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. Can you really blame Apple for focusing the attention of the stores onto their biggest selling product? Don’t iPods have a 75% market share in the US? However I do agree that the staff should be trained fully in all the products for sale.

    As for the Dell users coming in wondering how to switch on their iPod, it is the only way for them to find the information, as their Windoze using minds are too closed to think of looking in the book, and their Windoze equipped computers exploded in a shower of viruses and spyware when they connected to the internet to look on the Apple website.

    MW = what, as in, “ah look, there’s the iPod I want… ooh, what’s this??”

  2. The halo effect is real at ground level. Many individuals have been considering to ADD a Mac as their personal computer. iPod could well be the tipping factor for them to take the plunge.

    It certainly is for myself.

  3. “What will trip it up again are the standards and pricing issues.”
    Standards? What company incorporates more standards directly into it’s OS? From my experience, there are very few proprietary formats that Apple is responsible for. Even the core of their OS is based on open source technology, fer chrissake!!
    Pricing? You get what you pay for, period! If you want a quality, secure, stable, intuitive experience, you should be willing to pay a slight premium. Not to mention you actually come out better in the long run as Apple does not use the budget components that beige box makers use to offer generic pricing.

  4. I don’t think it is an halo effect.

    I purchased a new Mac Mini a few months ago because I saw it in a store I didn’t believe its small size and price. I loved so much macs that I purchased my second Mac ( a 17″ powerbook) 2 weeks ago. AND I don’t have an iPod, and I think maybe i’ll buy one later on in months or years.

    Also, I am tired of Windows problems (craching, freezing, viruses, spywares, worms, security breech,….)

  5. The real question is ‘What motivates people to buy a Mac ?”

    The problem is that there is no simple answer, everybody who buys one does it for a different mix of reasons.

    Some because the OS X is virus free, some because they’re fed up with Windows, some because they like the look of Macs, some because they want to run Mac-only applications, some because their friends run Macs and some because they’ve bought an iPod and were impressed enough to try something else from the same company. Many buy them for entirely different reasons.

    Nobody really knows what the true relevance of those factors might be and if one factor is an over-riding factor. All that matters is that people are buying more Macs than before and the trend looks like it will be accelerating.

  6. Nameless wrote: “I don’t think it is an halo effect.” Yep, your experience disproves a halo effect. I’m glad you bought Macs, but that was not the brightest bulb sort of reasoning.

    MW: “stop,” as in, “stop the inane comments”

  7. Most people I meet don’t even know Apple still makes Macs. “Average” people are just not interested. You have to plop an Apple Store right in front of their faces to wake them up. iPod is the bait that gets them into the Apple Stores to see the Macs. At least, that’s how it’s supposed to work.

    Hopefully, Apple hasn’t forgotten the real catch just because the bait is so easy to sell right now.

  8. Well, OS X is certainly a more compelling story than it ever has been before. Contrast that to Windows’ issues with malware and there is a lot for folks to consider in making the switch. The iPod just contributes to that, but I find it hard to believe the so-called halo effect is all that measurable.

  9. It is not the iPod halo effect, it is the APPLE STORE halo effect.

    For the first time people have actually been able to go into a store that was stocked with Apple products and presented in a classy, professional manner – not some after thought behind the row after row of Windows PCs in a generic electronic supermarket.

    It´s the Apple Store (plus everything that is in it) that is increasing Mac sales.

    Simple as that.

  10. Does it have to be a halo? Why not horns? Seems like the horns wearing crowd would be more fun anyway. Especially ring toss.

    To Ricochet Rabbit:
    What kind of crack was that? : D Aaah, I see. It probably gets mistaken for the Grand Canyon?

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