How will the Watch fair over time compared to the rest of Apple products?
Apple’s second quarter earnings came out today, posing a new Q2 record in total revenues at $58 billion at a year-over-year 27 percent revenue growth. And like last quarter, most of it—69 percent to be exact—can be attributed to the iPhone. Via Quartz:
iPhone shipments passed 61 million, the second-highest total ever. iPhone revenue represented 69% of Apple’s total sales, the same as in the December quarter.
Pretty insane that one product category can pose such dominating figures. That doesn’t even include their App Store business, which is growing 100 percent year-over-year on its own. It’s by power of sheer volume shipments combined with huge profit margins from each unit sold.
The question I’m entertaining is, having just launched a new product category in the Apple Watch, how might it fair in comparison to other Apple products in the long run? How many units will it sell over time compared to previous Apple categories? Silly to ask today, but an interesting thought experiment to say the least. Here’s some context (again, from Quartz):
Right now, Apple’s most successful product launch as far as cumulative units sold in the first 50 months is the iPad (top chart). However, I’m sure as that chart gets bigger, it will definitely change as the iPhone continues to move massive numbers. My inkling tells me the Watch will either be the second most successful product after the iPhone in terms of overall units, or downright eclipse it overall. My reasoning is that the Watch is such a low friction product (no need for data plans), the primary definition of mobile (doesn’t get any better than your wrist), it’s their most personal and customizable product yet, and it’s offered at competitive prices in multiple tiers. This will take time and the Watch won’t be as explosive immediately like the iPad but I’ve little doubt that it will sell incredibly well on its own trajectory as it becomes better as an independent product with its own universe of apps.
The margins are way higher on the iPhone so I doubt the Watch can exceed it as far as revenue goes (bottom chart), but you never know. Point is, it’s hard to imagine in the context of the present and it’s way too early to tell, but I’m very bullish on its potential especially in this age where the Internet of Things, being that our physical surroundings and tools are becoming more interconnected, is finally starting to show some traction. The Watch will only alleviate this process, creating a new supply and demand loop similar to how the iPhone gave way to a multitude of things that weren’t possible before through mobile and increasing bandwidth.
There is great power in removing friction in our lives and no one else is better suited to expand and ultimately own this market than Apple, being in the business of providing astounding user experiences while locking consumers in its ecosystem not just through their hardware but through enabling third-party applications that make their products even more valuable. Needless to say, while the mainstream can’t grasp yet why they would want one in the first place, I’ll go on the record and say the Watch will be extremely successful in the next five to ten years in the same ballpark as the iPhone (which itself is only 8 years old). I suppose we’ll see come 2020 how this prediction will play out.