Has Apple Thrown In the Towel?

James McQuivey

The rumors turn out to be true. Apple is buying Beats for $3 billion, just slightly less money than originally suggested. Now that it's official, I'm confidently reiterating my conviction that Apple cannot be spending this unprecedented sum on Beats for either its headphones or its subscription music business. Because while the company may be worth that much, it's not worth that much to Apple, the world's most innovative consumer electronics and consumer software maker. Because choosing to buy Beats purely for its existing businesses and revenues would represent Apple significantly lowering its sights, aiming to graduate right from innovative leader of life-changing technology to kinda-cool company that makes stuff teenagers like. Not that selling to teenagers isn't a good thing; it can certainly bring in money, but it doesn't typically generate long-lasting brand relationships.

To be clear, if Apple is buying Beats purely for its headphones or music subscription business, then Apple is making a mistake. However, there are those of us who still believe that Apple hasn't thrown in the towel. And why would it? There are still many consumer markets to dominate — entire markets like wearables and home automation tech and even in-car experiences, all of which are in their infancy — and Apple still has the smarts, the brand, and certainly the money to make a run for any of those things, if not all of them. So why would Apple instead sign up to become a holding company for fashionable but not life-changing brands?

Read more

Categories:

iPhone Up, iPad Down: What Apple's Device Mix Says About Mobile Devices

JP Gownder

Apple's reported earnings revealed a strong product mix contrast: iPhone sales increased 17% in units and 14% in revenues, while iPad sales decreased 16% in units and 13% in revenues. What accounts for this contrast? Is the iPad's growth trajectory broken?

Simply put, the iPhone's addressable market has only continued to increase with Apple's continued international expansion. Only recently, for example, has Apple broken out in Japan (still the world's third-largest economy); only a few months after releasing the 5S and 5C across all three of Japan's largest carriers, iPhone models made up 9 of the top 10 phones sold. And for iPhone, unlike iPad, the route to sales comes through carrier relationships -- of which Apple has landed more recently.

By contrast, the iPad's year-over-year results lagged because:

  • Price competition in tablets has been fierce. With Android tablets under $200 now commonplace -- including Samsung's Galaxy Tab 3 and Amazon Kindle Fire HDX -- Apple's premium pricing is catching up to it. 
  • Replacement rates are lower than expected. Why are prices catching up to iPad now? Because replacement rates haven't been as quick as with iPhone. The pace at which people purchase smartphones is quicker than that of iPads, even among the Apple faithful. This means that Apple is seeking an ever expanding market -- people without tablets. For later adopters, who didn't see the big deal early on, price matters more than for earlier adopters.
Read more

Your Voice Will Control The Future

James McQuivey

Google acquired Nest for billions, and then Facebook spent several more billion on Oculus VR. We’re only a few months into 2014, and already billions have been spent by some of the world’s largest digital players, with each of these companies eager to own the next big thing. Mobile is right here, right now, but everyone knows that very soon, there will be something else. But what else?

In the battle to find and claim the next device that everyone will want, these companies will soon realize that next big thing is not a thing at all: It’s your voice.

Voice control suffers from the same things plaguing augmented reality or virtual reality: It has been around for so long that we think we know what it is. Any fan of Star Trek: The Next Generation knows that voice control involves invoking an invisible computer with a command, “Computer,” followed by a query, “How many Klingons does it take to screw in a light bulb?” Maybe that’s a question you don’t want the answer to, but the computer — as voiced by Majel Barrett in the TV series — would know it.

It’s possibly a long history of popular depictions of voice control that made us collectively show so much enthusiasm for Siri when Apple first debuted it in 2011. It’s also partly to blame for why we quickly turned on Siri, declaring her soothing semi-robotic tones to be merely amusing at best or irrelevant at worst.

When Microsoft recently announced its long-rumored Cortana voice service for Windows Phone 8.1 as a catch-up to both Siri and Google Now’s own voice interface, the interest was modest, perhaps because if Siri hasn’t changed the way millions of Apple users use millions of Apple devices, how can Microsoft initiate a wave of behavior change when it has so few Windows Phone users?

