The iPad spread

If you are in the market for an iPad, get your pen and paper ready and answer the following –

  • What’s your budget?
  • Big or small?
  • Retina display? TouchID? Storage Capacity? Camera? What about a Barometer?
  • WiFi or WiFi + Cellular?
  • Colour?

or compare all the iPad models available for purchase.

Need more details?

Need more details? Of course you do.

There is a distinct possibility that you come out of this exercise with a model launched 3 years ago. Then, Apple’s last two years in iPad improvements mean nothing to you.

The iPad has not been performing well since the last few quarters. Sales are flat for this magical device. In addition, the iPad’s exceptional build quality and usage patterns impact existing customers who will buy a new one but already have an iPad.

This has forced Apple to become strange bed-fellows with IBM and focus on the enterprise. The other big idea is to broaden the product mix and address every price point in this segment.

But what about product simplicity? What about making the best product? This bewildering array of iPads confuse customers. The huge performance gap and complexity drive developers away.

The A5 chip has proved to be more resilient than the floppy disk and the optical drive.

Which colour you want?

The iPad Spread

The iPad Spread

Can this be simplified? Of course. Apple is the king of simple.But how? My 2 cents…

The iPad Mini has to be the first one to the slaughter house. This device is so old, it is nearer to the original iPad than to the latest one. And at this price point, consumers may incline more towards Android tablets. I have not heard of anybody buying an iPad Mini recently.

Moving on, the Mini 2 can be scrapped and the Mini 3 can be offered with and without the TouchID, only through certain distribution channels (Apple Stores, Apple.com). Rinse and repeat for the iPad Air/Air 2.

This leaves us with the iPad Air 2 and the iPad Mini 3.

Now we have a much simpler product lineup for the iPad. Displays are awesome, cameras are great and performance is fantastic all around. After deciding the size, the user gets to choose the color, TouchID support, storage capacity and cellular option.

This leaves the prospective iPad buyer with concrete yes/no, this/that decisions. Far less confusing and easier to make.

Now Apple, if you don’t mind, please exchange my iPad 4 with an iPad Air 2 16 GB WiFi-Only Space Gray.

App Store – Search Page

Go searching in the App Store, and you are presented with (left image) –

App.Store.Search  App_Store_Search_Suggestions

Its a major improvement from the past. Previously, all we got was a barren white screen with a search bar at the top. Apple has spiced things a bit and now displays trending searches in your store.

A few ideas to improve this interface (right image) –

  1. Change the text alignment from centre to left, please. Much better already!
  2. Add App Icons for straight hits, first result icon for generic searches.

This adds some visual appeal to the page. And hopefully stops us from searching for “themes for iphone”.

Apple’s Q3 2014 numbers

Apple’s Q3 2014 numbers are in. My observations on Apple’s financial data –

  1. iPhone rules the company. Product revenue was up by 9% as compared to the last quarter but dropped 24% sequentially. People around the world held on to their battered and scratched phones for a few more months and wait for the next version of Apple’s flagship product.
  2. Retail store sales are flat as compared to last year. This surprises me. Given Apple’s focus in this area, I expected a healthy growth in retail sales as compared to last year.
  3. Sequentially, revenues from Greater China and Japan fell by 35% and 36% respectively. The early adopters pool has dried out in these markets.
  4. The iTunes/Software/Services revenue remained flat sequentially. Apple customers did not buy more content and services than last quarter. Next quarter numbers will tell whether this is a one off case or the content consumption has peaked in Apple’s ecosystem.
  5. The Mac had a good quarter, almost equalling its so called disruptive nemesis in revenue. Yosemite announcement and Macbook Air price drop worked as the Mac reported a healthy 18% units growth compared to last year.

At my home, the iPad is used as the goto device for routine stuff. It is also the device my kid uses the most. I use the iPad mainly used for browsing and see no reason to upgrade to a new one within the next one year. My iPad is two years old and still works like a charm.

I believe the iPad will follow the TV replacement cycle. Still, only 13 million units sold in this quarter should worry Apple. Maybe IBM can fix this problem. We will see.

Beats with Apple

Apple’s acquisition of Beats Music and Beats Electronics has perplexed the inter webs. Some say this is a clear indication that Apple’s best days are over. Others say this is proof that Apple is getting smarter. Many have admitted that they have no idea why Apple would acquire Beats as there is nothing about Beats that Apple can’t manage on its own.

My perspective is a bit different. I looked at Apple’s Press Release announcing the acquisition and their reason is clear.

