How will we measure Apple’s Watch success?

It won’t be easy. The company will not be reporting the Watch segment revenues or (presumably) unit sales and therefore we won’t have an accurate unadulterated view of the business. In addition, the large number of products in the mix and wide price variance means that it will be difficult for analysts to determine demand and price.

There is a hidden benefit to not having this data. All data is a creation and it tends to lead thinking in directions led by whatever is being measured (and whoever chose those measures and their motives). And yet without data there is no evidence and no credibility. In other words: You can’t manage without measurement but you can’t be sure what to measure.

The analyst is then faced with a requirement to have good taste or at least judgement about what to measure. This judgement is based on experience and good theory. Given that, what could we measure to determine whether the Apple Watch will be a success?

Here are some suggestions:

  1. Language. Measure whether “Watch” will come to mean “Apple Watch”. “Phone” has come to mean not only “smartphone” but also all mobile/cellular phones and not just things used for calling but things used for all manner of information. This is a great test because the theft of semantics can only be accomplished through a degree of ubiquity of influential mindshare. Incidentally, the brand may well have been designed to do just that.[1]
  2. A measurable and significant reduction in the use of the iPhone. The Watch peels off uses from the iPhone and therefore the more it peels off, the less remains. However, that which remains will be more uniquely valuable to the incumbent. This is the process of carving and erosion that the PC experienced vs. mobile devices in general.
  3. An increase in the mix of large-screen iPhones. As iPhones are removed from pockets more rarely, the larger version might be more comfortable to carry and more useful to use for the immersive tasks that are outside the scope of Watch.
  4. An overall increase in iPhone sales beyond the foreseeable trajectory. This would suggest switchers from Android would be drawn to the platform purely for the value of the “accessory”. Note that this is not inconsistent with the lower usage and higher spec mix measurements.
  5. Apps uniquely targeting the Watch. It’s hard to imagine how this will develop as it involves millions of creative minds, but as smartphones created new economic value through the solving of new jobs to be done, the Watch should do the same. As a side-effect it should lead to new empires (or at least Unicorns) being formed around Watch use.
  6. Iteration. How quickly and deeply will the product be improved? Basic accessories like headphones and Apple TV have a leisurely update cycle. Smarter devices are faster. The cycle time of iteration should indicate how seriously Apple takes the platform and that itself should be fueled by positive consumer sentiment for the product.

These indicators are vague and the data will be weakly signaled but in many ways it will be more meaningful than any financial performance figures.

  1. It leaves open the question as to what watches as currently defined will come to be known as. []

    if Watch is to be used at a 10 second duration, No app is the answer.
    unless you play chess/game using notifications only. Apps aren’t even
    the main focus or even the home screen.

    “reduction of usage” is just another marketing BS.
    Apple wants Watch to be as addicting as iphone if not more.
    Watch will be triggering immune system so the brain will give you reward
    you just like when you pop a pimple, get a tattoo, scratch an itch, etc.

    Phantom Notification will be new “gate”. It will be real.
    Just like 10 years ago teenagers weren’t suppose to put the phone
    to their ear. What happen to that. Today Apple shows toddlers looking at iphone.
    then again watches use to have radioactive material so it could be seen in the dark.

    • Sam


      I don’t think people are going to read whole NYT articles or plays games on a watch.

      It will be be convenient to use the watch to make reminders and calendar events with Siri.

      I’m surprised with your tinfoilf hat on, you actually use the NSA spying Internet and actually found this website… 😉

      • Tatil_S

        Watch sales might drive Siri use up. It never became a habit to use Siri for me, because I feel like I can get “the rest” done myself more easily after going through the trouble of taking my phone out of my pocket and unlocking the screen.

    • theothergeoff

      The Watch will be passive apps. Apps you don’t ‘use’ but still you are ‘constantly’ using. The next UX is all about integrating into your ‘being’ not integrating into the ‘web’

      • Walt French

        On Apple Watch, the functions—notifications, taps, apps etc—use you!

