Interesting post on FT Alphaville about disagreements among analysts over Apple’s prospects for the final quarter of 2012 and first half of 2013. According to Citi, signs of increased pressure on Apple include:
- Apple’s hardware suppliers reporting cuts in orders.
- Cannibalisation of iPad 4 sales by the iPad Mini, with iPad Mini sales expected to outnumber those for the (more profitable) iPad 4 by at least two to one by Q2 2013.
- Increased competition (and price-sensitivity) in the tablet market generally.
- Growing customer preferences for the larger screen sizes offered by competitors such as Samsung.
Against that, Morgan Stanley predicts that iPhone 5 sales in the December quarter could exceed 50 million units, and argues that Samsung’s phone sales are mostly coming at the expense of other Android phone manufacturers.
But what I found particularly interesting from FT Alphaville’s post was Citi’s discussion on Apple’s “ecosystem”: the idea that Apple can lock in its customers by providing an integrated, Apple-only web of services and products that make it hard from people to switch to another manufacturer without losing content or functionality that they have come to value. Citi’s conclusion is that this isn’t currently valued by customers as much as Apple might hope:
In general consumers are indifferent with regard to having a common operating system across devices with 54% indicating that it is “Not Important.” Moreover, only 14% of respondents indicated that a common ecosystem was “Very Important.” Across iPad owners, the ecosystem is more important but only marginally so, with respondents that valued a common ecosystem up to 53% and 21% believing it is“Very Important.”
I suspect, though, that ecosystems are valued by those who are already integrated into one. If you own an Android phone and an iPad, the Apple/iTunes ecosystem probably doesn’t matter to you a great deal. But if you own an iPhone, iPad and Apple TV, and have bought dozens of movies or TV series on iTunes, then it probably matters a lot more to you that your next gadget fits into that world.
Conversely, I’m currently awaiting delivery of my first Android phone, to replace my iPhone – partly for the larger screen (to pick up on one of Citi’s other points), but mostly because I’ve found the iPhone to be playing less nicely than it used to with the Google ecosystem, which I’m more locked into than Apple/iTunes. That may not be a universal experience, but it’s far from unique.
On a wider scale, the Apple Maps debacle demonstrates the risks to a brand’s reputation when something goes wrong, not with the product itself, but with a valued part of the product’s ecosystem. Ten million iOS users downloaded the new Google Maps app in the first two days after its release last week – how many more have had their relationship with Apple’s ecosystem weakened, maybe even enough to tempt them to look elsewhere next time?
As I wrote last year, the battle between the “big four” consumer digital brands – Google, Apple, Facebook and Amazon – isn’t over mere hardware or individual services. It’s a battle between competing business models, built around competing ecosystems. While only a minority of customers may have noticed yet that this is happening, I expect that those four giants will continue to build their future plans around this trend.