Read more

Microsoft’s New Personal Digital Assistant Signals The Start Of Something Bigger

Clement Teo

When Clippy, Microsoft’s paper-clip assistant, disappeared in 1998, it was hardly missed; it was both annoying and offered little value to users. Zip forward 16 years: Microsoft has just introduced Cortana, a new personal digital assistant that the firm will launch on Windows Phone in the coming months. Powered by Bing, and about two years in the making, Cortana will be important if Microsoft gets it right. Here’s why it’s an exciting development:

  • Mobile-first is a growing enterprise strategy. The whole idea of creating a mobile-first enterprise strategy has taken root in many enterprises, as they recognize that users now expect any information or service they desire to be available to them, in context and at their moment of need. Users are cognitively and behaviorally ready to embrace wearable technology as an extension of mobility — and to weave it into their business processes. My colleague JP Gownder shares his views on wearables here.
Read more

Lenovo Bets On The Mobile Mind Shift And Aims To Be A Digital Platform

Frank Gillett

Lenovo’s made three strategic moves in just one month: 1) Buying IBM’s x86 server business, 2) Reorging into four business units – most importantly including one called “ecosystem and cloud group”, and 3) Buying Motorola Mobility. The later two are driven by the mobile mind shift – the increasing expectation of individuals that they can access information and service, in context, in their moment of need. Smartphones are central to that – as are the ecosystem and cloud services that deliver value through the smartphones.

Lenovo has stated intentions to become a leading smartphone maker globally, building on their leading position in the China market. Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market with a leading Google Android (not forked Android) offering - than trying to do it with their existing design teams and brand reach. Using Motorola, just as Lenovo used the IBM ThinkPad brand, to gain quick credibility and access to desirable markets, and built critical mass makes a lot of sense. 

But Motorola has not been shooting the lights out with designs or sales volumes in smartphones. So the value is simply in brand recognition to achieve market recognition faster - and to dramatically expand the design and marketing team with talent experienced at US and Western markets. 

Read more

Brand Relationship Is Dead — Long Live The Digital Customer Relationship

James McQuivey

Marketers, you are officially on notice: The very idea of brand relationship is going to become irrelevant thanks to digital disruption. If you continue to focus on building a wonderful brand relationship with your customer, you will one day awake to find that someone else has taken your place in your customer’s life — not with a more compelling brand relationship, but with a more compelling digital customer relationship.

Someone out there is building the “ultimate customer relationship,” a type of digital bridge I write about in my most recent Forrester report, "Start to Build Your Ultimate Customer Relationship." That ultimate digital customer relationship is the type of relationship that digital tools and services enable and that digital consumers welcome. They’re happily signing up for anything that tethers them to a source that can give them more of what they want, more easily than before. Even with the supposed threat of privacy all around us, consumers are diving into deep digital relationships with companies or brands that deal with the most sensitive aspects of their lives. Weight-loss app Lose It helps users log personal information such as calories consumed and tell others of their goals, leading to the loss of more than 27 million pounds so far; Square gets consumers to email cash to friends — thus introducing them to Square and inducing them to sign up; and Airbnb has welcomed more than half a million listings of spare rooms and apartments that have been visited by more than 9 million guests. What’s more personal than your weight, your money, and your spare room?

Read more

Google Bets On Internet Of Things And Connected Home, Not Just Data From Our Nest

Frank Gillett

Google’s acquisition of Nest has stirred a lot of interest and reaction, some of it misguided. After talking to lots of reporters, here are ten quick thoughts on why Google bought Nest and what it means:

1.    Google bought Nest for talent and strategic perspective, not products or data. Nest is too small and not scaling fast enough to justify the acquisition. This is about getting a great team that can teach Google about a new market realm, how the Internet of Things comes into the Connected Home.

2.    The price is ridiculously high – unless Google gets a huge head start on Connected Home. Google’s acquisition of Waze for $1 billion and Nest for $3.2 billion look pricey – but they are strategic bets for the long run, and can’t easily be compared.

3.    Building the next generation of Google Now is the goal, not snooping on our temps, room locations and smoke alarms. The Nest Labs team will help fuel development of the next generation of Google Now as it shifts more toward proactive assistance and advice.

4.    Google’s aim is to get an early start on identifying and adding software interfaces (APIs) to Gmail/Google Drive that connect it to smart products. This is not about Android in the home or about a battle for the device OS – it’s a battle for whose cloud service platform will coordinate an individual’s smart products – and their digital self.

5.    Identity, privacy, and security will also crucial in building out the Connected Home. Blanket privacy policies won’t be enough. Fatemeh Khatibloo’s research on contextual privacy shows the new way that privacy and identity will have to be managed.

