Back in the old days of just a moment ago, Apple would helpfully note that when you use free services that mine your data to sell for profit, you become the product. But Apple’s new strategy means most of its users are also becoming commoditized, albeit with an Apple twist.
I’m talking about average revenue per user.
Apple’s beautiful game
Playing a game as slick as that of the England Women’s team (*See Below), Apple has recognized that its hardware products are a platform with a unique audience. The characteristics of this audience allow the company to build engagement, customer loyalty, and growth, (important to a huge multinational cursed with the task of seeking out constant growth in a global economy facing existential transformation).
In “interesting times,” growth is impossible unless you build out toward certain characteristics, which Apple already enjoys. In a recent email shared with me, Julie Ask, Forrester Research VP and principal analyst, pointed out several of these traits:
- Apple’s customers tend to be more affluent than those on competing platforms. I’ve seen claims that the mean income of a US Android owner is $69,647, while iPhone user’s make $88,256.
- In addition to that, 35% of Apple’s iOS owners have household incomes over $100,000 per year. An iPhone user is also three times more likely than an Android owner to have a total household income over $300,000/annum. (Note: This doesn’t apply to Apple journalists, by the way.)
- 18% of Apple users only own Apple devices.
Add to this the company’s recent claim that in its most recent quarter, customer satisfaction and loyalty reached an all-time high in all its major product categories across all geographic segments. It also told us that nearly half of those purchasing a Mac or iPad, and over two-thirds of those purchasing an Apple Watch, were new to those products.
What is the effect of all this?
It means, rain or shine…
…Apple is weather-resistant
While the macro-economic climate seems gloomy, Apple management told us the company can’t make enough iPads or Macs to meet demand and has seen no obvious impact of the wider gloom on its iPhone sales.
Apple’s biggest selling product, iPhone, generates about 49% of the company’s net revenue, though it is interesting that services now account for 23.6% of net revenue, according to the most recent statement.
At root, of course, as I will keep saying, Apple’s pivot to services (despite blips like CSAM scanning and ads at the App Store) are predicated on high quality and strong personal privacy. Those foundational principles are best evidenced by the hundreds of award nominations won by Apple’s TV+ service this year and its numerous commitments to user privacy.
The thing about the services the company provides is that it knows its audience. It knows that its customers are loyal, happy, and have high degrees of trust in the company’s ability to do the right thing (with exceptions). What else does it know about its audience? They tend to be affluent with a high representation of creatives and knowledge workers.
That’s why when the company tells us it now has 860 million paid subscriptions to services on its platform, it’s telling us that, even in a hardware-sales depressed economy, it has upside.
It has huge opportunities to turn those customers into products, or, to be far fairer, to turn them onto the high-quality services it provides.
Apple is attracting five new subscribers every second
Apple’s trajectory remains quite visible. In the last 12 months, the company has been attracting an eye-watering 438,000 new subscription customers every single day. To spell this out, the 160 million new subscribers Apple attracted to its services over the past year means it is currently attracting five new subscribers ever single second of every single day.
Apple has a service-driven upside of at least $1 trillion dollars, according to Morgan Stanley.
- Take Apple Pay. US Apple Pay use has grown from 12% in 2020 to 21% in 2022 and growth has been even more rapid elsewhere. Almost one in five US adults use Apple Pay today, and around one in 10 adults use the service in Europe.
- Subscriptions are catching on. Forrester Research tells me 76% of US online adults use at least one music or video streaming service. They adopt them to save time, to get good deals, or save money; they decline them because they want to avoid high fees or long-term commitments, the analysts said.
The difference between Apple’s business plan and so many others in Silicon Valley is that while others offer compromised products for free to turn you into the product, Apple makes you pay for the products that you use. Though, as the data shows, its solutions remain every bit as addictive. You’re still the product, but that blend of privacy and agency is the unique Apple twist.
*One more thing:
I mentioned the England Women’s team. The world watched that match. Over half of it was cheering as the women achieved what males had failed to do for 60 years and bring the trophy to the UK. We know Apple is investing in sports entertainment. We also know the US will go football crazy in the next few years as the World Cup looms. Apple is buying rights to stream some of those matches. Someone needs to have a word with Eddy Cue: In a changing world, women’s football may become the fastest growing new sports opportunity, and if the company wants to build its TV+ service while also standing up for its values, investing in sporting rights for women’s football tournaments seems a smart bet.
Facetious to say it I know, but perhaps Sarina Wiegman is the new Ted Lasso…
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