Apple Share

The Jaded Consumer's post on Apple's share of the PC market hasn't been the only recent post of this kind. This story offers both (a) a chart comparing unit share to dollar share over time, and (b) a breakdown of sales growth (loss) by market segment, showing Apple rocking in consumer and education but losing ground in business and government.

Given that Apple's largest sales losses were in the larger business size categories, it looks like Apple's share in business (and maybe the market's overall concentration) is concentrated in smaller enterprises. This isn't particularly surprising historically, but I'd have been willing to believe that enterprises with high-dollar mobile workers with the clout to choose their own hardware might be more densely gathered in larger businesses than the share numbers suggest.

It looks like Apple sales of PCs to enterprise is likely trivial, that Apple could suffer >80% volume loss in the largest business segments without impacting share growth much. To the extent there's a market to chase there, it's wide open for Apple to take share.

But there are businesses Apple can bring into the fold without selling Macs. Apple recently ditched its WindowsMobile-based POS system in its retail stores, and has been deluged with requests by other businesses to deploy Apple's POS system. Even if Apple doesn't roll out its payment system as a commercial product (and find a way to profit as a high-volume payment processor), Apple can sell hardware to people looking to deploy third-party iPhone-based POS systems.

Eventually, if Apple continues to deliver high-value desktop and portable solutions, its sales will expand beyond the mobile devices currently on fire and begin to make inroads on the big-iron back-ends and other enterprise domains that perpetuate anti-Apple inertia. If this segment of the market is wide open, it's simply a question of timing and targeting.

Apple seems to surprise people with the markets its able to target, and I expect this trend to continue.

Silverlight Streaming on iPhone

Nitwits who haven't really understood Apple's position on Flash were shocked to learn Microsoft's Silerlight can now stream video to iPhones. The truth is easy to believe: after making plain that Apple didn't want iPhones clogged up with performance-sapping plug-ins that would enable unbridled evasion of Apple's app-approval process by enabling unvetted code to run (and retransmit itself, and do any other security-nightmare activity) at will, Microsoft has made its server products able to send iPhones standard HTML 5 video tags instead of Silverlight content, and to stream iPhones H.264 content instead of proprietary Microsoft encodings that depend on a Silverlight plug-in for decoding, so that iPhones get the same standards-compliant treatment iPhones prefer. Microsoft does this transparently to its customers via server-side transcoding, so that they need not realize they don't really need proprietary Microsoft file formats or nonstandard HTML tags to make their content accessible to the rest of the world. Apple hasn't bent; Microsoft has moved to make its tech support iPhones change-free, perhaps as a move to compete with Adobe's iPhone-incapable Flash.

The real question is why Microsoft is still transmitting standards-nonconformant content to every platform but the iPhone.

Another Look at Apple's Sales Share

Apple may be a PC market leader, after all.

The huge and unusual (at least, for Apple) share of sales enjoyed by Apple in the smartphone market has been commented on here before. Also previously discussed is Apple's relatively higher share of profit than its rivals in the PC market.

Today, we have an opportunity to revisit Apple's share of the PC market with an eye not toward unit volume (which is a metric that, due to differing profitability and the potential for loss-leaders and the like, is not particularly useful to assessing power in the marketplace or profitability) but toward revenue. Apple's share of the laptop market is in the range of 8% by unit volume but has approached 20% in some quarters. Apple's share of the desktop market is lower, though Apple reportedly holds over 90% of the market for PCs costing over $1,000. Understanding Apple's overall share and its competitiveness with other manufacturers is undermined in some as much by dividing the market into numerous slices to find the niches in which Apple successfully sells hardware as by pronouncing that with nearly 10% of the US market by unit volume, Apple lacks significant market power.

The revisitation is a look at the sales volume by dollars. This is meaningful in the PC hardware arena -- in ways it is not in the market for server operating system or server application software -- because there is no significant source in the market for zero-cost computer hardware. Apple's share of the new sales revenue for laptop computers -- a market segment in which Apple is believed to be a volume leader in the high-cost market segment -- has been over 30% for some time and recently stood at 34%. The desktop market, a segment in which Apple anecdotally didn't make many sales outside its iMac business, has grown beyond Apple's one-third-share a year ago to over 40% earlier in 2009, and now threatens to take half of all sales by dollar volume by posting a 48% share in October.

(In the server operating system market, proprietary vendors dominate by revenue because open-source competitors are available with a licensing cost of $0, or free. Measuring that market by dollars is thus doomed to confuse onlookers. Combined hardware/software pricing makes it hard to tell whether a "sale" is a single proprietary system with high-end licensing options, or is a whole rack of systems with open-source software. Due to the different capabilities of various server hardware, one might prefer to view the server market in terms of queries run or pages served or megabytes served rather than installed units or software revenue; yet, there is a strong desire to look at the future rather than the past by asking about current-quarter sales instead of the performance of previously-sold hardware. The sales models of competing businesses in this space are strikingly different, with some making revenue on services and others relying principally on software licensing fees. While it's tempting to argue that market success should be measured by existing deployments instead of new sales, wishing folks would use different metrics doesn't change habits.)

