Fat margins squeeze Apple against Android There are a million ways to over-analyse iOS versus Android market share, but one thing is often overlooked: Apple's high-margin strategy depends upon buying customers through subsidies, and may not be able to keep pace with Android's low-cost model over time. Google's Android growth - 250 per cent in 2011 - is particularly …
i cannot understand the down votes to this post.
i actually support apple in it's attempts to patent everything including a "method" to take all your money and make you feel smug about it. At some point, someone's got to wake up and realize that the emperor isn't wearing any clothes.
If Microsoft is a parasite then Google is a fungus, as by being gratis it leaves no chance for others in the ecosystem to survive, it sucks all the nutrients. That's no good either.
Do I want a future with only Google and Android? Fuck that.
Apple however is a virus, which Google caught when the of the two companies mixed (Eric Schmidt being the transmission vector). Google fungus then began copying Apple's virus RNA and now finds itself unable to get rid of it without many injections of expensive antivirals.
The mouse, proportional Fonts, Point and Click. Icons, Iconic properties, SmallTalk, Object Oriented environments ALL Created By and invented Xerox Parc or People while working there. MILLIONS of XEROX dollars. Worth BILLIONS now. Now please watch Jobs bragging over his company being an "Artist" ( "GREAT artists STEAL") Has nothng to do with this, RIGHT? Here: http://www.youtube.com/watch?v=nK7TQVFSA1Y
This was with reference his STEALING and admitting it in his interview as shown on YOUTUBE. GOTO Steven Jobs "I hired the wrong guy". BY the way... FANBOIS and GALS HATE the reference. But it's a salacious fact!!! APPLE STOLE XEROX Technology. ( IP ) Pure and simple. So ANYTHING Google does with ANDROID is fine by me. At least they know HOW to fight ( well... sort of Google's lawyers SEEM a bit SLOW to act.. ) BUT XEROX lost ( common knowledge in past legal circles ) not kowing what to do. Patent laws then were LAX, and unprepared for the modern age. STILL APPLE STOLE XEROX IP and that's the long and short of it.
"Do I want a future with only Google and Android? Fuck that"
I entirely agree - and I run a Desire Z and very much like the Android os. The author appears to be convinced that there will be a "winner" in the long term with one os completely dominating the market. He is neglecting to face up to the fact that the big loser in all of this would be the customers. The very last thing we as consumers want (if we are doing joined up thinking) is for one company, whoever it is, to "win" - we do not really want the mobile market to resemble the conventional pc market, do we? No, our interests here are in a certain sense in direct conflict to those of the companies concerned. Our interests are best taken care of by a functioning market where there are several players all of whom are doing in varying degrees reasonably well and competing like fuck. In that context I hope that not only both Google and Apple continue to do well but that MS ups their game with WinPhone and that RIM succeed in getting out of the doldrums they are currently in. Having three or four competing players in the game is the very best scenario for ensuring that innovation, competition, good kit and keen pricing are what characterise the mobile market - not lock-down, over-pricing and lack of innovation.
Apple will never drop their prices, the high prices are part of their brand ethos. Prestige pricing, if something costs more people assume it is of better quality. As we all know, the sum of its parts don't add up.
It is why Rolex can sell a watch that cost £500 to make for 20 grand, and why Armani can sell £20 worth of handbag for 3 grand. People are willing to pay it because they see it as a status thing, because they assume when other people see them with said overpriced product they will be jealous.
Where is this 'reasonably priced' Apple tablet? Surely you can't mean the iPad. $450 for a 10in with 16gb, no SD card spot, and wifi only is the cheapest iPad 2 you can get. Compare that to $300-$400 for the same specs in most Android tablet (with a couple of premium priced exceptions like the Galaxy Tab). Add to that that every single one of those Android tablets have SD card slots. The iPad is premium priced, just like every other Apple product on the market.
Which is fine. More power to them. Just don't go calling a premium price 'reasonable'.
