Forgive us for feeling vindicated*. Even as analysts have spent most of the past few months raising their Apple targets, the company delivered yet another stunning beat after its enormous Christmas quarter beat.
The beat was led, first and foremost, by sales of the iPhone of 35.1 million versus 30 million expected. (The iPad was a touch below expectations, but on the earnings call CEO Tim Cook said that it was mostly due to supply constraints.)
If we are right, this is a confirmation of our “developer network effect” thesis which holds that the winning mobile platform will be the one that attracts the most developers.
(The conventional wisdom up until recently, you will recall, was that Android would do to the iPhone what Windows did to the Mac, which is to say disrupt it with a cheaper product that would gain market share and become ubiquitous. But this idea is predicated on the postulate that software platforms have user network effects, when in reality they have developer network effects. Users go where the developers go, much more than the other way around.)
And as we highlight in our recent special report on the mobile platform war, developers overwhelmingly prefer Apple. There are many reasons for this, but the biggest one is that they earn more money with Apple.
The end result is that the best and most popular apps are on the iPhone. Which means that people buy iPhones. Which means that the best and most popular apps stay on the iPhone. Which means that more people buy iPhones.
If we’re right, and if this is the trend we’re seeing at play–and Apple’s two-quarters-in-a-row iPhone beats, after being stuck in neutral vs. Android, is consistent with the idea of a network effect kicking in–the sky is the limit for iOS and Apple.
(* We’re not feeling TOO vindicated, because we also predicted Apple would grow boringly in line with analyst estimates because of heightened expectations. This was before we realised the importance, and strength with Apple, of the developer network effect.)
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