You're serious? They take 73% of the profit in smartphone market, with Samsung at the second place (26%) and HTC, third (1%), their stock is booming, they have more money in the bank than all of their competitors combined (they can buy Samsung, HTC and Dell and shut them down and still have a few billion dollars left).
This is what I don't get: people applaud Apple for their massive profit margins when in reality it just shows how they're screwing the consumer. Does nobody care about the betterment of the general public -us!?- around here? By buying products with huge profit margins you're spending money on features that you're not getting. And THAT is why I refuse to buy Apple products.
Trade is generally a positive-sum game. The fact that the producer makes a profit means there is a producer surplus but the fact that consumers buy it means there is a consumer surplus too. The general public thinks iPhones are worth more than what Apple is charging, so they buy it.
By buying products with large profit margins you're sending a message that you want the company to stay in business and grow and keep doing what it's doing.
> By buying products with huge profit margins you're spending money on features that you're not getting.
No, part of what makes Apple so valuable is that they resist adding more "features" than the bare minimum, in favor of trying to preserve their best feature: simplicity.
'Consumer surplus' is an economic term, and it's simply a calculated or derived quantity. The fact of the matter is, marketing can change opinions on what a product is worth, or whether it should be bought. Surplus, in other words, is very much manipulable by marketing and advertisement. Consumers think iPhones are worth buying because Apple managed to convince them, and their friends, of it. Not because they may inherently provide more utility/enjoyment over their lifespan than a product from a competitor.
I don't mean to imply Apple products are overpriced in general. I mostly just prefer to discount/devalue marketing when making decisions on what to buy, and instead focus on the features that are important to me.
The standard free market theory is that profit attracts competitors that enter the market and drive down those profits. They would have gotten away with it too if it wasn't for those pesky patents.
Well, I enjoy using my Apple gears tremendously and they enable to do a lot of things that I wouldn't be able to do otherwise. I'd rather pay a $400 premium on a MacBook and have peace of mind for two years. People pay 100 times more for cars and housing.
Obviously I'm not implying that you or others don't care about 'peace of mind' and are cheap bastards who never pay for anything :) - it just happens that you don't find a MacBook or iPad or iPhone as valuable for you and your lifestyle as I do, and purchase what suits you best.
That's just it: Apple has managed to market its products, and especially its mobile devices, as better-no-matter-what. They're consistently behind the punch and offer a pretty feature-dilute experience.
It's also been mentioned that you pay for the "peace of mind," but can anybody here actually quantify what that means on a mobile device? I also find this really ironic because this comes after antenna-gate which most people seem to have forgot. We're consistently told by the media and Apple's marketing that buying from them is a safe bet, has this ever actually meant anything?
You're certainly entitled to your opinion, but I disagree. I find Apple's strategy more solid and sustainable than their competitors'.
BTW, I just wanted to say you have a GitHub link on your HN profile that leads to a 404. I thought maybe that was a mistake and you might want to fix it :)
It seems like essentially the same strategy that lost them the desktop wars after taking an early lead with the Mac. I don't see why we should expect things to be any different this time, although their vertical approach is better suited to mobile.
Apple can't really win on market share or their business model would be impossible to sustain on anti-trust grounds alone. The iPod was the only exception/fluke and IIRC there were some rumblings from the EU about it. The Bush DOJ was too 'business friendly' to worry much about it. Apple could make a market-share grab anytime they wanted to but they also realize it's suicide to do so. Better to own 30% of the market and 75% of the profits than 75% of the market and 30% of the profits. I don't know if they can sustain that but they probably won't shake things up until they are forced to. Don't mess with a good thing right?
>The fact is that they never took an early lead with the Mac
@eddieplan You might not be old enough to remember but the macintosh and earlier apple computers were the first commercially successful computers for the home market.
I can't see a meaningful analogy with the old Apple; to assert one is to assume that totally divergent situations (Apple owning a market wholesale, versus being a niche player) and companies (Apple 2012 is very different from Apple 1998) somehow combine in a way that papers over the very real changes that have happened internal and externally.
If by "strategy" you mean patenting obvious and likely things that already existed and then litigating the crap out of people, you may be right...this trial has set a precedent that might make that sustainable for them.
I chuckle every time I hear this. How much profit of the web server market does Microsoft take with IIS vs. the free alternatives like Apache and Nginx?
Who wins in the Server OS market of Windows Server vs. Linux/BSD? Who dominates the web dev tools market of Visual Studio vs. Eclipse/etc. ?
The same arguments you make can be made against the above too.
The idea of profit share as the metric was hyped up by the Apple fan blog network of Gruber-Siegler-Asymco etc. First, when Android had lower market share, they made numerous claims and 'analysis' that said Android could never overtake iPhone. When that did happen, for some time, they added the iPad to the mix by making it iOS vs. Android instead of just the mobile market and declared Apple the winner. And then later came up with the profitshare argument. Looks like the only metric that matters is what makes Apple the winner.
Since when did profit become the one and true metric?
I realize that they're writing what their audience wants to read, my only peeve is how much airtime their posts and arguments are given on HN. Meanwhile Paul Thurrott's Winsupersite is hellbanned on HN just for being a Microsoft watcher site. Draw your own conclusions.
Since when did profit become the one and true metric?
This is like wondering whether you'd be better off running a grocery store rather than a software business. Profit is the only metric. The idea that this notion started with Apple is strange.
Of course profit is ultimately the metric that counts.
But time and time again in the tech world we've seen that it's much easier to build something cheap and ubiquitous and eat your way up the value chain than it is to start at the top and try to tenaciously cling there. It didn't work for Apple last time and I think it's starting to slip for them again now.
