Is there really an Apple ‘iPod Halo Effect’ behind Mac sales or not?

“For several years in the mid-1980s, after Apple had launched the Macintosh — the first personal computer with a graphical user interface — and well before Microsoft was able to field anything beyond a command-line interface, Apple enjoyed a commanding share of the worldwide PC market. Its U.S. share hit 16% in 1986 and its worldwide share stood at 13%. By the 1990s, Apple had lost some of its shine, but was still a significant player. In fact, the company ranked second behind IBM worldwide from 1990 to 1993 with a market share hovering near 10%. In 1993, a surging Compaq took the top spot from IBM, and Apple was bumped to number three. It’s was pretty much downhill after that,” Roger Kay writes for Technology Pundits.

“Apple’s suit against Microsoft, attempting to prevent the Redmond software maker from using graphical elements such as folders in the interface for Windows 95, failed, and Microsoft was able to launch an operating environment that, over the years, became increasingly competitive with Apple’s Macintosh. Through the 1990s and into the new century, Apple’s share declined,” Kay writes. “Since 2000, Apple’s worldwide share has hovered around 2%. However, since mid-2004, the company and some of its followers have been touting a “halo effect,” a rise in Apple’s personal computer market share based on its highly successful iPod launch. The theory of the halo effect is that buyers of iPods, who download digital music from Apple’s iTunes music store on either a Mac or PC, are so enchanted with the experience that they run right out and purchase a Mac.”

Kay writes, “Now, Apple’s share has risen from 1.8% in 3Q04 pretty steadily, albeit in baby steps, up to a high of 2.5% in 2Q05 (Figure 2). It is not easy to determine whether this rise is due to a halo effect or just represents the normal cyclical of Apple users upgrading, which they do every few years. Making the determination more difficult is the fact that in 3Q05, Apple fell off marginally to 2.4%. So, no Sherman’s march to the sea here… My own view of the halo effect is that, like the Great Wall of China, it is a feature you can see from outer space, but just barely, and it is mostly discernible at the worldwide level from seasonality. To wit: for the past five years (since 2000), the company’s worldwide market share has remained in the 2-3% range WW. The low was 2003-2004. Since 3Q04, a tiny but steady rise, measured in tenths of a percent, has occurred, pretty much in and out of season. Apple’s high is generally in 2Q, based on the weighting of its business portfolio toward education, but overall, it has gained a bit more than half a point since the nadir.”

Kay writes, “Whether any of this makes any difference is a matter of perspective: from Apple’s point of view, business is up, profits are up, and shareholders can be happy, not just because of iPods, but Macs as well. From the overall market’s point of view, it’s a tempest in a teapot. I believe the company continues to make suboptimal strategic decisions, even as its marketing and short-term tactical execution are astounding. What will trip it up again are the standards and pricing issues.”

Much more in the full article, where Kay also notes that Apple Mac’s current rise corresponds to more recent events, such as the Apple retail store expansion and the introduction of the Man mini, which opened up a new lower price point, here.

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Back in January, Roger Kay said, “I have sifted through the numbers, and there’s no evidence of [a halo effect].” Now, in November, the iPod Halo Effect is a feature he “can see from outer space.” Wonder what he’ll think after another ten months pass?

FYI: “Many are familiar with the claim that the Great Wall of China is the only man-made object visible from space or from the moon with the naked eye. This is simply not true,” Matt Rosenberg writes for About.com. “From a low orbit of the earth, many artificial objects are visible on the earth, such as highways, ships in the sea, railroads, cities, fields of crops, and even some individual buildings. While at a low orbit, the Great Wall of China can certainly be seen from space but it is not unique in that regard. However, when leaving the earth’s orbit and acquiring an altitude of more than a few thousand miles, no man-made objects are visible at all.” Full article here.

Related articles:
Analyst: ‘there are definitely a lot of people joining Apple Mac ecosystem for the first time’ – November 08, 2005
Analyst estimates over a million Windows to Mac switchers during 2005’s first three quarters – November 07, 2005
Microsoft executives acknowledge Apple’s ‘iPod Halo Effect’ – July 29, 2005
RealMoney: Apple’s iPod Halo Effect ‘quite profound,’ Macs taking good market share from Wintel – June 27, 2005
The Street’s Wolverton: Apple’s iPod halo shines – July 19, 2005
Needham & Co: Apple ‘iPod Halo Effect’ fueling Mac purchases; predict 43 million iPod sales in 2006 – July 18, 2005
Comprehensive survey shows ‘iPod Halo Effect’ is increasing Apple Mac sales, market share – July 12, 2005
SG Cowen survey shows evidence of a significant iPod halo effect boosting Apple Mac sales – July 12, 2005
Merrill Lynch: Mac sales ‘appear robust,’ expects futher evidence of ‘iPod Halo Effect’ – July 07, 2005
Morgan Stanley: Apple’s ‘iPod Halo Effect’ is ‘roughly double what the market expects’ – March 18, 2005
Apple execs now see ‘iPod Halo Effect’ clearly paying off with higher Macintosh sales – January 13, 2005
IDC VP Roger Kay sees no evidence of Apple ‘iPod Halo Effect’ based on ‘Apple’s desktop share’ – January 10, 2005

31 Comments

  1. Could we argue halo effect in the US? Marketshare growing greater here.

    But those world number do look dismal. Still, 33% marketshare rise from the low. Down here the slightest number gains amount to large increases, so it would be good to continue some momentum. I mean, getting to 5% would be huge sales.