Read more

Why Microsoft Trumps Apple In The Battle For Consumer Mindshare

Tracy Stokes
As the opening of the 2014 Consumer Electronic Show (CES) dawned in Las Vegas, consumer technology firms pitched their innovation wares. Forrester’s latest TRUE brand compass research shows that innovation is a key to successfully building a sustainable consumer technology brand, but that innovation alone is not sufficient. 
 
In August 2013, Forrester conducted Consumer Technographics® research with 4,551 US online adults to uncover the drivers of a successful 21st century consumer technology brand. This research is part of Forrester’s TRUE brand compass framework designed to identify which brands are winning the battle for consumer mindshare and to help marketers build a brand that is trusted, remarkable, unmistakable, and essential (TRUE). This framework has two core components: 1) An overall TRUE brand compass ranking gives a snapshot of a brand’s resonance — the emotional connection a customer has with a brand, and 2) the TRUE brand compass scorecard reveals a brand’s progress along each of the four TRUE dimensions.  
 
In a surprise upset, Microsoft trumped Apple and Samsung in the TRUE brand rankings. In fact, Microsoft was the only brand in the survey to achieve the coveted trailblazer status— indicating that the Microsoft brand is “at the forefront of brand building with a unique and distinct brand identity that sets it apart from other brands.”  Both Apple and Samsung achieved leader status.
 
Read more

With China Mobile, Apple Finally Cuts To The Core Of The World’s Biggest Phone Market

Frank Gillett

The deal between Apple and China Mobile has been a long time coming, with lots of folks disappointed it didn’t happen in September when the latest iPhones were announced. China Mobile is the world’s largest mobile phone operator, with 760 million subscribers. That’s more than 1 in 7 of all people alive, and, as my friend Charlie has reminded me, more than 6 times the number of the largest US carrier, Verizon Wireless, or 3 times the size of AT&T and Verizon combined. 

Though Bryan Wang in our Beijing office points out that Apple’s iPhone offerings are very expensive by China standards, starting at about $740 unsubsidized, he also reports that there is lots of interest among China Mobile subscribers. With this deal, we’ll finally find out how far Apple can get in China without offering products that match the prices of market leaders Samsung, Lenovo, and Huawei, or innovator Xiaomi. Based on Forrester survey data, we estimate that Apple sold over 16.8 million iPhones in mainland China in the four quarters ending September, 2013. We estimate that Apple will be able to sell 17 million new iPhones to China Mobile users in the first 12 months – that’s on the low side of public estimates we’ve seen ranging from 15 to 30 million. So Apple will boost global iPhone sales – and iPhone revenues – by over 10%.

After waiting so long, why is China Mobile interested in the iPhone? Because they’re concerned about losing their best customers, which are some of China's most valuable ones, to China Telecom and China Unicom. And China Mobile is just launching the first 4G network in China, and Forrester believes it will have at least a 6 month head start before other operators begin adding 4G. The iPhone 5s and 5c give China Mobile showcase products to show off the power of their 4G network.

Read more

Look Beyond The Obvious In Apple's PrimeSense Buy

James McQuivey

View this post as it originally appeared on Advertising Age. 

This week, Apple confirmed the longstanding rumors that the company has agreed to acquire PrimeSense, the Israeli company that invented the technology behind the original Kinect for Xbox 360. All of Apple's moves are scrutinized closely, but this one is worth paying closer attention to than most.

The PrimeSense technology was astounding when it was first incorporated into the Kinect. This was not only because of what it could do — see you in 3D and model your skeletal structure as it observed you moving in physical space — but also because of how the company did it. Instead of imitating the $10,000 military-grade hardware of its predecessors, the company insisted on using off-the-shelf technology, whether hardware or software, so that the cost to deploy the solution would be laughably low, compared with prior imaging solutions. That's what made Microsoft so interested — Microsoft's own motion-sensing engineering group was years away from a homegrown Kinect experience and saw a chance to jump ahead of the market with PrimeSense. And jump it did, selling by our estimate more than 30 million cameras around the world, boosting sales of the Xbox 360 console even after it was already nearly five years old.

Now that Microsoft has moved beyond PrimeSense with the Xbox One and Apple has swooped in to buy the company, it will be tempting to think that Apple wants the technology so that it can finally make a successful play for the living room, something it has repeatedly failed to do with Apple TV. Certainly, the Primesense tech works great in the living room, and Apple would be foolish not to try it out there.

Read more