What makes you include GMail in that list? It has, by all measures, failed to move up the value chain, its revenue is completely eclipsed by that of Exchange. (Disclaimer: I work at MS.)
My question in response would be: what accounts has Microsoft lost to Gmail in the past couple of years?
From my connections, I'm aware that much of the startup world is on some mix of Gmail for Domains, Google Apps, and/or Mac for desktops/laptops. Microsoft really doesn't play.
Granted, those are small accounts, but I've also seen some household name established businesses ditch Exchange for Gmail. And in a world for which changing enterprise platforms almost universally elicits dread, the announcements were met with cheers. Really loud cheers.
And to answer in part: again, read Christensen. It's not that the cheap competition generates more revenue (though in some cases it does). By that metric you're making the same strategic error as recoiledsnake. It's that by growing marketshare, disruptive innovations suck the revnue out of the market.
It's what Red Hat did to Sun. It's what Craigslist did to classified advertising.
Profit is not the only metric. Market share is a valid metric to compare products (as long as you have a sustainable position).
If android was selling five times as many units as apple, but with only 15% the margin, then apple would still be the most profitable, but would be losing the mindshare war.
Eventually devs would be concentrating their efforts on android first, and perhaps only for android. In the long term, marketshare is the more important metric.
This is '99-bubble "sell the eyeballs" thinking. The point of business is profit. You can defer profitability, for instance to achieve market share in a market where having the greatest share promises future profits. But for that to be meaningful, you have to have a story about how buying market share with lower profits is going to offer a return on investment in the future. What's Samsung's story?
You must have missed the part where I wrote as long as you have a sustainable position.
In the case of Apple vs Samsung, the smart phone market is at a different level of maturity that lack of market share is not going drive developers away from iOS, but if we were much earlier in the market then it would be a significant issue for them.
What's Samsung's story?
I don't know what sort of margins Samsung is making on their devices, but they don't have to make as much per device as Apple to still be a success.
He's wondering why Gruber, who supported the "losing" side in Apple vs Microsoft (as measured over any timeframe besides the last 12 months or so) had such a damascene conversion. I doubt he'd have any issue with a weirdo that consistently supported the most profitable corporation in any market. It woukd still be weird, but at least consistently weird.
Looking at only the earnings reports and comparing profits is meaningless. If you follow the Gruber link it shows that Amazon's net profit is only $7M. That does not mean Amazon is having trouble making any money. It's that it's costs of expanding are swallowing the profits. Apple has a ton of cash in the bank lying around because they don't see a need for using it. Directly comparing the numbers makes no sense whatsoever except to people who's profit depends on telling people what they want to hear. i.e Apple this week is better than X in Y metric and hence Apple wins and X sucks, where X and Y are carefully picked.
Wasn't it just yesterday that Gruber was comparing revenues from a hardware business(iPhone) to Microsoft's primarily software business, instead of profits which would make more sense?
You're talking about John Gruber. I'm just talking about profit. Obviously, companies routinely defer profitability. Is that what you think Samsung, or any other Android vendor for that matter, is doing? I don't. Comparing the iPhone business with Amazon is an apples/oranges comparison. Comparing Samsung's Android business with the iPhone isn't.
Like Gruber, don't like Gruber, I don't care. But let's not introduce the meme that "profit" is a meaningless metric. It is the only metric. Companies that are optimized for something other than profit today are doing so in the service of profit, and nothing other than profit, tomorrow.
"Revenue", less profits, is money that doesn't belong to you.
And here I thought we were talking about business.
"Revenue", less profits, is money that doesn't belong to you. Keeping score with it is pretty silly. Want a lot of revenue? Start a grocery store, but sell everything at a 10% loss.
But Android is not there to make money, it is there to stop Apple taking over mobile and so cutting out Google from that business, so Google as a whole makes money.
> I chuckle every time I hear this. How much profit of the
> web server market does Microsoft take with IIS vs. the free
> alternatives like Apache and Nginx?
>
> Who wins in the Server OS market of Windows Server vs.
> Linux/BSD? Who dominates the web dev tools market of Visual
> Studio vs. Eclipse/etc. ?
In the not-to distant past (early 2006), I worked on a system which hosted millions of domains on Linux and Apache hosts. Microsoft called our company and offered them mega-bucks to switch the system to Windows and IIS so that they could increase market share. You can confirm this with netcraft - http://news.netcraft.com/archives/category/web-server-survey... . And we weren't the only shop they called with similar deals.
In this case, the one with the profit bought themselves 15% marketshare. I had real fears around that time that web stacks were going to start looking an awful lot like the desktop ecosystem.
Say company X sells 200 phones and makes $1000 profit.
Company Y sells 150 phones and makes $10,000 profit.
In this case we are comparing apples with apples. So it is a valid metric of comparison. In the same reasoning, if company Z sells 200 phones and loses money then obviously that is bad and company Z could potentially go bankrupt.
Well, company X is shipping its phone with an almost free (as in beer) software stack. If their entire stack was paid software, there would have been some more margin for profit. I cannot even guesstimate on how much would their profit share increase (given that higher price would mean lower sales), but it might be significant.
You're serious? They take 73% of the profit in smartphone market, with Samsung at the second place (26%) and HTC, third (1%), their stock is booming, they have more money in the bank than all of their competitors combined (they can buy Samsung, HTC and Dell and shut them down and still have a few billion dollars left).
I'd call that reward, not punishment.
http://www.asymco.com/2012/05/03/the-phone-market-in-2012-a-...