The peak of the development of the iPhone line. Apple Scenario Analysis
One of the most anticipated numbers on Monday was Apple's traditional sales report for the new iPhone 5 for the first three days. Traditionally, sales start on Friday, then take over a couple of weekends, and then Apple's victory report follows. Even during the presentation, I mentioned that this year the company decided not to lose face, and Singapore and Hong Kong were added to the traditional list of 6 countries where the phone is launched in the first place. God knows what an increase, but the simultaneous launch in more countries guarantees higher sales compared to the previous year, even if the volume of demand remains at the same level.
So, Apple officially announced that they sold 5 million phones over the weekend (that's three days). Let me remind you that in the first three days of sales of the iPhone 4s reached 4 million, which was a record last year. At first glance, the company has set a new record and the future of the iPhone is cloudless. But this is so only at first glance. Let's take a look at sales in the first three days for all iPhone versions.
Apple iPhone sales in the first three days (Apple official data) Year Model Million units Sales growth 2007 iPhone 0.27 - 2008 iPhone 3G 1 x3.7 2009 iPhone 3Gs 1 0 2010 iPhone 4 1.7 x1.7 2011 iPhone 4s 4 x2. 35 2012 iPhone 5 5 x1.2
The iPhone 3G showed the most impressive growth in relative numbers, but at the dawn of the development of the iPhone line, it was much easier to do this, since there were an enormous number of fixes and improvements relative to the first version. When switching from 3G to 3Gs, users frankly did not understand why they were interested in buying the same design and almost identical device, there was no increase in sales.
An explosion followed with the introduction of the iPhone 4 in 2010, with a groundbreaking new design that became an instant bestseller. This was also superimposed on the fact that the popularity of the iPhone has grown among ordinary consumers (who is an ordinary person, you can read here). It could be assumed that when changing 4 to 4s, there would be no explosion in sales, nothing foreshadowed this. It is naive to believe that the marketing feature in the form of Siri was able to get millions of people to buy this device. With the same design and functionality that hasn't changed drastically. Another update that did not stand out too much in terms of its capabilities. But the death of Steve Jobs turned the sales of this model into a cult - so the stars coincided. The name 4s was even called “for Jobs” (for Jobs - consonant and very successful). You can come up with a lot of explanations why 4s unexpectedly or for someone expected became the next bestseller, blew up the market. In my opinion, the main reason, no matter how cynical it sounds, is solely in the departure of Jobs, this is a tribute to him. Indirect evidence of this was the fact that sales increased sharply in the US, although there were no prerequisites for this (41% of global iPhone sales in Q4 2011, a quarter earlier they were 28 percent in the US).
Let's take a look at the iPhone's lifetime quarterly sales.
iPhone sales grew from quarter to quarter, there was no seasonality in demand, as the product was in a phase of explosive growth. As a result, this phase spanned from 2007 to mid-2010. The first sign that seasonality is starting to play a role was sales in the second quarter of 2010, which were lower than the first quarter of the same year (while everything was excellent in relation to the previous year). I will make a special reservation for those who are not too well versed in numbers - it is necessary to compare with the quarter of the previous year, this gives the most complete picture and removes the influence of seasonality. But for an explosively growing product or company, a comparison with the previous quarter allows you to determine the influence or absence of it from the side of the seasonal factor. It first appeared for the iPhone in mid-2010. The release of the iPhone 4 turned everything back, sales soared, but the potential of this device was not enough to avoid seasonal influences - in the third quarter, the market began to wait for the iPhone 5, which turned out to be the iPhone 4s. And again, sales went up sharply, the reason I have indicated above. But already in the first quarter of 2012, we see that sales are not growing compared to the previous quarter (year-on-year growth is more than impressive). In the second quarter, they are completely reduced! The explanations that sounded were different - these are low demand in Europe, and the expectation of a new device, and others. But the fact is that a clearly expressed seasonality factor has appeared. This means that already in 2012 the growth of the iPhone begins to be subject to seasonal fluctuations, within which the entire market lives. From the stage of explosive growth, the iPhone has moved into the era of a mature product.
There is nothing wrong with that, since there are no products that can grow in sales indefinitely and capture the entire market, especially such a competitive one as the smartphone market. The Apple iPhone has become the de facto gold standard of a smartphone, the first choice when buying such models in most countries. But this model also had its limitations, preventing further growth: the obvious stopper is the price. In the first quarter of 2011, Apple generated $24.6 billion in revenue, half of which came from the iPhone! In 2011-2012, the company's dependence on the success of this product became even higher. Today, there is even talk that Apple could become the first company whose value on the stock exchange exceeds one trillion dollars. This is a completely crazy number, and it is connected, first of all, with the success of the Apple iPhone, it is a flagship product that is ahead of any other product from the company. Thanks to the success of the iPhone, Apple was able to make the price of the aluminum MacBook Air so affordable. To some extent, this is a long game, a strategic choice to capture more market share in laptops, the fulfillment of an old dream of Apple.