In other news, Apple's mobile platform holds 50% of worldwide mobile device data traffic. Apple's share of the mobile phone market is a mere single digit: 2.5%. However, Apple only makes smartphones, and its share of smartphone sales is about 17% by unit volume. Yet, despite having less than a quarter of the smartphone unit share (and less than 3% of the unit share for cell phones), Apple's users account for half the planet's mobile data traffic: Apple's customers either like using their phones more, or for some reason must use them more, than customers of competing products. Why does this matter? These products, which people either are drawn to use more or are preferred by those with high use needs, command such a market premium that despite Apple's mere 2.5% cell phone share, Apple's cell phone profits ($1.6B) exceed those earned by Nokia ($1.1B) on its 35% global unit sales share. Selling high-margin, high-end machines is good business: Apple and RIM together held about 3% of the world's mobile phone unit sales share in 2008 (neither company being a handset unit volume leader), but received about 35% of the profits earned from building cell phones around the world (Apple itself claiming 20% of the global handset profit). As between Apple and RIM, it seems Apple has an edge in future growth. With that growth occurring squarely in the highest-margin part of the phone market, it's clear Apple's profit stands to benefit.

Meanwhile, Microsoft stands secure with over 90% of the PC operating system market share and -- with no PC hardware overhead -- enjoys pure gravy on every license sold. Not that this is any aid to OEMs saddled with MSFT's licensing fees, or improves the cost-competitiveness of products based on MSFT's products ....

Users Better Off Not Breaking iPhone Security

Hot on the heels of Phil Schiller's defense to BusinessWeek of Apple's application approval process is news of another Netherlands worm targeting customers who have disabled Apple's app-approval process by "jailbreaking" their phones to run anything loaded onto them (like malicious worms, surprise, surprise). Phones whose app-approval tools haven't been disabled are immune to the attack, as previously described here.

Phil Schiller's explanation of Apple's approval process is interesting because he expressly discusses Apple's effort to ensure that applications offered through the store don't obviously behave in a manner users don't expect. Developers whose apps easily crash, or snoop users' data, get a notice that Apple isn't ready to add the app to the store. Developers whose apps are designed to help users cheat at games of chance – something of potential interest in Las Vegas, for example – or otherwise to break the law, are often disappointed Apple won't play along. Why should Apple subject itself to liability for assisting people to violate the law in jurisdictions where gambling is legal, but regulated? (Cheating at a "friendly" game in another jurisdiction may not be illegal, but it's certainly unsportsmanlike – and why should Apple support it?)

Apple is trying to build a family product – something that parents can be confident their kids can use, something schools will allow on campus ... something that, in short, has a large and socially acceptable market. People who want to disable the security Apple has offered can apparently do so, but the folks helping them do it haven't proven themselves worthy of their customers' trust.

With Apple's exclusivity agreements expiring – and users' "need" to hack phones to work on unsupported networks seemingly coming to a close – one hopes that security-unconscious jailbreak tools will become increasingly a hazard of the past.

In the meantime, customers whose needs have driven them to jailbreak from necessity should change the passwords on their phones, disable root login, and close down the OpenSSH server started by the jailbreak tools.

Apple Developing Device-Generated Remote Control UI

After trying to control various electronics remotely -- with universal remotes, for example -- it is obvious to any user that the device you have in your hand is not quite as capable at controlling the device you want controlled as the controls on the target device itself. Apple seeks to remedy this with device-generated user interfaces that devices -- like iPods -- could push to would-be controllers in order to expose both a consistent interface (regardless the controlling tool) and an interface capable of exposing enough of the target device's functionality to make the controller useful.

The benefit of this scheme would be generic protocols for seeking and accepting both a UI and a command list. Users of iPods whose users hope to connect them to home stereos, automobiles, and other equipment will be able to expect easier control, more consistent behavior between devices, and perhaps (depending on licensing) cheaper control kits. If this matures into a shipping product, Apple could claim the high ground in the user interface fight over mobile devices in an increasingly interconnected (docking, bluetooth, wifi, etc.) world.

MSFT: Phone Apps Unimportant

On the heels of the news that Microsoft's mobile platform share is collapsing (losing 28% of its share Q32008 and Q32009), Microsoft reverses its long position on platforms (that it's all about developers, developers, developers ...) to proclaim that mobile apps just aren't important as a differentiator because they're so trivial that anything worth having will be immediately ported to any competing platform.

Not that Microsoft has explained who will be porting to its mobile platform over a hundred thousand applications now available on Apple's platform or why Google has said it can't afford to make all the necessary applications available and has urged developers to build mobile-friendly browser experiences for delivering web-based services in lieu of native applications. (Microsoft admits that the app/net line will blur until no-one can tell the difference, which is an admission that (a) Google's approach can work, and (b) MSFT's client platform lock-in strategy is doomed unless it can maintain file format lock or some other mechanism of dependence.) Instead, Microsoft seems to have fallen for a classic analytical failure: since Microsoft's own employees are overwhelmingly employed in desk jobs, the fact has entirely escaped Microsoft that everyone who is not employed at a desk job is more able to access important data from a mobile device than from a desktop computer. Mobile apps aren't a triviality unlike important desktop applications, they are in many cases the successors to desktop applications for people who will not spend much of their lives near desktop computers but will have mobile devices constantly available. Porting from iPhone's development environment to Microsoft's is surely at least as challenging as porting in the other direction.