  • Rangaprabhu P

    Good points. Make sense. I have questions on 5 and 6. Already there is a flurry of folks wanting to build a Watch app to go with their iOS app. Will this be a true indicator of the platform? I can see unique ones building the case for a watch as its own thing being indicators. But the initial wave would be good apps built by iOS developers who want their best foot forward on the Apple Watch.
    On 6, Apple has an interesting problem here. How do you iterate quickly and evolve the platform when you just asked a few tens of thousands if not more to pony upwards of $10K on a smart watch? This will have to be a fine balancing act and IMHO force Apple to either slow down iteration or offer hardware upgrades to the Edition audience. Maybe the Apple Care for the Edition will include a replacement guarantee or something?

    • Mark Jones

      On 6, I expect only the very rich (top 1%, maybe down to top 5%) to buy the Edition. And almost all of them won’t blink an eye to buy another the following year, whether as a gift for themselves or their loved ones. For the smaller % of rich market (i.e. the frugal rich who bought an Edition — most of this group will have bought the regular version), there will, as usual, spring up a “pre-owned” market that will buy it from them at about 50% of their original cost. Come release of the Apple Watch 2016, there will then be Apple Watches (2015 Edition) for sale between $6000 and $12000 as well.

      • One percent of the world is 70,000,000 people, give or take.

      • jinglesthula

        # of active iPhone owners (2013 study numbers) 294M
        If the top 1% of active iPhone users bought a $12k Edition that would be over $35Bn in sales. (I was too lazy to dig up more recent estimates… Horace?)

      • andrekibbe

        Hot off the presses, this Motley Fool article from today has a Morgan Stanley projection for total Watch sales volume based on “10% penetration into Apple’s 315M iPhone 5 or newer installed base exiting 2014” (i.e. all Watch-compatible iPhones).

      • Tatil_S

        I have a hard time believing somebody still owning an iP5 at the end of 2014 would be in the market segment of early adaptors for the watch.

      • andrekibbe

        The iPhone 5 has a 4″ screen, which is still preferred by many iPhone users, and is the one version that’s all black (I paid a $200 premium for a black MPB in the mid-2000s).

        People more often than not buy (or keep) things because they actually want them, not to be “early adopters” or tech hipsters.

      • Tatil_S

        I am not sure why you are so defensive. Observing that somebody may not want to buy a watch or may prefer to wait for a few more generations or may be holding on to an older model phone for longer than US average is not passing “negative” judgement. It is just an observation.

        People who hold on to iP5 have either decided that the new phones are not worth the cost or they have non-mainstream opinions about technology that emphasizes basic physical characteristics more than tech specs or fashion. This make them unlikely candidates to be first adaptors of smart watches. I am sure there will be some exceptions here and there, but it would be foolish to put all of them in the same category as first day iP6 pre-roder people in terms of their likelihood to buy a brand new, still being defined tech product.

      • andrekibbe

        “I am not sure why you are so defensive.”

        No more sugar for you.

        “Observing that somebody may not want to buy a watch or may prefer to wait for a few more generations or may be holding on to an older model phone for longer than US average is not passing “negative” judgement. It is just an observation.”

        It’s not a negative observation, just an incorrect one for the reasons I stated. The iPhone 5 has a couple of unique characteristics that later models, despite some desirable features, don’t preserve. For many users, Touch ID, larger screens and Apple Pay are enticing enough to be worthwhile upgrades—but not for everyone.

        “People who hold on to iP5 have either decided that the new phones are not worth the cost or they have non-mainstream opinions about technology that emphasizes basic physical characteristics more than tech specs or fashion. This make them unlikely candidates to be first adaptors of smart watches.”

        That’s where we disagree. If someone has a phone that supports iOS 8 and BTLE, like the 5 does, those might be all the tech specs that matter; other features like Apple Pay might be considered the digital equivalent of tailfins. I preordered the Apple Watch, but I still have an iPad 3 and a mid-2012 MBP. I didn’t get the Watch to be an early adopter, but because notifications and a host of other information are more conveniently accessible from my wrist. I never stopped wearing watches, even though I’ve been using smartphones since the Treo 300 in 2001.

