Two in Three Apple Watch Owners Won't Buy Next Version (Told You So)

Here we are, those who bought Apple Watches have been playing with their iToys. Some utterly love their iGadgets. But most who were duped into buying the expensive tech jewelry were disappointed or don't find any reason to upgrade. A fresh survey of Apple Watch owners by Quartz finds that two thirds won't be buying the new edition. And this turns out pretty much exactly as I predicted. The gadget does not have the appeal of the mobile phone/smartwatch (an Apple Watch is not even technically 'mobile' because you have to tether it to an iPhone for its functionality meaning it is 'only' an accessory, differing from those smart watches that do their own connectivity like say Samsung's Galaxy Gear smart watches). And I said the life of the Apple Watch will be two genations, the second generation will not sell as well as the first, and then Apple will quietly shut down this silly cul-de-sac of tech innovation. We are nearing the half-point of that prediction and the signs say.. those who buy Apple Watches do not on the whole fall in love with the idea of the metal on the wrist. It is a poor technology solution and will not replace the smartphone. Hence, it will fail as a business idea. Apple is on that path now, to ending the Apple Watch after the second edition. Here is your link to the Quartz survey

For those who want to re-visit my original analysis and insights and forecasts related to Apple Watch: Here is my original evaluation of the Apple Watch concept and its market potential from October 2014. And here is my 'final' analysis of Apple Watch, once it was launched and we saw how disappointing it really turned out to be in March 2015.

Comments

[Per "wertigon" Ekström]

The way I see it, the Apple premium is slowly losing altitude - And the problem with Apples business model is that they do not run on the same infrastructure that the rest of the smartphone world use.

Different chargers, different headphone jacks, different App platform... Everything is different from the rest of the market.

Sometimes it's great to be different. In the case of Apple though, it will mean more and more headaches as the world more and more standardize on Android.

Apple now needs to grow a new leg to stand on, as the iPhone will slowly sink (though this will not be apparent for years). And the Apple Watch is not it, the Apple TV is not it.

The watch is a nice side business but the next success story? Don't think so... :)

[Per "wertigon" Ekström]

Is Apple getting desperate on the App front?

http://www.theverge.com/2016/7/13/12170410/apple-reality-show-name-planet-of-the-apps

[E.Casais]

@PWE

Apple is not getting desperate and is making billions out of apps, but perhaps it has realized that app developers are becoming so.

After all, that "reality show" is described as letting "contestants [...] compet[e] for mentorship [...], as well as funding from top-tier VCs investing up to $10 million and marketing in the form of featured placement in the App Store."

If there truly are over 2 million apps in the AppStore, then just getting noticed can no longer even be described as a challenge -- let us not even discuss making any money at all.

So this is a way, admittedly an odd one, to rekindle some faith in the business model amongst app developers.

[Abdul Muis]

For 3 months ending May 2016 Samsung Galaxy S7/S7E (16%) beat iPhone 6S/6S+ (14.6%) in the US.
http://www.kantarworldpanel.com/global/News/Apple-versus-Samsung-is-so-over

While this is the norm everywhere, it's never happened in the US.

[TwistedFacts]

Abdul: nivelreumaan way to drop this:
"What’s more, when we look at where these purchases are coming from, just 5% of Samsung purchases came from those switching away from Apple, while 14% of Apple purchasers came from those switching away from Samsung. In both cases, the majority of sales came from customers repurchasing and upgrading within their preferred brand."

[Per "wertigon" Ekström]

@Wayne:

"And it doesn't matter that YOU think Apple products cost too much and are inferior. What matters is: does Apple have the ability to serve customers who think Apple's products are worth the money and are more desirable than the competition."

What matters is: does Apple have the ability to fool customers into buying devices that really doesn't do anything for them?

Why of course they do! However, fool me once, shame on you. Fool me twice...

[Corrections4U]

@per
"Why of course they do! However, fool me once, shame on you. Fool me twice..."