  2. The iPod has probably hurt the Mac more than anything, at least in the Apple Retail Stores. Prior to the iPod , the Apple Store was all about the Mac and applications that ran on the platform. The staff was well-trained and knowledgeable on the platform and the Genius Bar was rarely needed by most due to the excellent staff.

    Now, many of the floor staff are poorly trained and inexperienced with the Mac, which has been relegated to second-class status behind an MP3 player and it’s accessories. The floor staff do not attend well to Mac customers while pimping iPods and the Genius Bars are many times tied up with people too stupid to use an MP3 player without assistance.

    I think many great Apple Store Staff have been lost BECAUSE the focus was moved from the Mac. That is a very sad state of affairs. The floor space that used to be devoted to Mac accessories and applications is now filled with iPod Skins, FM Tuners and other sh*t that should be left to CompUSA, Best Buy & Radio Shack.

    My 2¢

  3. Grudgingly, kicking and screamingly, windozers are starting to admit that “Maybe all those Mac Phreaks were onto something after all”. Just listen to Leo Laporte’s KFI podcast – a ton of users are considering the Mac who never would have before.

    There is a groundswell growing of people that are sick and tired of fighting malware on windoze. And like any groundswell, it starts slowly and barely noticeably but contains great weight and strength as it approaches land and rears up larger and larger. Macs are going to be more and more of a force – just watch and see.

  4. I think when the first imac came out people started taking notice (well some of my mates did).

    Whether they did anything about was another matter; complacency has a fearful gravity. Yet with each successive mac release, including the ipod eventuall, i think some people have switched.

    The question really needs to address what percentage of people have switched who might not have, this is of course almost impossible to answer, but the general feeling is of a ground swell/awakeing from former complacent thinking. The last bastions of this wont be joe bloggs but the IT guys who are too lazy/scared to change, my past experience of such people was of a rabid desire to hate what they knew feck all about!!

    Anyway its late and i am drunk, so to summarise; yes people have switched because the ipod exists, but is the amount worth noting? who knows?

    MDN word: going as in going going I AM GONE!!!!!!!!!!!!

    me signing off from sunny BA

  5. [FIRST POST] I have to [partially] agree with you NO. Being an employee of a certain store..(ahem), I too think that the quality has gone down a bit. I did not visit/work for these certain stores before the iPod came out but I do think that more and more know about the iPods and less about the computers themselves. I am what you might call a fanboy so I know tons about almost everything from OldWorld to NewWorld Macs but that is just me.

    I have to say that I am getting tired of seeing people come in with basic questions (meaning its in the manual) about their iPods. Especially the ones that walk in with their DELLs asking for guided tutorials. Sometimes I do wish that the stores only sold CPUs, software, and all other non-iPod products. I do have to say that the iPod probably has had a sort of Halo effect for many customers although for some, the iPod world has brought a bit of disappointment to CPU owners…especially at the Genius Bar. I have done my best to try and give them the service they need.

    It is nearly impossible for me to stay away from talking about the iPods as every computer on the floor has an iPod attached to it *sigh*. I have done my best to try to keep to the CPU part. I just cannot deny that the iPod has had a halo effect for many.

    My 1/2¢

  6. Last time I checked, Apple computers had 8/10 in the US Amazon Top Ten bestsellers list.

    It’s the nearest to an ad hoc survey around, so ‘halo’ or not it can only be good news. ” width=”19″ height=”19″ alt=”cool smirk” style=”border:0;” />

  7. “Whether any of this makes any difference is a matter of perspective: from Apple’s point of view, business is up, profits are up, and shareholders can be happy, not just because of iPods, but Macs as well. From the overall market’s point of view, it’s a tempest in a teapot. I believe the company continues to make suboptimal strategic decisions, even as its marketing and short-term tactical execution are astounding. What will trip it up again are the standards and pricing issues.”

    And from a Mac users point of view, we just care that we have a stable, secure, superior user experience. Market share is irrelevant as long as I have mine.

  8. Answer: No, not really.
    Sony makes Playstation would that make you buy a Sony VideoCamera or computer?

    Panasonic makes a plasma TV would that make you buy a Panasonic computer?

    Microsoft makes a nice computer mouse, would that make you want to buy an Xbox?

    Canon sells a digital camera would that make you want to buy a Canon printer?

    Sears sells a dryer would that make me want to buy pair of jeans from Sears?

    Answer: Not necessarily.

    This iPod Halo effect is a myth based on no fact and perpetuated by the likes of MDN hoping that faith will move the market place.

  9. I just bought (ordered) my first iMac today after being a winblows puppet for 15 years.
    ive never been so excited to buy a computer as i am now, I have an ipod nano and i have to admit if it wasnt for that i probably wouldnt have researched other Apple products and bought a Mac.
    Ill be replacing my winblows pc with a linux installation.. so no more WINBLOWS for me ! no more viruses/malware !!
    and ill be recommending imacs to all my friends from now on

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