Mac Market Share, No Prescription Needed
Imagine for a moment that you own, as your daily vehicle, a Honda CR V. Further suppose that you like the car, you make up jokes about the thing and call it the Chromium 5 or whatever. Your affection for your vehicle is even apparent in inclement weather; a hailstorm will turn you into a pacing, worrisome wreck. In short, you really love the car, can’t think of a better one, but oddly, you don’t care that not every single person on the planet wants a Honda CR V. To you a car is a tool, perhaps a well liked method of conveyance, but nothing more. You might love your CR V a little too much, but in the end you understand it is simply a hunk of metal and plastic that rolls around on four rubber tires. If you are desirous of keeping a healthy perspective on the differences between mere objects and personal philosophies the best advice is not to buy a Mac.
Why not purchase the world’s greatest personal computer? Because once you do you’ll fall in love with the Mac. You’ll wonder why more people aren’t using one, you’ll want to spread the word, you’ll become a zealot. Inevitably, you will remain confused why the Mac isn’t more popular and then you’ll begin coming up with ways to fix the Mac’s low market share blues.* Here’s the trouble, the ways to “fix” Apple’s market share problems are all prescriptions for a malady that simply doesn’t exist.
The notion that Apple has a market share problem seems obvious, but it isn’t as bad as a quick glance at the numbers indicate. The breakdown between business computer purchases and home computer purchases is roughly a 66 to 33 split. Apple chooses to compete in what roughly amounts to a third of the market. Sure, it has penetration in professional graphics, scientific and the film industry but Apple is, by and large, a consumer computer designer.
With that in mind, Apple’s market share looks much, much better. In the arena Apple competes (by default, not by choice) it performs fairly well. At this point, the most obvious question is: If Apple can compete in the home computer market, why doesn’t it try competing in the larger market? 20% of the entire computer market is obviously preferable to 2% of the world market after all. The answer is simple but not obvious: because Apple demands maximum return for minimal possible effort.
Many companies would try to force themselves into markets simply because they can. Apple seems to take a different tract, instead of just trying to compete in any market segment that one of its products could fill it tends to focus on only introducing and competing in the areas where it has a great chance of success.
Let us use a case study at this point: the Video capable iPod.
There was no technical reason a video capable iPod couldn’t have been on the market sooner. Speaking from a purely economic perspective the move would have made sense. Users get a little extra functionality, Apple sells a few more iPods, and everyone wins.
Apple didn’t succumb to the easy temptation of introducing a Video capable iPod just because it could. Instead, the company bided its time, lined up content for the Video iPod and then, way too late many felt, introduced the thing. For Apple, with some exceptions, it is usually not enough to do something just because it can. It waits to do something until the path leads to a bucket of cash.
Which is smart. Why expend all your energy and resources competing in a cut-throat market where your chances of producing scads of cash are slim? That is a mistake a lot of other companies make. Think of the Dell DJ if you want an example of a product a company produced just because it wanted to be in on the next big thing. Apple tends to stay away from the “me too” product lines.
Even with the above noted, many are still dismayed by Apple’s market share. This likely harkens back to the days before Steve returned and Apple was in very real danger of going under or being purchased. That hasn’t been the case since the first G3 machine was introduced, and it is a lot like still worrying about Southeast Asia and the Domino Theory.
The time for worrying about Apple’s immediate fiscal situation is long past and, as noted earlier, those moments were gone before the iPod made AAPL the darling of every investor’s eye. Pre iPod Apple was profitable, the transition to OS X was underway and the company had plenty of money in the bank. Apple’s anemic market share is clearly not an impediment to profitability, the main goal of for-profit corporations.
Clearly, Apple isn’t hurt by its anemic market share. Sure, the Mac will never get AutoCad (how many consumers plunk down that kind of coin for a home computer program?). But perhaps surprisingly, Apple still have a lot of developer support. On the surface, it makes no sense. Why develop for the Mac when the much larger Windows audience is available?
Turns out that Mac users have more money, buy more programs, and are generally a more desirable market than the home PC users. If you were to poll your neighborhood and see what software people had actually purchased for their machines you’d likely find the number of people who added a piece of software that wasn’t free once the machine came home is very low (games excepted).