That analogy has been presented over and over again since original iPhone. If it did not apply during last 9 years, why would it do so now?

[Abdul Muis]

@Corrections4U

Because in Apple first couple of years, WHILE apple is NOT the best in all aspect. It still lead in some.

BUT LATELY, Apple have falling to only AVERAGE.

[Abdul Muis]

Interesting stats...
http://www.valuewalk.com/2016/07/apple-inc-aapl-china-june-q/

[chithanh]

@Per
Apple customers can rationalize to some degree buying a more expensive / inferior product carrying Apple branding, as long as the difference is not too big. Some older article but still worth reading:
http://betanews.com/2013/01/18/i-cant-believe-i-switched-from-iphone-5-to-galaxy-note-ii/
"biased but not stupid" is probably the best way to put it.

@Wayne Brady
> Define success?
As readers of this blog, success means shaping the future of mobile.
Now there is no major innovation coming out of the Apple watch (neither out of iPhone nor Mac) and even if there were, the competition would be able to replicate within 3 months. Apple reaction time to the competition's innovation however cannot possibly reach 3 months on their 2-year product cycle.

[winter]

Tomi,

As you expected

Clinton will push constitutional amendment to 'overturn Citizens United'
https://www.washingtonpost.com/news/post-politics/wp/2016/07/16/clinton-will-push-constitutional-amendment-to-overturn-citizens-united/

[chithanh]

@Wayne Brady
> success on this blog is being #1 in market share.

I think it is not as simple as that. You have to take the trajectory into account as well. When Symbian still was #1 at some point it became clear that it didn't have any future. Yes, it brought many innovations. But the writing was on the wall that innovation would happen elsewhere from then on. So while Symbian had remarkable achievements and successes, at the end it was just a mobile OS market leader reaching its expiration date.

> Profits don't matter as long as there is profits
> Only 1 company sells more smartphones than Apple....after all these years and all the cheap competition.

Well, the more competition among Android manufacturers, the less likely any individual one is to beat Apple in sales. Who'da thunk?
The collective sales, financial mass, amount of innovation of Android community totally dwarfs that of any individual manufacturer, including Apple. This is what counts. I can only point again to Eric S. Raymonds excellent analysis on the issue: http://esr.ibiblio.org/?p=2975
Apple is still around because it is profitable. Apple Watch is profitable too I guess, so it will be still around for some more time. But development/engineering resources are scarce, and much smarter to invest into improving the company's cash cow iPhone rather than the Apple Watch.

[Per "wertigon" Ekström]

@Wayne - it is not hard to be #1 if you're one of few seriously investing in it. Most others have realised the smart watch field is incredibly narrow and either they've moved on, or developed smart bands, or stuff like that.

But hey, it's like MS - what is the point of being king of the desktop when it's a measly 20% of the whole computing market?

[chithanh]

> And yes, Tomi has set the rules here and "marketshare with some profits" is the standard. Nokia was Number 1 all the while it was number 1.

As I wrote, it is not as easy as that. If you want to shape the future of mobile, marketshare today is good but not everything. Trajectors/capturing the new users is important. This has been a recurring topic since early times of this blog:

http://communities-dominate.blogs.com/brands/2009/09/what-do-i-mean-by-next-four-billion.html

Having at least some profits is an economic prerequisite in order to continue down that path. Having some market share is good to sustain complementary stuff like an app ecosystem.

> But now, Samsung makes far less on far more unit sales. HTC, Sony, Blackberry are all going out of business soon.
> And profits far more than all the rest combined.

You are back at using Apple's big profits as an argument. This is not relevant here.
What any individual Android manufacturer does and sells is irrelevant for Android. If HTC or Sony go out of business, it won't matter, other manufacturers will readily take over that business.

> Apple still setting the agenda despite it's "small marketshare". #2 in marketshare compared to all other manufacturers.

No, they are not. There is almost no innovation coming out of the iPhone nowadays. #2 position doesn't mean much if the competing ecosystem consists of >80% share but divided into thousands of manufacturers.