        “I am sure there will be some exceptions here and there, but it would be foolish to put all of them in the same category as first day iP6 pre-roder people in terms of their likelihood to buy a brand new, still being defined tech product.”

        Sure, any Apple customer who self-identifies as an early adopter probably bought the iPhone 6 and the Apple Watch immediately, but that’s a different cohort than those who buy products for functional reasons. iPhone 5 users already have a phone. The marginal utility of upgrading to a 6 pales compared to buying a wearable device that amplifies the convenience of their current phone, and even further reduces the need to upgrade.

      • theothergeoff

        I think the key point is if they have an iP5 now, they are slated for a iP6s upgrade this fall (I’m on a 4s…, my wife on a 5), and at that point, the Watch’s value will be defined to the ‘late adopters’

        If I define a market class, I’m one that waits for the ‘.1’ release, and in my case for phones, i skipped the 5s generation due to lack of need for TouchID or the form factor. Now, I’m waiting for the 6s. Same for the .1 Watch release.

        I used to have a multifunction watch on my wrist for 20 years… That stopped when I bought my first clamshell phone. Now, with a 6s form factor, a watch seems to be a likely ‘preservation’ step for keeping my phone in the pocket (my 4s is shattered front and back).

      • Sharon Sharalike

        I too am waiting for the second generation of the Apple Watch, as it should be a very large improvement. (This one was delayed, so it’ll be more like gen 2.5).

        However, while I’m waiting I’ll be enjoying the first gen watch 🙂

        Bands should be transferable, and the resale on the watch itself will be reasonable. So for a relatively small amount of net cost I’ll be using this one while I wait for the “real” one.

      • Tatil_S

        In other words, you are not in the market segment of *early* watch adaptors.

      • Mark Jones

        I wasn’t actually thinking of 1% of the total world population (even though that’s what I wrote), just the top 1% to 5% in the wealthier countries, primarily US, Asia, and Western Europe. But even cutting that 70m in half, 35m is still quite a few people who might buy an Apple Watch Edition.

    • mfoley

      keep in mind for building WatchApps currently your WatchApp is running on the iPhone, you require an iPhone parent app for distribution and for your WatchApp (aka Watch App Extension) you currently have no access to stuff on the watch like HR monitor, custom views/drawing, bluetooth, NFC. Still the Watch is awesome & WatchKit is pretty cool, glances are the new new. less is more.

    • Space Gorilla

      There’s no problem with the 10K and up Apple Watch being obsoleted quickly. People who buy 10K + watches simply don’t care. How much do you care if your hundred dollar DVD player breaks? Do you expect the company that made the DVD player to offer you new internals? Of course not. You just go buy another one, it isn’t worth your time to get it fixed. That’s what 10K purchases are to the people who will buy the Edition models.

      • “People who buy 10K + watches simply don’t care”

        Like a blast from a dog whistle, this reality seems to be utterly missing in most of the Apple Watch conversations I’ve come across.

  • Walt French

    Watches as currently defined probably WON’T be known analogously as a “no, I don’t have an” iPhone.

    Might elevate branding, as in “my Swatch” or “Hey, Rolexi! What time is it? Oh, yeah, the voice control to tell me the time isn’t working.” mini-jokes

    • Sharon Sharalike

      One thing’s for sure – luxury watches as currently defined won’t be known as “heirlooms”. Current owners may kid themselves that they’ll be passing them on to their grandkids, but those grandkids will be saying “That’s, uh, nice, Grandpa. Now how do I get it onto the net?” In a few years nobody will be willing to give up that wrist space to a mere clock. Grandpa might as well be passing down a sextant or a slide rule, where it’ll just sit on a shelf as a curiosity.

      • demodave

        I don’t think I agree with this statement. There is still an appreciation for classic cars and such. I think *classic* watches will still have a role in fashion and antiques appreciation. The real question will be how long those items stay in hiding before they are appreciated once again.