“Apple® today announced it has agreed to acquire the critically acclaimed subscription streaming music service Beats Music, and Beats Electronics, which makes the popular Beats headphones, speakers and audio software…”

OK.  So you buy a company for $2.6 billion. What do you say when you announce the deal? Why you bought it, right?

Apple wants Beats for it’s subscription service. Everything else is just icing. Beats Music is a very small part but gets the first mention in the press release. Ahead of the headphones, and ahead of Iovine.

Yes, there is $400 million more, but it vests over time, so relax.

No? Not convinced? Here is another example. This is the opening line in Satya Nadela’s statement on the Microsoft – Nokia acquisition.

“Today we welcome the Nokia Devices and Services business to our family. The mobile capabilities and assets they bring will advance our transformation…”

It is clear why Apple bought Beats. They wanted a music subscription service. So they bought one. But can’t Apple just build a service like Beats Music instead of spending the monies? Yeah, of course. Here are a few reasons they bought instead of built.

A stitch in time

Apple needs a music subscription service. The likes of Spotify and Pandora have proved there is a market. Apple’s data shows that the “buy” music model is on a decline. Apple wants to retain its position as the top destination for Music lovers. And Apple has run the numbers. Such a service will work. Apple will give it prime real estate on the iOS home screen.

But Apple already has a brand in the music space, iTunes. And brand iTunes works not only for music, but also apps, movies, podcasts and much more.

If Apple has to enter the music as a subscription space, it needs a new brand. And Apple has to enter the music as a subscription space.

A good option

Beats Music was the only viable option for Apple. It is run by industry veterans and not software entrepreneurs. The founders understand the music business better than most and have connections inside the industry. The Beats Music service uses a personalization algorithm that is a mix of digital innovation and musical passion. 300 years of experience in the music industry comes with this acquisition. This rich team cannot be built just by snatching Jimmy Iovine and offering him a lucrative contract to bake this within iTunes. Plus, Beats has fantastic relationships with some of the big artists, a mandatory requirement after the Ping debacle.

A trojan horse

Whenever Apple is compared with Google, the following quote is never far behind in the discussion. That Google is getting better at design faster that Apple is getting better in services. Maps and mail are cited as proofs.

A new, independent brand will give Apple the flexibility to launch the service on Android and Windows. It will open the market and bring the Apple experience to many more users. Since the smartphone market is getting saturated quickly, growth can come only from customers jumping ship. What better way to start than with Music? Email and maps are covered. But Music is still wide open.

And the headphones? Yeah, they are important. They sell a lot and are profitable. Apple will shore up this part of Beats, and introduce another accessory for its devices. So there’s that.

Most of the data and facts in this blog post come from Apple Press Release announcing the acquisition. Here it is.

Facebook buys WhatsApp

The big news this week was Facebook acquiring WhatsApp for a cool $19 billion dollars.

That is $19,000,000,000. In full glory.

For perspective, it is exactly 19 times what Facebook paid for Instagram a while ago, or just a fraction of Facebook’s current market cap. Whichever way you look at it.

Here is my take on the deal size.

Another way to look at this deal is to think that Facebook got a huge discount on WhatsApp valuation. WhatsApp would surely have gone public within the next few years and enjoy a market cap of at least $50 billion, if not more.

WhatsApp has got a lot of things going for it to support this kind of market valuation. Here are a few :-

  1. Crazy Growth : It has a huge reach with 450 million users. A good chunk of these are active every single day. And a million new users join the service everyday. This makes WhatsApp one of the fastest growing companies, ever. Pinterest who?
  2. Usage : People use WhatsApp on their mobile phones way more than any other app or service. As mobile phones take away more and more share of everyday time, this will only increase.
  3. Phone Numbers : The social graph at play in WhatsApp is already a validated and real graph. People join WhatsApp using their very real phone numbers. This social graph is as sticky as it gets.
  4. Opportunity : WhatsApp plays in the mobile messaging space, with data volumes rivaling telecom SMS traffic. As more users join the service and move to better phones, the volume of data will increase manifolds. All of this information put together, including text, voice, photos and videos, presents a treasure trove of information for an internet/mobile advertising company.

Facebook can become the Google Adwords of mobile, without selling a single ad on WhatsApp. All this data is golden for advertisers.

Considering these points, one can argue that WhatsApp got a fair price for what it has built and where it is today. Whether this price was fair for Facebook, only time will tell.