Perhaps this is best illustrated by a conversation I once had with a developer who created shareware for the Mac and Windows. The program we were discussing was virtually identical on both platforms, but the Mac version sold an order of magnitude more copies than the Windows version. Looking at the ownership numbers it makes the disparity seem unfathomable, but the reality is that Mac folks are much more likely to try and then buy (downloads were greater for Windows).
Perhaps it is time Mac fans realize that the true metric to measure the success of Apple is two-fold: How profitable the company is (answer=plenty) and how much the customers enjoy the products. By either of those measurements, Apple’s strategy of maximal return with minimal effort is wildly successful.
*Roughly 93.1456% of all the columns of I write fall into this category
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Apple’s market share will increase. Why? Because the consumer market will continue to grow while the business market seems to be falling off. Apple is positioning itself as the best products in the consumer space. It won’t compete on price, but its prices are comparable to Dell.
Look at what Apple has done in the last five years. Back then, Apple was forever reputed to be going out of business, now it is more profitable than Dell. It was a niche market then, now it is creating its own markets—the IPod, iTunes, etc. It was presumed incompatible with the PC world, now it runs devices better than on a PC. The main computer magazines hated the Mac, now they say that Apple makes the best computers on the market. Apple was considered an oddity, now it is way cool.
The Intel transition cost Apple 0.1 percent of the market last year while the Computer market grew by 9 percent. But, some pundits had projected a much higher loss in market share-or even that Apple would be forced out of business. This loss is nothing to worry about. Apple will grow greatly once it get the Intel transition out of the way. There is still too much FUD circulating about the Mac. The recent rash of bogus stories about virus attacks, Macs not being as fast as Linux and Windows, Apple freezing the development of the open source portion of its operating system, etc. show this. Apple is slowly clearing away the roadblocks that have been placed in it’s way. As it must, before it can take off.
Apple has been turning out superior products in the MacBook, the MacPro and the MacMini. The next microprocessor upgrade to Core 2 duo will probably be announced in August and Leopard 10.5 will be out before the end of the year. This, for Apple, will be a good school and Christmas buying season.
There are reasons why Apple’s market share will increase.
1. It is turning out superior products at a reasonable costs.
2. It has a superior OS to Vista.
3. It is attracting new customers to the computing world through the iPod, rather than merely cannibalizing the PC market.
4. It is picking up people disgruntled with Wintel.
5. It will pick up people who need dual and triple booted systems.
6. It’s reputation is slowly improving.
7. The ads will kick in after a year or two.
8. Apple is becoming way cool with the kids through the iPod.
9. It will become the best way for computer novices to get started.
But even so, this will keep Apple’s Market share in the teens. Apple will still be a niche, but it will be in the most profitable portion of the market.
What will boost Apple’s share above ten percent will be the coming transition to ubiquitous computing. Improvements in technology will reduce the costs so that entire computers will be on a single chip. Every device on a computer today will become stand-alone as it get its own computer and interfaces wirelessly with each other.
The OS may seem less important, but this is where the consumer experience kicks in. Apple has the best computing experience and customer service. It has the most rapidly developing software. It is new and innovative when the rest of the PC market is stogy, user unfriendly and business oriented.
Apple will grow the market mostly by adding people who never had a computer before and by adding non-technical people who are afraid of computers. These people are not part of the market now, but they comprise the majority of people in the world. Apple will drag them in and make computing fun.
I can remember not too many years ago when even long-term Apple fans were abandoning the Mac. OS/9 and below had a reputation for crashing, Macs were very expensive and it was impossible to find an Apple support person who wore shoes.
It’s a different story today, and I think you will see a rapid uptake of the Intel-based Macs over the next few quarters. Don’t look for huge market share gains though - but a doubling of Apple’s market share of the home market by June 2007 is not out of the question.
I switched to Apple about 18 months ago. In the last few months, since the Intel transition, I have converted two friends to Apple and I have at least 4 friends who will buy a Mac in the next little while.
