The Unofficial Apple Consumer Strategy

I switched to all things Apple around 2002-2003 and never looked back. In 2006 I drew up a one-pager that illustrated what in my mind Apple's consumer strategy should be. It was then just for fun and not meant to be a serious prediction for the future behemoth that was going to lord over all other tech giants. Surprisingly, it was not off the mark too much in rear mirror.

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This chart can be viewed from a few different angles:

Where We Are

Apple’s current offering already covers study room (iMac) and living room (AppleTV); static state (iMac) and mobile state (Macbook); indoor and outdoor (iPod). With the addition of iPhone, Apple is posed to become the 24/7 soul mate for the consumer no matter where he is at and no matter what he is doing. It’s no secret that Apple makes most of its money on hardware. Its journey on that path is pretty remarkable  if you think about the fact that until iPod’s birth in 2001, Apple only had Macintosh desktops/powerbooks to compete with the ubiquitous PC/windows combo. Seeing that it was a mission impossible to upstage the 95% market leader, Apple shrewdly ventured into an off-the-beaten path of the MP3 player domain. By commanding lion’s share of the player market and opening up iTunes for Windows, it successfully converted hordes of new fans like me. Convinced how cool Apple’s application was, many naturally bought big-ticket items like iMac/Powerbook/Macbook and never looked back at PC/Windows since.

In retrospective, that curve ball strategy was certainly a stroke of genius and is now stuff of legend. With the full line-up we’re about to witness in June (iPhone), Apple will be in position to launch the
greatest counter-strike ever. Forget about all the exciting functionalities (most of which are not revenue streams) for a second, iPhone’s importance lies in its ability to drive iMac/Macbook sales. Why it has a shot of doing that? Because it syncs. It syncs with iTunes on existing Macs and potentially it can sync with AppleTV (my speculation) so that you can control your entire Internet experience without stepping out of your living room (assuming your Macs are in a separate study).

What We Can Have

iTunes is over-due for a name change, obviously (my suggestions are iCosmo,  iVerse, iSphere… yeah..very lame, I know. iLife is actually very good, but it’s already taken by Apple itself). One key factor in iPod’s success is the vast amount of contents available through iTunes. I think eventually we can pretty much have everything through Mac applications. Just list down all the non-interactive information you ever want to have by the medium it’s presented through. Music, checked; video/movie, checked; TV programs, checked; images, checked (iPhoto); radio, checked. Let’s fill the blank now. What else is missing? Books? Bingo!

iPod is too small for book-reading, but iPhone has the right size to serve as an excellent book reader with its relatively large screen. I’m usually not a huge fan for digital book reader as I feel there is something unique about flipping through freshly minted pages. But if this market will ever take off, I’ll give my benefit of doubt to Steve Jobs and the Co. (sorry Sony, not you).

Of course, unlike the music/movie markets where content ownership is highly consolidated into a few hands, book market is extremely fragmented with ownership all over the place. So it’ll be a much bigger challenge in terms of negotiations, logistics and operations. That’s another discussion for another day.

What We Can Do

iPhone will be the ultimate all-in-one enabler of various applications that we can’t live without. Even with the meteorite rise of iPod, Apple’s value to consumer is still primarily on what contents consumer can GET. iPod is not designed to offer sophisticated interaction or contents creation. It just retrieves contents and presents them in a very efficient manner. With iPhone, Apple’s prowess in tightly integrated softwares will be fully unleashed. Now we can actually do many things, or, should I say, everything. Below are just a few low hanging fruits:

1. Full PIM (personal information management) solution

This will be the holy grail for many users, especially the business ones. It has three main elements: contacts, calendar and to-do list. Right now consumer often has 5 different places for them: PDA, cell phone, PC from work, PC/Mac from home, and web (gmail/yahoo). To sync all of them, in all directions while maintaining full interactivity on each device,  is an insurmountable task. The technical difficulty of synchronization increases exponentially with each additional device. iPhone can combine PDA + cell phone + home machine + web (gmail contacts potentially can have two-way sync with Apple’s Address book. Not easy though.).

In addition, iPhone not only can reduce  the number of devices, but also may offer information aggregation from multiple angles. If you click on a contact’s profile, it’ll show all his emails, all his voice messages, all the chat scripts, all the photos, all the podcasts, all the meeting requests involving him, and all the to-do items assigned to him. That, my friend, is the future.