You know I'm not in the market for a tablet at this time.. however when I go to the bigbox stores to see what's out there.. You can't find the Android Tablets.. they are either placed in areas where visibility is low or they don't carry them. This is slowly turning around... but if the consumer can't find the device then they certainly can't purchase one!
Let's put that into perspective, shall we? I have an iPad provided to me for work. I also have a Nook Tablet that I bought and rooted. Having used both of them I can tell you that the $250 Nook is far more useful to me than the $450 iPad. Granted it's a 7in screen vs the 10in screen on the iPad, but even so it hardly qualifies as 'cheap junk'.
But let's go with your assumption that only Asus and Samsung are worth having. Currently Best Buy has the 16gb versions of both the 10in Galaxy Tab and the 10in Transformer for $399.99. The Galaxy Tab is a sale price, with the normal price being the same as that of a 16gb iPad, but the Transformer price is the regular price. That's two high quality (by your own rather narrow definition) Android tablets that beat Apple's price by $50 without even shopping around.
"Where is this 'reasonably priced' Apple tablet? Surely you can't mean the iPad. $450 for a 10in with 16gb, no SD card spot, and wifi only is the cheapest iPad 2 you can get."
Something to remember that before the iPad pricing was confirmed and everyone expected Apple to release a tablet, was that everyone thought that it was going to cost $1,000 - that it came out for half the price caught everyone by surprise... especially competitors. Rival manufacturers have struggled competiting over price. Everyone was amazed at the price point, but if we skip forward, it's premium priced because it's Apple.
When the iPad 2 came out, there was a modest price decrease and Tim Cook said (at the time, IIRC) that they would be hoping to reduce with future revisions.
"The iPad is premium priced, just like every other Apple product on the market"
Yes, there are cheaper offerings out there, but quite a few aren't as good. El Reg did a round-up review of the tablets and some were cheaper than the iPad and some cost more - sure the iPad doesn't have a SD card slot, but not everyone needs one and specs aren't anything. I use my iPad 2 for making music - the software isn't there for me to do the same thing isn't available on Android.
The claim that "every other Apple product on the market" is premium priced is debatable - quite a bit, I would agree, but the claim doesn't always stack up. Look at the MacBook Airs and ultrabooks - the closest competition to the former are Asus Zenbooks, which are priced roughly the same.
"everyone thought that it was going to cost $1,000 - that it came out for half the price caught everyone by surprise... especially competitors. Rival manufacturers have struggled competiting over price. Everyone was amazed at the price point,"
Who is this 'everyone' of which you speak?
I certainly didn't expect a tablet to be $1000, the ipad's price seemed expensive to me and still does. Rival manufacturers are cheaper than Apple, just look at the price lists for yourself, even more so when competitors products are often discounted as they don't control prices like apple does.
A possible exception is Samsung, but they do have higher resolution screens and better specs for the same money so they're certainly not struggling to compete on price.
But as mentioned earlier that's part of how Apple generates prestige - if that's what floats your boat then fine, not judging here...
"Yes, there are cheaper offerings out there, but quite a few aren't as good."
And quite a few are definitively better. I just went from a Macbook Pro to an Asus - Asus was half the price had double the cores, 5x the storage, 4x the ram - it blows the macbook out of the water, but definitely isn't as pretty.
As I said, whatever floats your boat...
“Who is this 'everyone' of which you speak?
All the coverage talked about an approximate $1,000 price point and at the time, there was no visible dissent about this. I may have used the term of ‘everyone’ loosely but that was the overwhelming consensus of opinion – I certainly didn’t see people saying that price point was ridiculous and Apple would be bringing out a cheaper product. On the contrary, most seemed to think: ‘That sounds awfully expensive, but it is Apple.’
“Rival manufacturers are cheaper than Apple, just look at the price lists for yourself, even more so when competitors products are often discounted as they don't control prices like apple does.”