> And yet, it's allegedly a flop.

Apple Watch has achieved some success, but as Tomi said it is a "silly cul-de-sac of tech". No future for it. Some profits to meet the economic prerequisites that it will be around for a bit, but that's it.

[chithanh]

> How is it that Google and so many Android makers jumped into the smart watch business on mere rumors (or corporate spying) that Apple was working on a watch IF Apple isn't setting the agenda?

They *are not setting* the agenda in smartphones. Did I say they never were in smartwatches?

> So, rather than acknowledging this major accomplishment of Apple's - you folks fall back on insulting Apple customers for being too stupid to know better.

I wonder how long one must be a fan of Apple products in order to develop such a persecution complex.

I did not accuse Apple of being stupid. Actually they are very smart moving development resources away from Apple Watch and towards iPhone. Where Apple had achievements I of course acknowledged and commended them for that. Last time in smartphones it was when Apple went 64-bit ARM a year before anyone else, and handed Qualcomm and others their complacent asses to them. (In PCs it was when the MacBook 12 abandoned the proprietary Thunderbolt and MagSafe in favour of open standards based USB Type-C with Power Delivery and DisplayPort Alternate Mode.)

What I noted is that Apple's strategy prioritizes immediate profits over marketshare, and that they cannot keep up with the innovation of the Android competition. But that is not a result of being stupid, and I'm certain you will find people on investment blogs cheering about this. But this is not an investment blog.

[Tomi T Ahonen]

Dear I'll Just..

I deleted your comment. You did not explain anything about that link. But at that link was a ridiculously misleading chart of a share price, which seemed to suggest a giant drop, which was a slight one-day decline (when you look at the SCALE on the chart..)

Don't do that here. If you have a point to make, make it. You may provide links. But don't troll us. That was silly.

Tomi Ahonen :-)

[chithanh]

@Wayne Brady
> Can't keep up?!
Indeed, can't keep up. The Apple-Samsung lawsuit made documents public that revealed it took Apple around two years from realizing how consumers want big-screen smartphones to actually releasing such a handset. Any Android manufacturer who needs two years for that will be out of business very soon.

3D touch can be useful in some areas. I'd hardly call it an innovation because it is just a new name for existing technology. And yes, Android manufacturers will move to pressure-sensitive touch screens if it turns out to be something that consumers want. But apparently for now they have decided that there is no need to hurry.

> Like with Apple Pay

Apple Pay is quite inferior to the mobile payments Nokia had a decade before, including carrier billing and whatnot.
It didn't even work outside USA in the beginning.

[chithanh]

Sorry that should have been "Nokia had *half* a decade before". :)

[Per "wertigon" Ekström]

"Apple's first phablet exploded in sales and took huge share away from Samsung."

As I've pointed out multiple times this was due to three things;

1. Coincided with Chinese market taking off
2. Pent-up demand for a large-screen smartphone
3. Key competitors (Sony, Samsung, Qualcomm) made major strategic blunders which enhanced the numbers.

Apple grew due to it's own accord, but Samsung went in decline due to the mistakes they did. Now Samsung is growing their Galaxy line again, and it is doubtful they will do another major blunder - but you never know. :)

"Apple was never in the PC OS market and isn't in the smartphone OS market now."

But they are in that market. Else they would provide Android phones, not iOS phones. iOS is a platform and Android is slowly but surely chipping away at that platform, device after device.

"And Apple's business has proven it's sustainability."

Just like Nokias business has proven it's sustainability? Or Nintendo?

[Per "wertigon" Ekström]

@Piot:

Market share right now is a toss-up. I have a feeling that we'll see a decline in numbers in both Apple and total markets this year, but I could be wrong. The first quarter was everything but promising, and Apple is flagging for another dissapointing quarter. I'm almost certain that Apple will not sell more than 231M units this year, so Apple will not gain any market share unless the market as a whole dips.

We'll know in August when the Q2 report comes in... :)