2. Geocoding & Mapping

Web 2.0 applications such as flickr.com and maps.google.com have made geocoding/geotagging possible. The future vision is that you click on a place on the map, you can see all the photos, videos and related contents right there. The bottleneck seems to be logging the GPS figures. It’s still very expensive to get a GPS-embedded camera, or a portable GPS receiver with display. Like many other Mac fans, I’m guessing that iPhone will be GPS-enabled very soon. This is how it works: you use iPhone to take a photo; save that with GPS data into iPhoto; send the photo to Google Map/Flickr; then IM the link of the address to your buddies - all done on iPhone. I won’t go much further here. Once you have a smartphone + GPS + Map, you can virtually do a million different things, and I’ll just leave the rest to your imagination.

3. Gaming

What does iPhone look like? Nintendo DS and Sony PSP. Hah, now we’re talking. Paul thinks that Apple should just acquire Nintendo and I totally agree. Putting aside the trivial operational and cultural challenge (which is besides the point) and just for the pure of fun of intellectual debate, Apple and Nintendo is a match made in heaven. Both excel in home-grown, enclosed products and both handle hardware-software integration very well. Many of Nintendo’s DS games, which require touch-screen, can be potentially adapted to the iPhone screen.

There has long been a debate on whether Apple should position itself as a game machine. There are two trends that are clearly emerging. One, game consoles are morphing into multi-media entertainment centers; two, interactive on-line games are re-defining what is game, who plays them, and who will pay for them (just look at the phenomenal success of world of warcraft and second life, and their impact on the mainstream society).  AppleTV + iTunes + iPhone will be Apple’s response to the attack from Xbox 360 and PS3 on the first trend, and iPhone with wi-fi + Nintendo can provide Apple a leap frog into the highly lucrative online/casual gaming market. If my memory serves me right, gaming industry’s total revenue already surpassed that of Hollywood since 2005. For such an industry whose rapidly-expanding boundary keeps challenging people’s conventional wisdom and traditional expectations, Apple should really get a decent slice of that.

4. Pushed Contents: RSS and Emails

At the moment “push” technology is being used on some email services, like corporate emails for Blackberry and the coming-soon Yahoo email for iPhone. I envision one day it will also be deployed to RSS applications like Google Reader and Bloglines on a mobile device. In an age when people only care to watch the first 20 seconds of movies on youtube, RSS, along with Google Reader, has totally changed my way of reading Internet news. ’nuff said. Just fire up your iPhone and read your RSS feeds there. Plain and simple. Hold on. There is one more twist. Another blank spot on Apple’s strategy landscape is enterprise solutions. Blackberry is still very resilient because it can push Outlook emails to satisfy the needs for business users in large companies. However, what if Apple works with Google to push gmail to iPhone (I don’t have much faith in Yahoo’s ability to do anything exciting), and what if companies can migrate their group collaboration applications to Google/Apple (already happening) and abandon Outlook? It’s a fairly long shot but a very possible scenario. iPhone, potentially can be Apple’s spring board to break into the enterprise customers.

5. Instant Messaging and Skype

Another fiercely-contested market where iPhone’s unique wi-fi capability can fully leverage Apple’s existing application that is well-designed but sparsely used. Yahoo Chat is already available on Blackberry. iChat is the best chatting client but few people, even among Mac users (Adium seems a more popular choice), are using it. It should get on iPhone while improving its jabbar protocal to better work with MSN, Yahoo and Gtalk users. It can be done today on a Mac but the cumbersome procedure is not for the average users. The hard part of the IM market is how you can milk money out of it. Skype could be a good source of additional revenue for Apple. There is already fully-fledged IP Skype phone. Why not just use iPhone to call your Skype buddies?

Having said all these, iPhone’s main use is still to drive hardware sales for iMac/Macbook as mentioned earlier.  All the nice contents and fancy capabilities are right now just various parts of a seamless and holistic  user experience, but they do enable us to glimpse into how Apple can shape our life in future while making a killing commercially. That future is beautiful.

By the way, you can also make phone calls with iPhone.

So...whew, long story short, that’s my take on what Apple’s strategy can be.

Herbert Yang

Herbert Yang

Shanghai