Like the LG Optimus Pad, which launched at £750 less than a year ago? Yes, it can now be had cheaper, but some places are still flogging it for nearly £700. I’m not saying that this is the norm – it’s not - but pricing is a bit more varied than some feel. I would certainly say that the majority of big-name tablets are cheaper than Apple, but not to the point where the savings are so substantial that people will be voting with their wallet. The people I know who have gone for an Android tablet have usually bought one because they wanted one specifically – that they managed to save a few quid was a bonus. I’ve a few friends who work/manage in the retail sector and all have said that the average punter see the differences in pricing as marginal - would they have been worse off getting a cheaper Android machine? Probably not in a lot of cases, but the savings weren't sufficient to be a buying factor.
“A possible exception is Samsung, but they do have higher resolution screens and better specs for the same money so they're certainly not struggling to compete on price.”
Samsung is finding it very hard to perform well in the market – 'Honestly, we're not doing very well in the tablet market.' http://www.channelregister.co.uk/2012/02/28/samsung_fondleslab/
“But as mentioned earlier that's part of how Apple generates prestige - if that's what floats your boat then fine, not judging here...”
As I say, I use my iPad to make music with – one of the *main* reasons I bought it. There aren’t the apps on Android that I could be do the same things – so rather than an iPad as ‘what floats my boat’ I view it more as making an informed buying decision about considering what I wanted and what products could give me.
If I hadn’t been planning to use a tablet for music production, then I probably would have gone for a Asus Transformer. But I was, so I went with the best fit.
“And quite a few are definitively better. I just went from a Macbook Pro to an Asus - Asus was half the price had double the cores, 5x the storage, 4x the ram - it blows the macbook out of the water, but definitely isn't as pretty.
Sure, but I was talking about *MacBook Airs* and *ultrabooks* – comparing those machines to other type of laptops to those is hardly comparing like for like.
If you track the ComScore survey data in the US you can make a case that iPhone has been taking all those abandoning RIM/MS/Palm and Android has captured all of the people buying a smartphone for the first time. The reality is going to be slightly more complex than that, but not much more complex.
Apple cares about putting a quality product with a positive experience from start to finish, which is why they do the whole widget. If they do that right, the profits will follow ... and they do the vast majority of the time. Most of the press and competition get that wrong. That is why Steve & Co. got so PO'd at Samsung who was trying to replicate the whole package. Remember that they were caught with their pants down with the iPad2. What they were shipping at that time was crap.
Call me a "fanboi" as I use a Mac (because it works and doesn't get in my way) , but my servers are debian because that is the right tool for the jobs they need to do. My phone is Android and I don't use an iPad ... yet.
Normal Matt Asay service is resumed. I was getting worried he's abnormally rational of late.
What Matt seems to have missed is that Apple like some of the other premium brands doesn't give a shit for market share never has done never will do - at least not at the expense of price.
None of Matts pontificating changes the acknowledged facts even a child knows - until the next disruptive entrant or product enters Apple will own the High End and Android the low end. As always Apple will hover up money like a Banker with a bag of charlie on a hookers tits, whilst the android crowd will be fishing in bins for butts to make a roll up (in cash terms).
/cluestickupsidethehead
To be fair to Matt, I think his argument is more along the lines that mobile phones aren't like other products in that relatively few people pay full price for them. Operator subsidies are what makes smartphones accessible for the majority of people and *if* the operators decide they can make more/pay less by getting punters to buy more Androids than iPhones then Apple will find it impossible to maintain the high price of their phones.
>What Matt seems to have missed is that Apple like some of the other premium brands doesn't give a shit for market share never has done never will do - at least not at the expense of price.
Humm, this is like the other poster about Armani suits. Premium pricing strategies make a lot of sense in many cases. Including Apple's. But unlike suits and rolexes, phones and tablets are evolving rapidly. And to evolve your tech and make it shiny, you need sufficient R&D funds. You can't do that if you ship too few handsets, unlike say Hermes scarves which benefit from scarcity (and look silly/pretentious, IMHO).
