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  • They Say Apple is Always Doomed to Fail

    May 25th, 2016

    You probably didn’t realize that Google has some big problems to solve. Very few people upgrade their mobile handsets to the newest versions of Android despite touting loads of new features at I/O events. Indeed, most customers can’t upgrade, because it’s not offered to them by the wireless carrier or the handset maker. But that’s just a start.

    In 2015, Google earned $67.39 billon from ad sales. Total revenue was $74.54 billon, meaning that 90% of that cash came from ad sales. Not from the Android OS, not from Nest smart thermostats, not from Nexus smartphones, not from any other product. It was all about those targeted ads that were based on what they learned about you and your tastes. Anything that hurts the amount of money Google earns from each click or tap on an ad can have a huge impact over time.

    But Google isn’t considered a one-product company, even though that’s what the earnings reveal.

    In contrast, 64.99% of Apple’s revenue for 2Q 2016 came from the iPhone. More than a third of the total came from other products and services that include the Mac, iPad, Apple Watch, iTunes, Apple Music and so forth and so on. But Apple IS considered a one product company because a single product line has a huge impact on total sales. But without the iPhone, Apple would still be a pretty large company, with revenue that exceeds that of Google.

    Do you see the disconnect here?

    Even worse, whatever Apple does must be wrong, must be doomed to failure. How often you hear such talk about Google even though all its efforts to expand the revenue base much beyond ads has failed?

    It all started with the Mac. In the early days, people would say that a proper personal computer must have a command line interface, and MS-DOS was the standard. A Mac’s pretty graphical user interface wasn’t taken seriously. Macs were toys; they weren’t meant for serious work. Well, until Microsoft Windows became good enough to actually become productive. Suddenly the complaints were forgotten, except for the people who suggested Apple adopt Windows or license the Mac OS.

    And I haven’t begun that old “Macs are overpriced” argument. Macs aren’t cheap, but the reasons are far more nuanced than that.

    When the iPod came out, promising 1,000 songs in your pocket for $399, it was regarded as an indulgence, a toy from Steve Jobs that would probably go nowhere. Instead, it quickly dominated the nascent digital music player market and remained there until its features were assumed by the iPhone. Yes, iPods are still being sold by the millions, although the product has been updated only rarely in recent years.

    When the iPhone arrived in 2007, it also wasn’t taken seriously. It was too expensive, lacked features, and didn’t a proper smartphone require a physical keyboard? It’s hard to believe that, in those days, the BlackBerry was the standard bearer, and Android prototypes were similarly configured. In 2016, people hardly remember the BlackBerry, even though it’s still being made.

    I could go on. The iPad was an overgrown iPod touch, the Apple Watch was just too expensive to compete with Android Wear and Pebbles, and don’t forget a Fitbit. To make the iPad seem less successful, it is often compared with $50 tablets, gear that hardly exits the toy category. An Apple Watch is compared to the Fitbit in industry tallies of what are considered “wearable” sales. Close but no cigar, since the Apple Watch is supposed to be a smartwatch. It would be similar to referring to an iPhone as a digital music player because that’s one of its features.

    The Apple Store chain is 15 years old this year. I remember when the original stores were launched, and I attended the grand openings of the first stores in Arizona, beginning with the one in Chandler, AZ. It was a huge deal, but came at a time when tech companies hadn’t done so well in setting up their own retail facilities. Do you remember the Gateway Store?

    Apple had some different ideas devised by Steve Jobs, Ron Johnson and crew. It came at a time when Apple wasn’t being treated all that well by third-party retailers. So Macs would often be tossed in out-of-the-way locations, and the sales staff would refer would-be customers to products from which they’d earn a nice spiff to supplement their paychecks.

    The Apple Store was designed to set the standard for the sales experience, and, over time, other Apple resellers decided to emulate at least some of the good stuff.

    This year, the Apple Store is undergoing some big changes. The Genius Bar, where you’d receive support — and sometimes authorized repairs — from an Apple person, is morphing into a Genius Grove. It will offer customers more space to just hang out. An article from Slate Magazine quotes Apple retail executive Angela Ahrendts about the new feature, “We didn’t want it to feel like a store. We wanted it to feel like a town square—very open, and everyone invited.”

    I wonder about the Microsoft Store, which debuted in 2009. As of last summer, there were 66 outlets around the world. I’m not at all sure whether that’s a big deal or not, but, in contrast, there were 463 Apple Stores worldwide as of the end of 2015. Many are set to undergo an overhaul in the years ahead, and few will dispute the fact that the chain has been hugely successful.

    Except in the clouded minds of those who imagine that Apple is desperate after a single down quarter and with the prospect of another. But even if sales are down, profit margins are high. Is that the mark of a failing company?



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