      • Sharon Sharalike

        Of course, but they won’t be appreciated as watches, but rather something interesting, in the same way that the other items I mentioned would be. This will take time, of course, until a generation has grown up with smart wearable computers.

      • demodave

        Hmm. I guess I got stuck on the language of “luxury watches as currently defined” which for me assumed the “antiques” thought model.

      • disposableidentity

        We only collect classic cars (and pay astronomical sums for rare or desirable models) because we care about them. We only care about cars because we drive them.

        No one collects horse-drawn carriages or pocket watches anymore.

      • Walt French

        Collectibles help us recall socially- or personally-significant events: graduation, retirement, the spread of civilization (stamps), triumphs of intellect and hard work (cars), election of a hero, winning a war, etc.

        These are Jobs To Be Done. Horse-drawn buggies were never milestones because they’ve existed since ancient history. But I’ve visited a stagecoach museum; they symbolized the conquest of the American West.

        I suspect collectible watches are markers of membership in a patriarchy of wealth, almost always given from father to son or bought by an up-and-comer who wants to show himself and others of that clan that he has arrived. A rather innocuous way to employ artisans who essentially build devices that fawn over their betters; Marx would approve of workers being thus alienated from their product.

      • disposableidentity

        Not sure I follow you.

        In fact the robber barons, royalty, and other wealthy elites did collect carriages in the same way the wealthy might collect classic cars today — the way many people collect vintage Rolex wristwatches today.

        I would bet that collecting stamps or coins will be largely a thing of the past, once all of us who used them in everyday life have died off. Exactly the way almost no one collects pocket watches today.

        To my original point we collect the things we know and care about.

      • pk_de_cville

        “There is still an appreciation for classic cars and such.”

        Classics that are only collectibles:

        Telegraph Keys
        Buggy whips
        The first bicycles
        Sony Walkman
        Windows tablets (pre iPad)
        Smartphones (pre iPhone)
        Apple I
        IBM PCs

        When and if all cars are either all electric or hydrogen based today’s classics will become collectibles.

      • scotawarcester

        Yes Dave, but I think what Apple has done once again, is take a device (like the phone), that only does one thing, and increase its utility into something that really revolutionizes your life with the app ecosystem. I wonder what will be next! In a way, it is shame shame on every industry out there for staying so myopic; kudos to Apple for capitalizing on this.

      • Walt French

        Pretty sure that just a few more years into the future, no kid is going to understand the idea of “getting onto” the Internet. Likely, not even “the Internet.”

        Just as Jobs dropped “Computer” from Apple’s name 8 years ago, the Internet will become the water that we fish swim in, not aware of its existence because we never experience or imagine its absence.

      • Sharon Sharalike

        I think you’re right. It’s be a while, though. Around here even the electricity goes out at least once a month.

      • pk_de_cville

        Today, a zero cost delay and distortion free coversation with my friend in Turkey is ‘magic’.

        Tomorrow it will be unnoticed as just the way the world works.

  • jinglesthula

    “It leaves open the question as to what watches as currently defined will come to be known as.” love the subtle humor

  • Christian Peel

    I was not enough of an insider to understand the reference to unicorns; after searching I guess it means a product line with at least $1B revenue/year.

    • rational2

      A startup with 1 Billion+ valuation.

      A (startup) company with 1 Billion revenue per year is a success story.

  • 程肯

    Point 6, that’s the one I’m interested in. Presumably, they’ll be working on the SOC continuously, perhaps in a tick-tock fashion, but what about the exterior? Do they need to or want to change that every year? Other than materials and finishes, are they planning to keep the same exterior shape?

    “The company will not be reporting the Watch segment revenues or (presumably) unit sales and therefore we won’t have an accurate unadulterated view of the business.”

    I’m no accountant, but if the Watch is successful, don’t they eventually have to break out the revs? Is that threshold 10% of total sales? And if they do, would they restate sales from 12 months prior in order to have a comparison? Wouldn’t 25M Watches break that 10% threshold, if that is what it takes?

