For Apple, the only thing that really matters for its future is its competition with Android.
At today’s WWDC keynote, we saw a few things that give us a glimpse at where Apple is relative to Android. For the most part, things look good if you’re an Apple bull.
PART I: Apple is taking Android customers.
It’s cliche at this point to note that Apple is the iPhone company.
Anyone who follows the company even a little bit realises this is the case. The majority of Apple’s revenue comes from the iPhone, and the vast majority of its profits come from the iPhone.
But just because it’s cliche doesn’t mean we should ignore it. It’s the truth about Apple.
The iPad and Mac are wonderful products, but they’re nowhere near as important as the iPhone. And the iWatch, should it ever materialise, will not overtake the iPhone.
The iPhone is a once-in-a-lifetime product. Almost every single person on the planet is going to end up owning a smartphone at some point. Apple has successfully sold 500 million iPhones at ~$600 a piece. Many of those sales are subsidized by carriers making it possible for consumers to think they’re paying $US0-$200 for their phones.
Yet, many people think that Apple is in a precarious position. They look at Android gaining share around the world via cheaper hardware and think that Apple is going to be relegated to a second-tier player.
Even analysts who think Apple’s stock is worth buying think the company is boxed in. They think Apple’s growth in the future comes from iPhone owners upgrading to new iPhones instead of new customers coming to the iPhone. They believe the high end of the market is saturated, and therefore growth is going to flatten.
To those people, Tim Cook has a message: You are wrong.
“Over 130 million customers who bought an iOS device in the past 12 months were buying their first Apple device,” said Cook before introducing iOS 8, the new software for the iPhone and iPad. “Many of these customers were switchers from Android. They had bought an Android phone — by mistake. Then had sought a better experience … And a better life. And decided to check out iPhone and iOS.”
He added, “Nearly half of our customers in China in the past six months switch from Android to iPhone. This is incredible.”
The clear implication from Cook: We are not done growing the iPhone and iPad businesses. And, Android users aren’t hooked into the Android ecosystem, we can get them.
Now, Cook didn’t say how many iPhone users bailed for Android in the past six months. We’re not sure how exactly to figure that out. It’s possible Apple’s net customers are flat. But, Cook said customer satisfaction with the iPhone is at 97%, so it seems likely that Apple isn’t losing too many customers to Android.
PART II: Apple is taking Android features
The consensus takeaway from today’s event is that Apple has finally opened up its platform and given developers, and consumers, more of what they want.
A quick overview of some new stuff from Apple:
- Apple is opening beta testing for apps. This will let developers give away more copies of its apps for testing, which should make them better.
- It’s allowing third-party apps to integrate with iOS in a way it never has before. Photo apps like VSCOCam can work right in the Photos app, for instance. And Apple is allowing third-party keyboards, which is pretty radical. This means that a company like Swype, which makes a popular Android keyboard, can make an iPhone keyboard.
- Apple also announced that it would add widgets to iOS’ notification center. These are pretty useful for getting information at a glance.
- iCloud photo storage is much better. Now you can store all of your photos in iCloud (as long as you pay).
- Spotlight search is more comprehensive. Today, if you search on the iPhone you just see what’s on the iPhone. In the future, it will be a universal search that looks through the web, the App Store, and lots of other places.
- iCloud Drive is just like Dropbox or Google Drive. Apple has long resisted replicating the file structure of the desktop in the cloud. Today, it stopped resisting.
- Siri now works by just saying, “Hey, Siri.” This will make using Siri a lot easier.
It’s like Apple took a list of what everyone says is better about Android and then checked every box until the iPhone was dead even.
The only thing Android has over iPhone now is big screens, and low-cost hardware.
Apple is expected to release an iPhone with a 4.7-inch screen, and an iPhone with a 5.5-inch screen in September. So, Apple will be able to check that box versus Android.
The only thing missing is low-cost hardware. We’re not expecting Apple to release low-cost hardware. Then again, we weren’t expecting Apple to allow some other company to come in and change the iPhone’s keyboard.
Perhaps this new, emboldened Apple will release a low-cost iPhone in the fall, and really go after Android.
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