One of my friends who is not very computer literate was holidaying in Hawaii and popped into an Apple store. His reaction?
“F***, what stuff they have.”
Another friend now has a new 20” iMac running iTunes and beaming her large music collection across her house to her stereo via an inexpensive Airport wireless device. She is in her late 60’s, and fairly computer literate, but she cannot believe how easy everything is to use on the Mac. Her grandchildren love Photo Booth (great for parties) and her Olympus digital camera just connects so easily to iPhoto its ridiculous. Her large extended family are astonished by the capabilities of her iMac, and admiring of its gorgeous good looks. In this family, the Mac lost its reputation for quirkiness in a weekend and became something desirable instead.
Perhaps the greatest impact of the Intel tradition is that those of us who have already “seen the light” are emboldened to recommend a Mac to all and sundry, confident that the Mac will surprise and delight them, and in dual boot mode or with Parallel’s virtualisation software, they can run anything!
I think Apple is doing fine these day, in terms of where it’s going and what it’s doing.
That ‘run anything’ that sydneystephen mentions in his final paragraph really will have a greater effect than many are foreseeing now.
A lot of resistance to Mac was the software shortage, but really, that was just games.
I’d be tickled to see Vista degenerate into a corporate tool and a gaming platform.
Mac really doesn’t cut it on those huge corporate/government installs. I think that’s all going to be Windows world for some time to come.
But the consumer market. Oh my!
If Apple comes out with Boot Camp or its successors preinstalled on new machines, maybe even intelligently configured out of the box for PC novices, and has a Mac OS portion there too intelligently set up for new users, we might see a lot more people going for the hardware and staying for the Operating System.
I take my MacBook Pro with me to work, at clients’ sites, booted into Windows XP and casually run all the apps I need on it. I get asked quite a bit how that all works and spend a lot of time rebooting into the Mac OS for show and tell. So, maybe not a corporate machine, but lots and lots more people are asking me about it for a home machine.
For one reason or another, we still have people who believe that the Mac marketshare, short of MS suddenly going out of business, will sky-rocket.
News Flash: We will never go above a 5% marketshare so long as Windows is the 800 pound gorilla in te room. It doesn’t matter how good Apple’s products are, nor how horrible MS products are. But that is not a good measure of success. Is BMW or Mercedes judged by their marketshare? Both have smaller marketshare than the Mac in their respective markets, and neither are going out of business anytime soon, nor are they about to explode their marketshare despite having superior products to most competitors.
The figures reported for market share are sales numbers.
That means that if people keep and use their Macs longer than people keep and use Windows computers, the Mac share of the installed base is higher than the sales market share.
What do you think?
An interesting irony, Mr Seibold, is that Apple has had its worst market-share whilst Mr Jobs has been in charge. The “golden years” from 1990 to 95 where when SJ was elsewhere.
So it is interesting that under SJ, Apple has been able to be more profitable with less market-share.
Which would vindicate your theory of “Apple’s strategy of maximal return with minimal effort”
Nice article Chris, pretty much in line with my thoughts
We need more spread of the general idea that “good numbers” are good, but being able to keep an eye on “the whole thing” is even better. But maybe then many analysts would not have anything left to yammer about, become unemployed, blame Apple in the process, and boom, yet another crusade.
Apple is successful because it is selling other people’s products, namely music and video.
As a computer company they are not doing so well. Changing chips makes their product use inferior, puts additional burdens on developers, graveyards lots of applications (again,) and pretty much leaves them in the hands of mindless idiots who think music and games or TV is the only thing a computer is for. None of that content is something Apple creates, which basically makes their product a toaster. They are doing really well selling the iPod, but that is not a product that will sustain itself forever, anymore than Sony’s walkman did.
And Sony didn’t open up 100’s of high rent stores to sell a Walkman. What is Sony? Do they make radio, own the music, etc.? They had to change to survive, Apple has never changed. Apple is in trouble. Their strategy is based on incremental innovation which they try to package as breakthroughs. This balloon will pop eventually. The days of DRM are numbered, which is all that is holding the company together.
