My estimate of last quarter’s iTunes gross revenues suggested a spending rate of $40 per iTunes account. It would make sense to consider how that figure changed over time. The following graph shows the pattern:
You can read each bar in the graph as the total “ARPU” or average revenue per iTunes user.
I overlaid a graph showing the total number of accounts as reported by Apple to the (retroactively) estimated revenue structure. Account totals are measured with the right axis and ARPU with the left. Note that I also broke down each component of iTunes as currently defined (Music, Video, Apps, Books, Software and Services.)
The time frame covered is from Q2 2007, or the quarter prior to the iPhone launch. A few patterns emerge:
The following is a slightly edited transcript of a portion of the Critical Path podcast #79. I am reproducing it here for the sake of brevity and focus of discussion.
I’m going to try to put together an analogy together here that maybe will help us think through the Facebook Home and the Google Fiber issue.
I’ve been thinking a lot about how to illustrate Google’s business model. The problem is that discussion has been polarized: Two camps have formed. One camp suggests that Google is a benevolent entity that does great things and only asks that we indulge their hobby of a business model called advertising. Fundamentally they are about pushing the envelope on technology, making wonderful things happen.
That is one camp. I call them the utopians. It may not be a nice thing to call them but I frame it as being exceedingly idealistic.
The anti-utopian camp is one that suggests that Google is an advertising company primarily, and fundamentally and overwhelmingly. And anything they do technologically is in support of that. The implication is that Google is sinister and manipulative, bent on getting away with as much privacy extraction as possible.
I believe that the anti-utopians dismissing Google as an advertising company sounds a bit incomplete. It’s not incorrect. It’s not erroneous. It’s just not a complete story.
The comScore mobiLens survey for the US ending February 2013 shows continuing rapid expansion of smartphone usage in the US. Even though the 50% penetration threshold was passed seven months earlier, the rate of new smartphone users was second highest ever recorded with over 1 million new-to-smartphones users every week during February.
Overall penetration increased to 57% with nearly 2% of the population switching in one month. Using the average growth rate for the last six periods, the US could see 80% penetration in another 19 months or by Q3/Q4 2014.
Thanks to @jtk0621 via twitter I was able to obtain a quarterly view into Samsung’s SG&A expenditures by cost category.
The value of this data is in being able to understand why Samsung SG&A as a percent of sales remains fairly constant. To recap, the discrepancy with Samsung’s SG&A is that it has grown in proportion to rapidly rising sales. Normally, when sales grow, SG&A grows but when sales grow very rapidly, SG&A grows a bit more slowly since it’s primarily a function of headcount and hiring is necessarily organic and hence slower as a process.
The contrast is shown in the following comparison between Apple’s SG&A and Samsung’s SG&A as a percent of sales. [For more detail on Samsung revenue composition see: The Cost of Selling Galaxies].
Apple’s SG&A has declined as a percent of sales, as one would expect, but Samsung’s hasn’t.
I have hypothesized that the reason for this might be in the practice of “outsourcing” many marketing functions. As Samsung expands promotional efforts, it does so partially by hiring people but even more so by farming out a lot more work. In this way, if and when sales subside, it can pare costs. This practice ensures that it’s not exposed to a huge cost structure that is hard to control. The downside to this approach might be obtaining “quality” marketing as oversight is still depending on inside teams who still have limited resources.
To test this hypothesis, I looked at the types of costs it reports and divided them into two categories:
Category 1 are what might be considered “internal” costs which are in function of employees or operations. These costs are:
- Retirement Benefits
I graphed these costs over time below:
Category 2 costs are those which can be “outsourced” and are in function of budget items. These are:
From the initial product launch until the end of 2012, AT&T has activated 72 million iPhones. Verizon began selling iPhones four years after AT&T and managed to activate 26 million since. Sprint began nine months after Verizon and has activated 8.5 million.
In proportion of their subscriber bases, the activations are shown in the following graph.
I identified the reported iPhone activations with blue areas while the sum of green and blue areas represent total subs at the end a the given year.
I also took the liberty of forecasting 2013 data in order to try to estimate T-Mobile’s contribution.