Hey, I think Apple is entering the post iPhone era the same way Microsoft entered the post-Windows era
just a couple of years ago. It is not to say that the iPhone is going away anytime soon
But rather to say that just like Microsoft kind of moved past windows and found alternative revenue sources,
Apple will have to do the same with the iPhone. So in the 43rd episode of the Story Behind Series,
let's take a closer look at this huge upcoming shift.
This video was sponsored by Cheddar. A new YouTube channel that covers
business, technology media and news, but without the boring parts.
Apple right now is pretty much the iPhone company
Their other products are huge businesses too. Mac for example is the fourth largest
PC brand in the world and would be a fortune 500 company all on its own,
Apple proudly touts that even despite recent slowdowns
It sells more iPads and any single PC maker sells laptops
and their other products are picking up steam, too
But, all of these pale in comparison to the juggernaut that is the iPhone.
The other stuff is substantial when compared to other companies but tiny within Apple.
And while having the world's most valuable product is awesome, the lack of any sort of real
diversification, means that one sales of that product start slowing, it can cause problems for the company.
And that's exactly what happened the last quarter. For the first time in 17 years,
Apple missed its revenue targets, the company stopped reporting the number of iPhones it ships each quarter,
and the news is full of reports from suppliers claiming further cuts in the
iPhone production going forward. And while analysts disagree on how
significant the slowdown is or if it's just a seasonal one-off thing or even
who or what is to blame, one thing has become pretty clear by now.
iPhones, just like most other smartphones as well, have started hitting a sort of ceiling
Smartphones as a whole have plateaued and are down year-over-year for the second time in a row
Which is actually part of a pretty natural process.
I think.
This graph represents the life cycle of every product. Eventually, each will reach a saturation point
where most people who want one will already have one. And it seems like,
globally, smartphones have just reached that point. Unless sales in developing markets manage to outperform
the slowdowns in the West and in China or unless huge new generational leaps like
5G or foldable phones manage to spur a massive new upgrade cycle,
It appears that we are currently at peak smartphone and what comes next will be the post smartphone
and by extension, the post iPhone era. A scary place to be for a company that relies so much on the iPhone
But taking a closer look at Microsoft might give them some hope.
Because, the peak in iPhones and smartphones
Reminds me so much of the peak in Windows and PCs.
That peak wasn't anywhere near as big as that of the iPhone
But it was very similar. Microsoft just like Apple was at some point built nearly entirely around one core product:
Windows. It was untouchable within Microsoft and while it lasted Windows propelled the company to the top of the tech world
But as it became clearer and clearer that Windows alone wouldn't be the future, Microsoft started
diversifying its business. Office was spun off and eventually became a
First-class citizen not only on Mac but also on iPads, Android, and the web. Azure and cloud services became the fastest-growing part of the business
Embracing not just windows but Linux servers as well
Microsoft ventured into
Consumer hardware with Xbox and surface. It became a major game publisher, it built a whole enterprise software suite and much more
The company isn't reporting numbers very clearly
But we know for sure that today, Windows only makes up a fraction of Microsoft's revenues. Windows didn't go away
It's still actively used by over a billion people around the world
but Microsoft not only realized that it's past its peak, it managed to bring out other products to balance out the
Slowdowns and looking at their earnings as well as their stock price in recent years, it's clearly worked out for them
I would argue that this is pretty much the exact same
challenge that Apple is facing now as well. Moving into the post iPhone era and trying to find some alternative revenue sources and
Tim Cook and Apple have actually been pretty clear about what they hope those new revenue sources to be
The biggest plan seems to be for Apple to find new ways to make money out of existing Apple users
They want to sell them more and more accessories like the Apple watch
And AirPods and most importantly they want to make money out of software and services like the App Store, Apple Pay, Apple Music
ICloud and so on and Apple has even been teasing a Netflix like video streaming service as well
Apple wants to become an Internet services company. Other than that
They are also planning to revive the iPad by slowly turning it into a substitute for laptops
In fact, all three platform makers are getting ready for a new type of device to replace traditional laptops for the average consumer
Google, is betting on Chromebooks, Microsoft is making more slimmed down versions of Windows that run on mobile chips
And Apple is making the iPad behave more like a laptop
It's unclear
If consumers really want to replace their laptops for something new or which of the three the majority of users will choose but Apple
Definitely has plans to push the iPad hard
Those are the obvious publicly stated growth plans
But let's also not forget that Apple could just show up with some completely new
Product as well. After all, they are the most secretive tech giant we know of so just like they launched the iPhone and the iPad
Seemingly out of nowhere. It's entirely possible that they will one day just surprise us with a new product like AR glasses
For example, I wouldn't be surprised given how much Tim Cook loves to talk about AR
But we'll have to wait and see ok second question
Can Apple grow these new businesses fast enough to offset the potential declines of the iPhone?