    • BMc

      I would expect to see annual updates for the first few years at least, with both internal and external changes. SOC is likeliest bet, along with improved battery (although only small incremental improvements are on the “known” horizon of battery tech). Perhaps a new sensor each year is a goal, though not necessarily feasible. Adding dedicated GPS (only activated when required such as starting a fitness activity) would seem to be next step.

      On the external part, I could see them adopt the iPhone tick-tock model where the design is updated every two years. That said, if we look at the iPad, the 2nd generation was a solid change over 1st, but then only incremental changes from there. Clearly with fashion, design means more, so perhaps changes will be annual in the beginning – though only subtle variations on what Apple I am sure is hoping is an iconic design.

      • Tatil_S

        A bit off topic, but I am curious. Why do you call 1G to 2G transition “a solid change” while the others are merely “incremental”? “Faster CPU and video chat camera” doesn’t sound more impressive than “faster CPU and retina screen”.

      • disposableidentity

        You only have to hold them to know how big a change it was from 1st to 2nd gen. It’s a totally different machine.

      • theothergeoff

        and I would think the 3G to 4G change in most prior platforms as the ‘most significant,’ maybe not relative to the former iteration, but to set a new trajectory for future generations.

        the 3rd iPhone (3GS) to 4th (iPhone 4). New CPU, and ‘Retina’ becomes part of the nomenclature.

        the 3rd iPad to 4th. Lightning connector, significantly better battery/power envelope. So much so that the 3 just ‘disappeared’.

        iPod. Arguably the 4th generation was the introduction of the iPod Mini. Click Wheel, different form factor, much smaller, multi-colors. Set in motion the ‘family’ of iPods (classic, mini, nano, shuffle).

        iMac: [in terms of form factors/packaging, not just ‘tock’ upgrades] the 4th generation was the first Intel iMac. ’nuff said.’

        The first to 2nd generations are tweaks to the basic design premise. The 3rd generate almost (save for the iPad), is a speed increase. The 4th generation seems to set in motion the true intent of the platform, in terms of size/form/performance which defines a new set of jobs to be done which opens up the ‘masses’ to the product (especially in the iPod, iPhone, iPad space).

        My guess is that we’ll see 2-3 iterations of the watch in the next 1-3 years, and the 4th to -6th iterations will be more on 2-3 year cycles… primarily because watches are not ‘consumables’ (They don’t fall into the definition of ‘highly portable electronics’…. they are ‘functional jewelry’)

        So I see the 1st-3rd gen devices
        1) improving battery life/performance
        2) improving ‘ding resistance’ (scratch and water)
        3) mapping the utilization of apps and designing SOCs optimized for those.
        4) driving cost down to the less than $250/$199 space for entry level (every college kid has a mac/ipad, iPhone, watch)

        and the 4th generation makes that major quantum leap that drives the $199 buyer Gen3 buyer into the $400-$1400 category(and/or drives massive capabilities into the $199 space, opening up the long pull of lock-in luxury [I am committed to the AppleID ecosystem, now, I just need to buy a watch that matches my suit/earrings/car/status, as I move up the economic ladder]).

  • Sacto_Joe

    My guess is Apple will update us on the number of Watches sold in total, especially if it’s remarkable. The PR would be too good to pass up. Then use process of elimination for the Watch; that is, figure everything else out and what’s left over is Watch sales. I’d guess Horace will be particularly good at this.

  • #4 is my prediction. Since IMO, the Watch is a new Display and Input mode extension which depends on an iPhone, I believe this is the metric that Apple is looking for.

  • Tatil_S

    3#: Is the data you get right now fine grained enough to deduce the impact on iPad sales by the iPhone 6 and 6 Plus? If not, I doubt you’ll be able to read Watch sales based on Plus to “normal” ratio.

    #6: This will be interesting to follow. Despite its original launch in Spring and the usual once a year release cycle, iPad eventually moved to an autumn release schedule. Watch screams Christmas gift much more so than iPad. Unless it suffers a Newton-esque slow death, it is probably inevitable that Watch will make a similar transition. Will that result in longer than a year wait once or two releases in one year at some point? iPhone did the former and iPad had the latter.