But back to Apple iPhone sales, which in absolute terms remain unsurpassed and dazzling. This product is a bestseller. Is not it? But it has left the growth stage, and now we are witnessing the peak of the development of the iPhone line, which will require new solutions and development scenarios from the company. Look again at the table and evaluate iPhone sales in 2011-2012 - you see seasonality, but the main thing is that the growth rate is declining. It was very important to know how many iPhone 5s the company will sell in the first three days - the number we know is 5 million. And it can be argued that, despite the announcement of excessive demand, queues for many kilometers and similar signs of a successful product launch, he could not reverse the trend. Including Singapore and Hong Kong, sales of the iPhone 5 are equal to those of the iPhone 4s in the first three days (recall that there were not eight, but only six countries).
If we evaluate sales growth without taking into account two additional countries, then in this case it is x1.2 in relation to iPhone 4s. There is no reason to believe that there were problems with sales, no. I like how eagerly analysts discuss their misses after the official figure was announced - most assumed that sales would be between 6 and 10 million. My forecast was given even before the announcement of the iPhone 5, it was 5.2 million devices. But when I learned about the two additional countries, I figured that in the worst-case scenario, the company would reach the level of 6 million phones in three days. It didn't happen.
This is how analysts justify their blunders, it's funny enough to read these explanations in hindsight. Most of the market believed in the fairy tale that Apple could grow indefinitely (in sales, stock value, market share), but this is a myth.
Here is the justification for the number of 6 million phones sold, which is called the most pessimistic scenario (I fully share the expectations of 6 million, which did not come true).
We must realize that Apple has reached a critical point for the iPhone, when there will be no more explosive growth, and there are many reasons for this, in order to understand the situation and further market development scenarios, we need to consider them.
What happened to the iPhone, or where innovations disappeared in 2012
I hope that no one will argue that the iPhone has become the most massive, reference and expensive smartphone in the world (if you count sales for the average price, someone can find models that are more expensive, but only in absolute terms of the price, which is not the case important). The concept proposed in 2007 turned out to be winning, despite the fact that before the 3Gs model, technical flaws were too noticeable and crossed out the advantages of the devices. By the iPhone 4 model, the device deservedly became in demand, at one point such components as design, case materials, and functional richness of software met. The main scenario for using this smartphone is simple to disgrace - you take it out of the box, insert a SIM card and start using it. Everything. No additional study of the possibilities is required, you have seen the previous model - it means that you know how to work with this one.
But Apple faced an ideological problem that was originally put into this product - it became a standard, and as a result, the company could not make any drastic changes either in its design or in its menu. The problem of new devices inheriting the look and functions of old models is as old as the world. Nokia had to put up with this misfortune, when for many years the company pulled the same interfaces, finding an opportunity to abandon them only when launching new product families. But ideologically, the influence of the old products was enormous. No company in the world can immediately cross out the desires and habits of existing users and start everything from scratch. Utopia - to think that someone can do it.
Apple's interface limitations were convenient and good for models that didn't have a lot of features. This situation is completely analogous to the limitations of the main menu that Microsoft put in Windows Phone 7, and the workaround that WP8 resorted to in order to somehow remove these restrictions and not damage the overall concept. As the number of features increases, the simplicity of Apple phones will disappear, and they will become more complicated for users - this is a necessary measure that Apple will willingly or not, although they try to avoid it by hook or by crook. Any company, including Apple, in order to compete in the smartphone market, must complicate its products, increase the number of functions in them - this is the nature of the market. People are waiting for an increase not only in technical characteristics, but also in the appearance of additional features.Part of the answer to where Apple is heading is the introduction of the Passbook program, the company's attempt to bridge the gap into the real world, to connect its phones to real objects and activities in everyday life. This is a very strong and correct concept, but no one can be sure that everything will work as it should. And this concept does not negate the fact that products will gradually become more complex, primarily programmatically.
In iOS6, for the first time, we saw a fairly large number of direct borrowings from Android (photo during video shooting, SMS template for rejecting calls, and so on). It should be mentioned that today users associate these features with Android, but many of them are not unique to this OS and came from earlier phones.
Unfortunately, Apple has already created a very convenient and simple product for the iPhone 4, the complication of which leads to the disappearance of the ease of use, which is one of the competitive advantages of the iPhone. The transition from iOS5 to iOS6, with about 200 new features announced, shows that the changes are still not so much and they are not too conspicuous. The reason is precisely in that lightness, Apple is very afraid of losing it. But there is no workaround, they will have to complicate the iPhone sooner or later. Where it leads? The answer is obvious - in each subsequent version of the iPhone there will be an increasing number of functions that will be "borrowed" from Android. It won't be outright theft or anything like that, Android itself has borrowed a lot. The problem is that this OS has a very high potential from the very beginning, it has most of the functions that you can imagine and because of which many consider this OS to be “heavy” to master.