And honestly, I think it's a little too early to say. Services seems to be growing pretty fast for Apple
They alone make around 10 billion dollars a quarter which just for comparison is about a third of what Microsoft makes all together
Accessories are doing pretty great too
They are already making more money than the iPod ever made and are expected to overtake both the iPad and the Mac in revenue soon
The new iPad pros had a fairly good last quarter, which could mean that after a long period of struggle
Apple's strategy is working and some people are slowly adopting iPads as their main computers
but still all of these appear tiny in comparison to the iPhone and
Accessories and services are both heavily tied to the iPhone's performance
So slowing iPhone sales could theoretically cap those businesses, too
I also wonder if Tim Cook, whose expertise and brilliance is in supply chain management and operations, you know stuff that hardware businesses
Really need if he is the right person to run an internet and software services company
I mean those two things require completely different sets of skills
Microsoft had to undergo long painful years of transition and I'd argue that the only really managed to move past Windows once they actually
replaced both their CEO and the guy who ran Windows
people like to assume that tech companies who are really good at building one thing can just magically
Overnight become really good at building something completely different, but history actually suggests that that is not at all the case
It took Microsoft years of Quality Assurance problems and big overstocking issues until they became a competent Hardware maker with surface
Google went through dozens of failed devices. Their super expensive failure
that was the Motorola acquisition and years of Quality Assurance issues until
This year their Google home and pixel hardware started to become well
Moderately successful and Samsung too has been trying and failing to build a successful software business since forever
Big changes are difficult for even the most successful companies
So I would expect Apple's adoption of Internet services to be a long and difficult process
Filled with changes in their senior management team as well. Either way,
I would actually also expect this new
Embrace of Internet services to impact Apple's values and impact how Apple thinks as a company. Just think of privacy
For example, apparently Apple's favorite topic. As their income is currently mostly from selling hardware
It makes sense that they talk about privacy all the time
they are not in the business for selling ads after all but as they become more and more of an Internet services company can they
Afford to continue to respect your privacy on the same level?
I mean Google Maps and Google assistant wipe the floor with Apple maps and Siri in large part because
Google is more than happy to capture and use all your data whenever it can
Netflix also doesn't shy away from analyzing what everyone watches because it lets them make smart decisions
About what shows to produce and how to market shows effectively respecting people's privacy is a noble pursuit
But it has historically not been the winning formula for the Internet services category
I sure as hell hope that Apple can stick to their ideals, but I think it will be difficult for them
Another big change is that in the past Apple has tried to avoid relying on third parties as much as possible, but
Internet service companies, like Google or Netflix
well
They tend to be cross-platform for a reason
Users expect their movies, music or cloud files or whatever other service to work from any device and we can see Apple slowly
making this shift, too.
Early signs included Apple music embracing Android first and then coming to Alexa and we have recently also heard news of iTunes coming to
Samsung TVs, AirPlay and HomeKit coming to multiple other TV platforms and so on
Apple has brought some of their apps and services to other platforms in the past before
But this new services push will mean that they'll have to be a lot more cross-platform and a lot more cooperative in the future
which, if you think about it, changes the whole
Apple business model because in the past if you wanted access to Apple services
You needed to buy the Apple TV or the HomePod
But now you can just buy a Samsung TV and Alexa or whatever the hell you want and you can still get access in other
words
There are big big changes on the horizon for Apple and seeing how Apple will manage this shift will be
Fascinating every company has to face their hero product hitting a ceiling at some point some like Microsoft managed to find
Replacements before it was too late and others like Blockbuster or Kodak become unable to deal with the technological change.
In fact, Cheddar made a great analysis of Codex failure to adapt
So if you like these sort of company history videos
I recommend watching theirs
Links are in the description below which will let them know that I sent you and if you liked the video consider subscribing to them
Thanks to Cheddar for supporting my channel and I'll see you in the next video