  • #6 is the metric that intrigues me more.
    iPhones are now set to an annual update cycle by Apple, and a two years upgrade cycle by users, but iPhones updates are bound to be less and less significative, there is room for improvements of course but I am not sure that the job to be done can be really improved by updates three or four years from now.
    The Watch on the other side has a road full of meaningful improvements: more battery life, more sensors, more power, cord cutting from iPhone dependency, health data improvements and on and on.
    The Watch upgrade could substitute the iPhone upgrade cycle in due time: i.e. get the Watch with the new health sensor instead of the new iPhone.
    This could be a revolution since watches until now have had long upgrade cycles and yet Apple could transfer part of the expectations for the new iPhone to the new Watch, add new bracelets, new forms, new colors, new materials and make users fast switching between models.
    That could also explain the relative low price of the sport and watch models, they are made for quick updates cycles, 1/2 years like the iPhone and they are made to replace the iPhone’s upgrade excitements when, shortly in 3/4 years, the iPhones upgrades will be less significant.

    • pk_de_cville

      “…iPhones updates are bound to be less and less significant.”

      True. This is a huge competitive risk vis a vis Android (Xiaomi, Samsung, HTC) and Win Phone.

      Apple’s response is to advance as fast as possible in device design and functionality, AND distinguish its Apple ecosystem; both are top priorities.

      • I agree with your view of Apple response but I don’t think it is a competitive risk for Apple since the same problem face all other competitors.
        The more we go further the more the ecosystem will count and the less the device by itself.
        Phones will be entry point to the ecosystem but the increment of year over year features will be less valuable than today.
        The stronger brand will be the one with the more services, the more apps, the more accessories, the more coolness and in all this fields Apple is very well positioned.
        We could say that Apple is shifting the focus from the phone itself to the services it enables and the gadgets it connect to in advance from what will be the inevitable future.

  • jinglesthula

    Another indicator (at least initially) is that the worlds best manufacturing company sold out of launch-day supply w/in 24h of preorder. Ship times are now 4-6 weeks.

  • demodave

    This is sort of like an uncertainty principle problem: the more precisely you try to measure the results of the Watch, the less well you understand it. i think you’ve already nailed the biggest problem, Horace, but not really stated it: the measurer will define the results of the measurement. What is of greater interest to me is the fact that Apple will have all the data, will probably choose not to share it, but will have its own internal definitions of “success” for the Watch. I wish I knew what those metrics are, and I I would love to be a fly on the wall in the meetings where those metrics are discussed.

    I think the cultural metrics suggested are very interesting, though, and I fear that they could very easily be used to come to the all too common “Apple is doomed” conclusion.

    Time will tell.

  • Martin

    Early sales surveys are out. These will skew toward the high end, but out of maybe 20,000 respondents (self-selected, worth noting) it looks like about a 56%/40%/4% breakdown on sport/watch/edition. That’d put ASP between $800 and $1000. That’s pretty remarkable. I’m sure that won’t hold up in a proper measure, and certainly in post-launch quarter, but Watch may well match iPhone on ASP. I’d wager Watch rolls in close to iPhone on margins as well. Style carries a lot of value, but very little cost.

    • Watch margins will be higher.

      • scotawarcester

        Apple has truly created an un-subsidized product that exploits the consumer’s discretionary capital spending. To your point Horace even if only 10% of people buy at the high end of the Edition watches, it will radically mark up ASPs.

      • Martin

        Yeah, that’s my general feeling, though I worry slightly about the cost of retail on Watch. So far it’s been fine, but selling jewelry isn’t like selling electronics. Jewelry retailers usually demand 50% margins on wholesale because cost of sales are so high. I’m not sure Apple can entirely escape that.

  • scotawarcester

    Or, #3 – since Apple is putting notifications, etc on your wrist, they may hope that you downsize back to a smaller phone again like the 4″ form factor, thus reducing material costs. Would you not be more comfortable toting a smaller, lighter iphone than the 5.5″ monster?