The fact that Microsoft thinks mobile apps are trivial and easily ported ignores that (a) mobile apps developed with an API not available on another platform won't be ported so much as completely rewritten, (b) the complexity of mobile applications will increase with mobile platforms' power and users' expectation of using the platform as a primary interface to their electronic data and the data maintained by their brokers, bankers, movie rental vendors, and local movie theaters, and (c) developers, as Microsoft ought to have learned while enjoying an operating system monopoly for the last twenty-five years, target the dominant platforms and the remaining platforms tend as a result to fight to stay in the game. Microsoft's management may have, under the influence of its own Kool-Aid, developed the impression that its success in the PC market resulted from the quality of its APIs and not the spurious error messages with which it frightened customers from competitors' platforms, or the insidious effects of vendor-lock.

Meanwhile, developers have apparently not properly understood Microsoft's memo on app porting; Gameloft and other developers are scaling back efforts on Android in favor of their existing customer base on iPhone, where the sales are. With Android's share of the mobile approaching the share of Microsoft's platform and growing, the fact that developers have cold feet about Android development seems a grim portent for the future of similar development on Microsoft's mobile platform.

After admitting that Apple's gaining market share in PC operating systems is a big deal (though he claims MSFT holds 83% of the high-end notebook market, a figure at odds with data showing Apple commanding 91% of that market), it's odd to see MSFT pretending that its small and failing share in the mobile market is anything but an unmitigated disaster. The fact that Microsoft "wants" a commanding share of the mobile market only underscores the severity of the blow it's suffered from a combined field of closed-source and open-source platforms running on both differentiated and commodity hardware. Three consecutive quarters of declining revenue are no fluke.

A look at Gartner's mobile phone market share is instructive: RIM, Apple, HTC, and Samsung all gained market share while the market itself increased 13%. These gains were at the expense of Nokia (42.3% to 39.3%) and "Other" (21.3% to 13.1%). Since RIM, Apple, and Samsung all have their own mobile operating systems, HTC has begun shipping Android (and has added interface elements to protect people from noticing the MSFT operating system on its phones that ship with it), and Palm is migrating from MSFT's OS to a new platform based on open-source plumbing like the Linux kernel and WebKit, it's no surprise that these gains -- and the loss of share among the "other" category -- come at the expense not only of Nokia (which lost 7% of its share) but also Microsoft (whose 28% y/y share loss has to smart). The trend isn't good for Microsoft in the mobile space. To the extent Windows Mobile might have a market segment not subject to attack by iPhones, it's worth noting that Android is being viewed as preparing to eat MSFT's mobile lunch.

Microsoft hasn't got file format lock to trap customers in the mobile space, because people don't depend on Microsoft file formats for many mobile applications. Microsoft's small-percentage position prevents it from leveraging code investments in a proprietary API to keep developers from making other platforms attractive. The poor performance of Microsoft's operating system (this HTC review tellingly damns is with faint praise: looks good hidden, is bad at driving capacitive displays, etc.) can't be very exciting to developers who want a slick and improving platform to make their products look best. What has Microsoft got going for it in the mobile space, exactly? Developers can't be particularly keen to invest resources in a platform whose size is dropping more than a quarter of its share in a year.

Meanwhile, Apple's share of online traffic dwarfs even its growing share of the smartphone market. If iPhone users' demands outstrip their numbers, support for their traffic and their demands should continue to dominate. A few years ago, The Jaded Consumer contacted his broker to complain about its website not behaving well for the iPhone's browser; the broker said mobile users should access the broker through a crippled mobile site formatted to look awful on the iPhone and to waste enormous time scrolling about looking for the page's content. Today, the broker's data can be accessed from users' choice of four different native iPhone applications. The one the Jaded Consumer picked makes access to multiple accounts a snap. The application has been repeatedly revised and supports every feature of the site I like to access – in some cases, even better than the regular web version. How times change.

Chinese Sell Crummy Goods Locally, Too

The low-quality and mislabeled goods shipped to your hometown from China don't reflect Chinese hatred for foreigners especially; if this story is any guide, that's just the way they do business. Imagine: a third of condoms being counterfeit. (And likely unsterilized, lubricated with vegetable oil, and untested for suitability to function as intended.) While it's nice to see a (single) bust put an end to an IP theft/consumer fraud/public health threat, the fact that the aggregation of fraud so dominates the market invites serious questions (how the market should be approached, how one should distinguish one's products, how consumers should be educated to seek their intended products, how things got so bad without a revolution, etc.).

Chinese assumptions about the relative trustworthiness of foreigners (Chinese trust foreign brands more than domestic brands) may bode well for high-value brands seeking access to the growing market of middle-class and wealthier Chinese.