Archive for March, 2013

It’s an iPod, not an iWatch

March 21st, 2013 No comments

The internet is a buzz with prospects of Apple making an iWatch. And now, analysts are saying it’s not a good idea: watches have too little margin, their too competitive, and it’s just not a big enough deal for Apple.

Apple will be wise to ignore them.

Have you heard of the iPod? They’re not selling like they used to, but these little music players were once all the rage. They’ve mostly been replaced by phones, but in fact, many people, particularly exercise enthusiasts, still use theirs. Apple once made an iPod that even had a watch feature built in and it was so popular that people starting making their own wristwatch bands for it.

What could Apple do to revitalize its iPod segment? Why it could add useful features to the iPod. The iPod could have a built in wristband and receive information from your phone. It could start and stop music from your phone and pause when a call comes in. It might show you your heart rate and read outs from your GPS (all in an app in your phone). Wouldn’t this be better than an iPod? Might you consider upgrading your iPod shuffle or nano for one with these nifty features?

For some reason, all these analysts have missed this simple fact. An iWatch is a new segment they say. It’s building a new eco-system. Is there even a market for it? Since Apple has already made an iPod that worked like a watch, I am dumbfounded at how no one has noticed that this isn’t a new segment at all.

Apple has built up a reputation for life-changing devices and the stock market is expecting nothing less. That’s the argument given why Apple shouldn’t make an iWatch–they’ll disappoint the stock market. Except it’s ridiculous. It’s good business to make good products, even if they’re not ground breaking. The lowly iPod was the first step in remaking Apple; it seems almost sad that it’s all but forgotten now. Good thing Apple hasn’t forgotten it.

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Nouns are more important than adjectives

March 6th, 2013 No comments

Bloomberg quotes Thrivent analyst Nabil Elsheshai “It’s no coincidence that Google’s rise has coincided with Apple’s demise. Making money from services versus devices is growingly perceived as a better business model.”

Please, correct me if I’m wrong, but somebody has to make something for a service to actually be of any value at all.

You service your car; no car, no service.

You get information from the web about where to buy things; nothing to buy, no reason to search for info about it.

Crowd sourcing tells you which restaurant you want to eat in and Pandora streams music to your desktop, but the food had to be prepared and musicians had to create the music; everything, it seems to me, starts and finishes with things.

Right now, Google makes much of its revenue related to advertising. It’s genius really, all the ways they skim money from that business and what it’s done for them. For that Google should be commended. But to suggest that services are more valuable than devices seems crazy to me. On the plus side, Google makes money from the advertising of, well, anything. That’s, no question, a pretty big stream of money, but it’s literally pennies an ad. Margin per transaction is important for a business because each transaction, even with Gooogle’s efficiency, costs something.

Meanwhile, thing-makers, like the companies I usually work with, have to set aside some of their margins for advertising—money they’ll pay maybe to Google in order to get the word out about their new thing.That advertising dollar can never be greater than the money made from the thing in the first place though, can it? Google’s ultimate market, if unopposed and if they get every advertising dollar out there, is certainly large and, likely larger than Apple’s. Apple can make only so many different categories of iDevices after all. Except Apple, and all of us thing-makers (manufacturers) typically make quite a bit more money every time someone buys our object; even if we pay Google a little bit to help convince them. The broader suggestion, that services are more valuable than things is ludicrous.

It’s annoying because one thing may be true about this quote: perception. Small startups selling real live things you can touch and use have a hard time just competing for investor ear-time with thousands of software models based on some variation of ‘get a load of users for a service and then sell the users to advertisers.’ Usually this business model is called a service, but it’s driven by advertising, and there is only so much advertising revenue to go around. And it’s always going to be smaller than the revenue from selling actual objects.

In other words, without the nouns, there’s really no reason to bother describing them.