Mr Consilvio. I wonder where you are coming from… Let’s deal with this point by point…
1. As a computer company they are not doing so well. Now by what measure(s) do you consider Apple is not doing well? Share price? Profitability? Cool Factor? Market Share? On any of these criteria Apple is doing very well indeed. Michael Dell should be so lucky!
2. Changing chips make their product inferior. Really? I have a G4 Powerbook. The Macbook Pro with an Intel Core Duo processor that I set up for a friend last weekend was so much faster it was crazy. And even for Rosetta applications such as Office it was as quick, or quicker, than my G4.
3. Additional burden on developers. Is that even a consideration? Apple are delivering a product to an end user. Technology changes very rapidly - what are you saying? Keep the PowerPC chip and make the notebook users suffer to keep the developers happy?
4. Graveyards lots of applications. Maybe. Are there lots of applications that won’t run under Rosetta? If there are, I havent found any. Though Messenger wouldn’t install on the Macbook Pro - which is probably a good thing in retrospect…
5. Mindless idiots. Well, my friend Byron uses his Mac to write music. My friend Pam uses her Macbook Pro to play her music, surf the net, manage her digital photos, receive and send email, do the accounts for her husband’s building business, run her own project management business and prepare her submissions for her university degree.
6. Content. Hmmm. Does that make Microsoft toast? Apple create the hardware, the operating system and a pile of software that most of use will use with their Macs. Safari, iPhoto, iTunes, iDVD, Keynote, Pages…
7. iPod sustaining itself forever. Hmmm. Henry Ford designed and created the Model T Ford. How many were sold in 2006? Should Henry have kept his pencil in his pocket? Should Sony have held back on the walkman? Nothing lasts forever. Apple will survive long term only if they continue to design great products which catch the imagination of the consumer. They are on a roll right now - be a little bit generous and applaud Apple for getting it right today.
8. Apple has never changed. Well, I don’t imagine that Steve W and Steve J imagined they would control 80% of the personal music player market when they were selling their first computer out of their garage. Of course Apple has changed.
9. Apple is in trouble. haha. Bill, you are sprung big-time!
10. Incremental innovation packaged as breakthroughs. How incremental is the iTunes store? the iPod? OS/X? Apple have so far given us FIVE ENORMOUS revolutions. Firstly, the mouse driven point and click user interface, then the iPod, buying music by the track via iTunes, podcasting and now video podcasting. Can you think of another IT company that has changed the market in a comparable manner? I have been in the industry for 30 years and I can’t…
11. The balloon will pop. Stop blowing…
12. The days of DRM are numbered. Do you really think so? I don’t. And should they be? What do our musicians think about DRM? Challenge for you Mr Consilvio. Next time you are in a pub with a live band, ask them about DRM. Tell them you think it is your right to take their music, record it, copy it and give it away to all your friends.
BB where are you when I need you…
Market Share Anaemia. I like it.
Seriously though, take a look at Apple and tell me they are a company doing it tough.
Apple lost the corporate market to Wintel years ago. But in the home market I reckon that Apple are going to grow their marketshare explosively in the next little while. Maybe some of this will spill over into the corporate marketplace.
Here is a different perspective. Let’s say Apple grow their home market share rapidly. Say by end 2008 they have 30% of the home market. There will be some crossover into business users - lots of consultants who have Macs will require the Microsoft IT people to get on top of the connectivity issues (it isn’t hard - I use my Powerbook in my own company’s 6-server Windows 2003 network without a problem).
I can see Gartner coming out with a report that shows that Macs on the desktop cost 40% less to maintain than Wintel machines.
I can see major companies rolling out Macbooks to their sales reps because they have realised that the cost of maintaining Wintel machines is just too high.
I can see software developers releasing specialised business software for the Mac and selling a winning solution.
I can see lawyers insisting on a Macbook because they can.
I can see an Apple Macbook Pro being part of a salary package to attract the brightest and the best.
I can see people sticking fake apple logos on their Dells to pretend they are stylish…
I am new to Apple. Whatever has gone before, forget it. The world has changed and Apple are on a roll.
I honestly believe, after 30 years in this business (and 29 years as a disbeliever) that Apple will astound us all.