $95 billion/yr for installed base alone (excluding iPods, Peripherals, iTunes apps/songs, and Software sales.) Today that figure is about $40 billion/yr. [1]

Interesting valuation exercises can follow. [2] It would also be interesting to perform a similar analysis for other vendors/platforms.

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Notes:

  1. Note that actual sales are considerably higher than this figure as new customers are added. These figures should be considered “baseline” sales.
  2. Thanks to a kind reader for suggesting this line of analysis.
Comments (67)

Nokia a trop écouté les réseaux télécoms

Jun 28, ’11 1:36 PM

My thanks to Robert van Apeldoorn, journalist for Trends Tendances Magazine, for asking good questions. My responses are reproduced below. The article (in French) is titled “Nokia a trop écouté les réseaux télécoms” and can be found in the June 23rd edition of the magazine along with more details in the article “Comment Nokia peut-il renaître?”.

-About your post “Does the phone market forgive failure”, that puts forward the idea that all mobile device vendors experiencing losses never really recover… It seems that this possible “rule” is more severe than in the computer industry. If Digital Equipement, Compaq, WordPerfect did fail, IBM and, yes, Apple, did survive failure and rebound strongly. Do you think that there is a difference between the industries? What makes the failures more lethal in the mobile device market ?

The observation is unique to the mobile phone market and even there it’s only an observation not a rule. It could be that Nokia will be the first mobile phone company that will recover from severe crisis, but history shows it to be very unlikely. I try to shed some light on the reasons why it’s unlikely and what makes the mobile phone market so unforgiving. I think much of the problem rests with the fact that mobile phones are sold indirectly, through intermediaries who are amplifying both success and failure. A company like Apple was able to recover in the computer industry because it launched new products like iPod which could be sold directly to consumers. It had to convince the consumer and only the consumer. Having to convince a distributor, retailer, value added reseller, operator and consumer would be much more difficult. These intermediaries are “institutional” buyers who are risk averse and have low tolerance for untested ideas. Institutional buyers need to think about dealing with other people’s money not just their own so they are doing the right thing from their point of view.

Nokia needs to persuade first operators, then distributors and then consumers that its new products are great (even though maybe the old ones were not so great.) That’s tough. Apple works in the other direction. It creates consumer demand then “sells” that demand to the intermediaries as needed.

These intermediaries (which Steve Jobs famously called “orifices” to the market)

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The iPhone at four; growing up or just growing?

Jun 27, ’11 11:53 PM

Ever since the iPhone launched four years ago (to the day), the question on everyone’s mind has been: When will Apple expand the portfolio to reach into all market segments? I remember thinking in 2007 whether it would be in six months or a year that they would create a “mini”, “nano” and “classic” line-up which served them so well with the iPod.

Apple however took a different approach. To their credit, they focused on the platform and built a consistent experience around a fixed screen size to nurture an ecosystem. They also improved the power of the device so that experience would improve to be better and more robust. In other words, they treated every iPhone as not being good enough, needful of every megahertz of power, every pixel of screen and every minute of battery life. They polished the OS constantly and added APIs by the thousands.

In other words, they acted like a computer software company, not like a “device vendor” or like a handset manufacturer which was everyone’s (including mine) frame of reference.

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Capital.bg | Nobody wants to buy RIM

Jun 27, ’11 3:28 PM

Технологии и наука | Хорацио Дедиу: Никой не иска да купи Research In Motion RIM – Капитал.

My thanks again to Andrian Georgiev for interview questions [Bulgarian] related to RIM. My answers to his questions (in English) are below:

Q: What should RIM do to reinvent itself? Should it stray from its business-oriented image?

RIM had begun to move away from a business image already in 2005 or so when it started its “Pearl” brand and a consumer-oriented strategy. The company probably foresaw that business customers would not be enough to maintain the growth they had become accustomed to. The strategy has led to a growing popularity in Latin America and other regions like the Middle East where the product is used as a low-cost alternative to SMS for avid texters. Even in the US, many teenagers use Blackberries instead of iPhones because they can use it for the BBM service (at a lower cost). I believe that it is not coincidence that iMessage was launched.

The company’s salvation is not in branching into new markets but in establishing a credible platform. When Nokia announced that they would be the “third option” after the iPhone and Android ecosystems, they did not even mention the Blackberry. The fact that Blackberry is not seen as an ecosystem is the root of the problem.

Q: How should RIM accelerate the introduction of QNX?

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MacDirectory: Exclusive | Horace Dediu: Apple expert

Jun 21, ’11 5:56 PM

“This is my site. It’s an evolving experiment in collaborative and peer reviewed analysis.”

via MacDirectory: Exclusive | Horace Dediu: Apple expert.

Comments (12)