I suspect you are both right - Apple will stick to its upmarket image branding and will make lots of money. But it will also need to watch the volume in order not to be out-innovated by the likes of Samsung.
Part of the problem is that even getting the iPhone on a 24 month contract requires an up-front payment. I've had some interesting chats with various UK carriers - who are all singing from the same song sheet. Apple dictates the cost of the device, the cost of the contract AND certainly until a few years ago - how much data the contract includes. Many of the UK carriers would love to flog the iPhone for free on a 24 month contract - just like they do with any other phone of a similar price point - but they are not allowed to do so - Apple says. Android therefore remains a powerful smartphone for free on a 24 month contract. This suits me fine - I love Android.
Here in Switzerland, depending upon what contract (monthly cost), you can get an iPhone 4s for as little as one franc now, from at least two major players (can not be bothered to check them all).
As UK usually has better deals in terms of free upgrades etc., I very much doubt that this is a Swiss speciality, even though we are well known for the lowest prices in Europe if not the world.
I think you might want to look at all the small print... To get a 4S (or any premium handset) for that price you will be tied into an inflated monthly fee for at least 24 months.
That's the way it usually works.
Without the payback for the phone your monthly mobile bill would be somewhat smaller. Mine is a tiny £20 a month, because I bought the handset out of my own pocket (my existing carrier didn't offer the handset I wanted). If I'd bought a premium handset through them then the monthly bill for the same number of minutes/texts/data would be closer to £45 a month, which is £300 a year extra to pay for the handset.
Who'se making more money?
Who will continue making more money?
What is the point of this article? People who can't affored an iproduct buy cheaper ones, as well as people who prefer not to buy an iproduct will often buy equally expensive alternatives. Those who aspire to buy an iproduct will eventually buy one.
Well I'm shocked.
Also the only real area I meet lots of people that refuse to have an iphone are IT people who often say "but I can do anything I like with this expensive phone" to whit "What is it you do do with it?" "I occasionally receive an alert email and maybe make a call... sometimes I ssh to a server!" le sigh~~~, also much to my eternal irritation they're forever trying to prove to me their phone is better. Honestly guys, don't care, I like my phone, it's perfectly adequate and there is nothing about it I dislike (except that I need a knew case for it with another pretty anime character as my old one is broke) so get over your need to go on and on and on about yours.
The nub of the fanbois issue : buying into Apple is a matter of faith - its religious.
IT people understand the missed opportunities of i-products, particularly the ipad, and they try to engage i-fans in logical discussion and argument, but it's all pointless ... logic and faith are mutually exclusive.
We can't (and possibly don't want to) understand each other.
And not among smartphone only, and not because os subsidies. Ask yourself how BMW or Merceders, Armani or Prada, and so on doesn't need to be "cheap". You can sell a billion phone and have little profit, or sell far less and have a huge profit. I would prefer to work for the latter company, or own its shares...
A car analogy isn't a good one here if you're extolling the virtues of Apple.
Rolls Royce/Bentley *were* the original expensive car brand. Ford and VW were were the mass production box shifters.
Rolls Royce is now owned by the BMW (a recent upstart by comparison).
Ford own chunks of Mazda, Volvo and until a couple of years ago, Jaguar, Land Rover and Aston Martin.
VW (Peoples Car) was a box shifter started in the 1930s by Mr Adolf. They now own Bentley, Porsche, Seat, Skoda, Lamborghini and Bugatti.
FIAT, the Italian box shifter, own Lancia, Alfa Romeo, Ferrari, Maserati.
Wasn't there a study last week that agreed that the majority of first time buys were Android, but that the majority of people's 2nd and subsequent phones were iOS. So people get the cheap Android for their first phone, then once they realise they like having a smartphone, then they're prepared to save and splash out of a high-end smartphone. And there must be lots more people one their 2nd and more phone than there are first timers
"But ultimately the mobile ecosystem is going to revolve around one big player..." and this writer knows this how? It's never happened in the past, where is his evidence it will happen in the future?
