“Apple cares little about market share, much more about profits,” Karl Johnson writes for T-GAAP. “For companies like Microsoft and Intel, market share and profits go hand in hand. This is not true for Apple.”
“Apple competed with Microsoft not through market share, but through margins,” Johnson writes. “They proved this when Steve Jobs came back and ended the licensing program for the Mac OS. Steve showed you can make a lot of money without dominant market share. They are now doing the same thing with Android.”
Johnson writes, “While Android’s increasing market share looks bad for Apple, the opposite is true… Apple would have to reduce its profit per device in order to go after market share. Apple’s decision to go after margins instead of market is paying off as they rake in over 50% of the mobile market profits. This is even better news for Apple than market share is for Google.”
Read more in the full article here.
Who the hell in the Apple world DOESN’t know this?
Apple’s revenue numbers speak for themselves.
I think some people have yet to wake up to this key principle, leaving what seems to be an old school of thought. In a way, Apple really no longer has to compete with the others. That makes it doubly difficult, if not impossible, for them to compete with Apple. Apple gets to concentrate on innovations, pushing the technological envelope, and giving customers the best consumer experience. The others are forced to go for market share by shaving their margins and making BOGOF offers – a really crappy, if not impossible, long-term business model.
Also, google does not make money from selling Android (because it is open source) so google expected to make profits from selling ads trough the Android phones.
Problem is that Even that Android score a higher market share than iOS in sales, According to NetApplication, iOS devices have more than 2% of the world market share in internet usage and android only have .4 %.
So google is not making money in any way with android, what’s makes us remember the words from Steve Jobs: “Google is doing fine now, Android is only make things worse for google”
…Kind of like comparing Apples to oranges, isn’t it?
I think this is first about supply and demand, second about profits, and third about margins. As long as Apple can continue to sell more than they can actually supply, there is absolutely zero incentive to lower prices. After all, they’re getting maximum profit AND maximum margins. Once this changes, and supply outstrips demand, I can easily see them reducing their prices (ie, margins) to continue to maximize profit.
Almost 100% of the market share for personal computers is composed of Mac OS (real and copycat) machines. The real Mac gets the high margin, and the copycats (Windoze) barely cover their costs.
Almost 100% of them market share for smart phones is composed of Apple iPhone (real and copycat) devices. The real iPhone gets the high margin, and the copycats (Android) bearly cover their costs (an Google gets nothing).
Apple owns both markets, but only profits from the profitable high-margin quality items, not the low-margin copycat junk.
That’s OK with me.
Apple’s high margin strategy is a riskier but higher reward strategy. It only works for as long as Apple keeps innovating at a higher rate than its competition. In the 1990’s Apple’s rate of innovation slowed and the company nearly went bankrupt.
It looks like Apple is set to deliver advances in mobile computing for years to come. But if/when they slow down their high margins vs. lower phone marketshare to Android could quickly become a weakness again.
It is interesting that so far with the iPad they have managed a high margin and high marketshare strategy, and that they were also able to carry that off with the iPod. That kind of a lock makes it very hard for competition to make a living, thus the plethora of vanquished MP3 product lines and competitors.
Market share is a worthless metric, unless comparing products/services of the same level — e.g. car rentals aimed at the general public. It is irrelevant when talking about sales numbers of a good quality SLR camera compared to $100 snapshot models.
But it’s a particularly stupid metric when talking about Android, where there is, in a very real sense, no such thing. To count the large number of mutually incompatible or partially compatible OS’s as one thing is outrageous dishonesty.
So when are samsung investors going to wake up and bring forth a class action for erroneously manipulating their market share numbers on their tablet since last fall?
Gaagle cares about one thing and one thing only – eyeballs on ads (OK, spying on people, too). Thus, they don’t care about excellence re Hemodroid – they only care that it gets folks’ eyeballs on ads.
Apple, on the other hand, set out with the intention of making a phone that would be the best there is.
Intentions matter.
If this isn’t pointing out the obvious, then I don’t know what is.
Apple never publicly stated that it was determined to dominate the smartphone market with the iPhone. Steve had a modest goal of 1% market share in a year and still the cellphone industry and pundits laughed and said it would never happen.
Both Google and Microsoft from the very beginning said they wanted to put their mobile OSes on everything they possibly could to take over major smartphone market share.
I’m positive that Android won’t soon have double the smartphone market share of iOS. Maybe 10% more, tops within a year or so. The analysts think Android share is just going to grow without limits but I’m sure it will reach some point where growth will be nearly flat and I think that will be at 40% to 45% market share which won’t cut into iPhone profitability for Apple.