It's a curious situation - Google goes to great lengths to spruce up Android and make it visually beautiful, as well as add ease of use, which is lacking for the mainstream consumer. Apple, on the other hand, is not trying to destroy the ease of use of their phones, but also to add a certain number of features so as not to look lagging behind the competition. But Apple's task is incredibly more difficult, because at some point the technological gap will become even greater and the iPhone will begin to lose to Android products not only in prices, but also in functionality in all areas.
In the video, I did not conduct a detailed comparison of the capabilities of Android 4.x and iOS6, this will be covered in a separate article. But I can say that offline voice dialing and in all languages of the world (most of them) is a fantastic feature in Android. This is just one example of the sophisticated technology made possible by Google Voice. But Android has much more such technologies and features.
Apple's temporary advantage was the development of games for smartphones - the company revolutionized this market. With the release of tablets, it only strengthened its position, as Android gets many games much later than iOS. And in this aspect, we can say that Apple wins, it looks more advantageous. Up to a certain point, since in 2012-2013 the quality of applications, the speed of their release begin to look approximately the same for the average person. Free or conditional free applications on Android is perceived as a plus. This erodes Apple's advantage in this area, the company is not at all as unshakable as it might seem.
Now let's compare iPhone 4s and iPhone 5, what will we see here? Those 200 features aren't too flashy, and the hardware changes aren't too drastic. They sell us the same familiar iPhone in a slightly different way, trying to maintain its ease of use.
I'm getting more confident that Apple is already lagging behind other companies in terms of technology, as the charge of the original ideas embedded in the iPhone has dried up. Other manufacturers do not just catch up, they overtake this device technically - compensating for the inconvenience of some functions, the crookedness and sometimes ugliness of the interfaces by the ability to customize the UI for themselves, as well as any other functions. Open versus closed iPhone and lots of restrictions. By the way, most of the 200 features are just overcoming the limitations that Apple laid down with its worldview (for example, the need to synchronize only via cable and the subsequent ability to do this via Wi-Fi or the stupid need to download podcasts only via a PC, from which finally gave up).
I'm going to take the liberty of saying that Apple has lost momentum in trying to keep the iPhone light and easy to use, and this will become very visible in 2013.
What can Apple do - iPhone development scenario
The iPhone 5 model will be the best-selling in the history of the company, I have no doubt about it. But at what price these sales will be achieved remains an open question. I am sure that subsequent models will be evolutionary changes in relation to current devices, as a result, no revolution will occur. And this allows us to say that the peak of sales will be on the iPhone 5, and subsequently sales will plateau or grow slightly. On the one hand, this is not the worst scenario for Apple - in absolute terms, such sales will bring in billions of dollars. But from the point of view of investors, this will be a loss of market share in favor of other operating systems (this is already happening, iOS is second only to Android), as well as a minus to the value of shares. It is important for Apple to increase iPhone sales at any cost, it is a key product for the company. But here we are faced with a different problem - marketing cannot increase sales in the main markets for Apple, as it already uses all possible tools. In development, the company limits itself in pursuit of the ease of use of the iPhone. What remains? It is also impossible to sacrifice the price of this product, it will affect the profit. Releasing an inexpensive iPhone of a smaller size means a sharp increase in market share, but it will no longer be possible to overcome Android, it has come off too far in market share, it is represented in all price segments.And the release of such a product (new product) will delay interest from the older model and ultimately bring smaller profits again. Within this dilemma, it's not very clear to me which path Apple might take. Most likely, the company in 2013 will follow the same path that we saw earlier. A sharp upgrade of the iPhone 5 will be adequate (not to version 5s, but immediately to six). It will be an interesting move, it will support sales. But, unfortunately, we must say that next year, and even now, the main sales will be achieved by PR tools, marketing, but not by the product. The pace of iPhone development shows that the company has encountered problems and is unable to get out of the trap - the transition from iPhone 4s to iPhone 5 is quite formal, there is not much point in replacing one device with another. I repeat the idea - the iPhone 4 was already too good to be fundamentally improved, and the company is not succeeding. The subsequent improvements are the winding up of additional functions that are necessary for competition, but complicate the work with the phone and make it similar to some extent to competitors. To my great regret, Apple apparently decided to be like all manufacturers, and this means that now the battle for the market is moving into the usual plane, where Apple will defend the won share, but not try to aggressively increase it. Protection means that we will not see drastic changes in the product, they are contraindicated. And the period of growth in iPhone sales, as we said in numbers in the first part, has already been exhausted - it is impossible to achieve a significant increase in sales with current products.
This is such a rather interesting situation - Apple has reached the practical ceiling for the iPhone, which means that any manufacturer claiming to sell smartphones will bite off a piece of the market from this company. Ahead we will see how Apple defends its market share from the attacks of competitors, and believe me, it will be very interesting. We are already witnessing the first part in the form of court battles. But I hope that the hostilities will also be transferred to advertising messages, services, products.