Nokia still sells a shedload of Symbian phones and the reality is there is very little to prevent a new player entering the market. Provided apps can be written cross-platform, and that seems to be the case more now than any time in the past, his suggestion of one platform to rule all others is highly dubious.
Sure, Apple will have to start selling devices with iOS at close to break-even prices in just a 2-5 years. That would leave it with merely 30% of ALL revenue in the market for iOS apps. That is perhaps 3x better than where Amazon starts today with the Kindle Fire, and likewise for M$ and other Android manufacturers. Everyone else is just playing to stay in business, not to succeed in this time frame. Apple just needs to ensure there is no killer app for android that is not on iOS. Especially given they can nearly buy Amazon or Sony (4x over) with cash on hand. In the meantime, they just adjust the dials to profit maximization.
Think you are either spuddling, thick or ignorant. Numbers apply to profits, not items. Which is still in business, BMW, Rolls Royce, British Leyland, Woolworths? Which is just about the richest firm? Apple? Samsung? LTC? Nokia? Sony?
Apple believes in profit, not market share. The world is littered with economic disasters that are built on assumption what matters is market share, not profit. Market share alone never kept anyone in business. Nokia went after market share and look what happened. Android will ultimately become a cannabalised market in which you have too many phones chasing too little money (see Nokia).
This article is flawed in so many ways........Apple isn't hurting.....heck today it was announced that the ATF is dropping blackberries for iPhones. The iPhone had the most sales over the holiday quarter and the last few months iPhone is going up as Android is evening out and going the other way.
But in the long long run I think its Microsoft all over again....we are seeing Android all over being used on junk up to good products and it will have the most marketshare just like Windows and Apple with have its own little niche market just like the Mac. There are so many junk Android phones out there and too much confusion and choices its a mess. Apple has a nice simple way of doing things and having its niche market is fine with me! Apple makes the best hardware and software and it will continue.
I don't know which blinkered view of sales figures you are looking at (although from your phrasing I guess it's US only figures), but you might like to look at these.
http://www.gartner.com/it/page.jsp?id=1848514
Sorry they are Q3 2011, but I think they prove the point.
In summary:
Worldwide smartphone sales to end users Q3 2011
Android 52.5%
Symbian 16.9%
iOS 15.0%
RIM 11%
So getting ATF to kick out the Blackberry in their favour isn't really the fight they need to be fighting if they intend on domination.
Sure, Apple aren't hurting as long as people continue to feed their huge profit margins, but unless they are willing to remain a niche product, they will have to do something. Yes, I know, just like the Mac, but I know plenty of ex Mac users who have deserted to PC, usually because of software availability.
You only have to look at what happened to Nokia to see how quickly things can change in the mobile world.
As far as I'm concerned I'd rather have to many choices than none at all, and long may that continue.
Hmmmmmm.....
So -
1) Android is going to end up on a lot of phones - basically the none Apple ones. Microsoft is going to bob along at the back with a small amount of market share.
2) Apple's computer business is based on having the majority of the high-margin business. Most of the PC business is selling a wafer thing margins.
3) Apple caused/prompted a massive take up in smart phones and tablets that spread usage of both a long way outside the usual niches for such products.
4) Everyone else is following the Apple lead in these two areas.
5) It is assumed that Apple won't make a mid/low price offering in these two market areas. But what did they do with iPod?
All of the above strongly suggests that Apple with be a declining percentage of the phone/tablet market. But they will probably have quite a lock on the high-margin part of the business, and probably record massively growing sales in absolute terms for the next few years.
As tech marches on, there will be point where iPhone/iPad "Mini" offerings will make sense - sufficient performance on a cheaper device. We have also seen, to date, the results of attempts to build cheapo tablets...
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