I don’t think Apple has to constantly innovate to keep sales up. High-quality products and good customer service should be enough. How much more can Apple do to a smartphone? A telepathy chip? A fuel cell battery? I’ll admit my imagination is limited, so I’m probably missing some bigger picture.
Apple’s economy of scale is enough to crush competitors for years to come if they continue to use their cash reserve for stockpiling component supplies for their relatively small product lineup.
Here is Google’s problem around market share. Apple has taken the high end of the market, just as they did with computers. If people will pay $200 extra for an iPhone, what happens to Android market share when Apple drops the iPhone price to $200? Could they even GIVE them away?
Something Google hasn’t learned that Apple has: There are customers you can’t afford to do business with. These are the one’s who have no money, who will weasel, sneak, steal, and chisel every piece of software, music, accessories, parts, service, and support. They will whine and sue over every perceived flaw and expect to be catered to. Google and Android are welcome to service those customers as far as Apple is concerned.
Wait a minute. I’m confused here. Didn’t Steve Jobs say in his famous “the sales guy is running Microsoft” interview that what nearly killed Apple is that they sat on their butt collecting profits when they should have gone for market share? Don’t look down on market share. It’s a powerful thing.
Apple sure as hell cared about market share when it came to the iPod. Their whole strategy was to keep moving so fast that competitors couldn’t get their foot in the door, innovating new models at light speed and slashing the prices on the old ones. Eventually Apple’s position was so unassailable that their competitors just gave up.
I think what the article is trying to say is that being #1 in market share isn’t necessarily important to Apple, which is true. Look at the Mac, for example. But that’s not the same as saying that market share itself isn’t important. Again, look at the Mac, where market share has been creeping up, adding to Apple’s bottom line and helping to make the platform one that developers can no longer ignore.
I’d be concerned if Apple ever stated “We don’t care about our market share. We’ll just collect our profits.” But thankfully, that’s not at all the case.
——RM
Just look at Porch, BMW, Mercedes, Bentley etc. The high value brands doesn’t lead in the market share and they don’t care. Same does Apple.
My grandfather, a businessman, had a saying, “you don’t go broke taking a profit”
Where Google gets screwed is when the handset manufacturers and carriers use Android but use Bing, Baidu, etc. for search and other Internet services. Then Google gets shutout on their only source of revenue from Android.
Look at Wikipedia’s article on the Pareto principle.
Have been taught this for years and seen it in action in many different industries.
@Zeke
No, Google does make money from those folks, because they click the ads. It’s Google’s customers who have not learned the lesson, they pay for people seeing ads who don’t buy. When Google’s customers wise up, and they will as technology improves, then I think Google will be in deep deep trouble. If Apple can find a way to turn the advertising from their high end market share in to money for Apple and not Google, then Google, who is really a one trick pony will begin a nose dive they will not be able to pull out from.
Well shucks. Apple owns 100% of the market for Apple products.
“you don’t go broke taking a profit”
Seems like the Feds have figured out how to do just that.
apple products are aspirational to the consumer. that’s what makes consumers pay a premium. not all consumers can or will pay a premium, but enough of them have to make apple the 2nd highest market cap company in the US.
20% of the US population have 80% of the income. these people buy things. there is margin in those hills.
most people don’t talk about how apple does this. because they don’t know what to call it, they throw out the catch-all phrase, innovation. but, what exactly is that?
apple’s innovation is to take technology and make it accessible to the masses. that was the mac, the ipod, the iphone, the ipad. simple concept, lots of hard work. doing it better than everyone else and sometimes before everyone else is what people are calling innovation. making technology accessible means making it not seem like technology. everyone else seems to go an extra step to impress you that their product is the latest technology and here’s the manual to prove it. i, and i doubt many others have read a manual for the ipad.
Please folks, don’t go off the deep end in the other direction. Remember the days of 2% Mac market share and fleeing application developers? The world has not changed overnight. Market share still matters – it just isn’t the only thing that matters.
For instance, when Apple is earning healthy profits at ~30% market share in smartphones, I see a company that has established terrific balance. There is still plenty of room to grow, yet the company is not seeking market share at the expense of profits or by cheapening its products through ill-advised cost-cutting efforts. Apple requires to have sufficient market share to maintain vibrant Mac and iOS ecosystems. That, in turn, will help drawn in future generations of Mac and iOS consumers.
Someone obviously gets it. Android marginalizing the rest of the competition and becoming the only “other” smartphone platform is the best thing that could happen to Apple. Against the fragmented platform, which is just a collection of small players making commodity hardware with no central leadership or strategy, Apple keeps making most of the available profit. It does not really matter ‘droid “does,” as long as Apple meets or exceeds its internal quarterly goals for unit sales, revenue, and total profit.
And that’s the bottom line.