Today Apple announced that they are giving away new software for free, selling their computers at a slightly lower price point, and launching the new iPad Air.
Tim Cook’s vision for Apple becomes more clear with every product launch:
- Keep product quality high and deliver incremental new technologies (so far)
- Experiment with lower prices and lower-end markets
- Do everything possible to maintain and grow margins, largely by using operational savvy
- Gain greater revenue by selling content and services on more devices
- Repeat
One observation is that today’s presentation focused more on pricing than normal, as opposed to new products and features. I don’t think this is just on-the-surface. It could be that Apple is paying more attention to pricing and how that influences consumer behavior. In the past, perhaps it was more about the combination of the content and the technology and what that means. The attitude was “look how great this is – how could you NOT want it?!”. Could there be a changing tide?
The iPad Air name is also notable in that Apple is trying to use the “halo effect” of the MacBook Air brand in building and branding a new iPad. We see weight consistently treated as a key component of the overall “feel” of a product. So important that the product name reflects that. The word “Air” has connotations beyond just a light physical weight – casual, fun, sleek…like the air we are surrounded by you know it’s there but we ca’t see it. I would hope the iPad Air is at least visible.
A familiar strategy
Yes, this is very similar to Android in that Apple is giving away software for free, but there is a big difference in terms of the revenue makeup. In the Apple model consumers pay for the content and services. With Google, the money comes from businesses (advertisers) in the form of advertising dollars. Google has tried to be more of an B2C e-commerce company, but it’s been a challenge. Apple has tried to be a B2B advertising company with iAd, and the results are unclear (at least to me).
They are not competing for “wallet-share”, since these are two different wallet’s. Maybe these two companies aren’t on such a collision course after all. They are simply sharing a very common Silicon Valley strategy – build great products, give them out for free and if users actively engage, find ways to make money.
The launch show
It’s interesting that Apple has increasingly relied on pre-show videos during their product launches. Not sure how I feel about that one. What happened to the product demo?
P.S. If I was looking at Apple from an investor perspective one key question is have is about margins. What does the sacrifice of margin for market share mean for the stock price? Can Apple achieve efficiencies in other parts of their business to offset the lower margin on product price?
