Apple has already recognized this as a likely outcome within the digital transformation of everything. This is why it has worked so hard and so long to build a strong business around services. This model isn’t just about selling people Apple Music, iCloud and iTunes Match subscriptions, App Store sales of Apple Pay trades; it’s about connecting you to an ecosystem you love to be in and making it easy for you to stay there. You can even affordably enjoy a new iPhone every year thanks to Apple’s iPhone Upgrade Program.
Tear yourself away from fetishistic attachment to device sales and think instead about how the sale of these devices has always been about building a compelling and stable ecosystem. That’s why the company is investing so deeply in ensuring every one of its users is on the most recent platforms.
This is a platform, and platforms drive opportunity
I’ll hand you over to Apple CEO, Tim Cook:
“The Services business is powered by our huge installed base of active devices, which crossed 1 billion units earlier this year. As we discussed on this call in January, those 1 billion-plus active devices are a source of recurring revenue that is growing independent of the unit shipments we report every three months. In fact, the purchase value of services tied to our installed base was a record $9.9 billion in the March quarter, up 27 percent over last year, accelerating from the 24 percent growth rate we reported in the December quarter.”
Now I know lots of analysts and investors can’t get their heads arond this, and I echo Jim Dalrymple in his reaction to the disappearance of one billionaire from the AAPL investor mix. I took a moment recently to let you know the smart approach (‘Apple is an arms dealer, analyst claims,’), which values Apple at around $150+/share. (Sayonara, Icahn).
Carl Icahn sells entire Apple stake - https://t.co/rSXfHsuiL6— The Loop (@theloop) April 28, 2016
Apple’s overall platform ecosystem is becoming far more important than the devices used within it. That’s not to say Apple won’t sell you devices, no – nor does it mean we won’t buy new devices as they ship (look at the success of the iPhone SE and the dampening in smartwatch sales as the world waits for Apple Watch 2), but it does mean Apple’s ecosystem will be the driver of future growth.
The reasons why
Statistics help build my point:
- iPhone customers are very loyal with a 95 percent customer satisfaction rate.
- Most iPhone users stick with the platform for at least eight years.
- When given the chance most employees choose Apple
- iOS users are far more active users of mobile solutions than those on other platforms – even last year, IBM Commerce noted that nearly 40 percent of all post Thanksgiving traffic came from iOS devices – accounting for 27.7 percent of sales. (Android generated 17.3% and 8.3% respectively).
- iOS users also spend more on online sales, including on content and services.
- As of April 18, 84 percent of iOS users are on iOS 9, 11 percent on iOS 8 leaving just 5 percent on older versions of the software.
- Apple has added more switchers from other platforms in the past six months than in “any other quarter ever”, the company claims.
One more thing
While focusing on great hardware backed up by platform-unique features such as Continuity, we’re going to see Apple work hard to make its services available to Android. The fragmented Android platforms simply cannot match Apple’s services offer, meaning it could easily become a client platform for Apple’s far superior services in the next few years. Apple’s already working on it – why else do you think it introduced Family Sharing and music video support to Apple Music on Android this week? While I think it will take time for the pundits to truly understand the significance of this prediction, Apple also offers this useful tool for end users who already do.
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