Curated by Stuart Fogarty stuart@admaticallycom for AFAO'Meara Advertising, Streamabout The Video Agency and Admatic Ireland.
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Apple, on foot of recent Q1 numbers which were seemingly 'below expectations' and which you can read about by scrolling down this blog, means their share price is slipping. It's -11% since April 26th (-27% over the year). An 8 straight day decline and this hasn't happened since 1998. Sales in China were also -26% so investor confidence is a bit rattled with headline investor Carl Icahn, dumping his stock and adding to the downward pressure. Tim Cook was interviewed yesterday to rally support and as he points out, things are still pretty good at Apple. Q1 had 50 Billion+ in revenues; 10 Billion in profits. "No one else is earning that" he said, "Last year we earned 53 Billion in profits and I think the number 2 company was 24 Billion". He also talked about "great innovation in the pipeline" and if you looked at China on a two-year basis, "Apple grew +70%. It's hard-pressed to say those aren't good results". He also called India a market with huge potential. Cook is right. This is an extraordinary company showing dazzling high numbers and will continue. The donkeys of Wall Street can't see past short term declines in their supposed high expectations. They're simply playing the market, shorting for their own financial gain rather than a true reflection of company value and activity. So be it. But don't let that be statement on true value long term. 10 Billion in profits. In a Quarter. No reason to panic.
Apple announces further expansion today in Cork, Ireland (South West). Tim Cook was there in person this morning. They've been in Ireland for 30 years and announced a further 1,000 jobs by 2017 on the back of the 5,000 Irish direct employees already. And that's up by 25% this year alone. It's estimated that Apple's Irish operations support about 18,000 jobs directly and indirectly. Fairly vast. It makes Apple, one of Ireland's biggest employers/investors.
So much ado about nothing. Or is it? Apple's long awaited, over excited, highly pumped PR launch of the new Ipad (the first launch was in 2010), the 'Ipad Air', just didn't seem worth the 'long-awaited' wait. Okay it's much lighter and slimmer, about 20% less, which MD Tim Cook said took "years" to develop and heralded it as a big "leap forward", a new generation but then there was little else to say. It replaces the IPad 4. It comes with a better HD camera for 'Facetime' and dual microphones but regrettably, the same battery life. Don't know about you but speed has not been an issue with my IPad, nor camera, nor microphones - but battery life has. As the Ipad moves into movies, extended battery life will be key and that hasn't been fixed.
Innovation has to solve a problem, rather than just for the sake of it. The Ipad Air is much, much faster too (A7 chip) and it comes with free Mac software, although costing £739 stg for the 128 gig, Wifi enabled version, it's not cheap. The entry level 16 gig version, will be about £399 stg when it's available on November 1st. But 16 gigs, is really of little use in my view. It's an increasingly competitive market too with Samsung and Nokia "phablets", although Apple's is guessed to have a 32% market share having sold 170 million Ipads. Nokia of course, have just been bought by Microsoft for over 5 billion usd and launched their new Windows 8 tablet this week too. Microsoft's own 'Surface2' went on sale yesterday but nobody seemed to care. They were watching Apple. So it's a hot space to be in. One of the great criticisms after Steve Jobs (I know, yawn) is that Tim Cook's leadership hasn't brought real innovation to Apple since. If this is a sign of it, I'm inclined to agree. A lighter, faster, more expensive, Ipad might be good and useful but it's hardly, earth shattering. And earth shattering was how Apple used to be.
Apple's market cap has dropped below 400 Billion usd, Shock! That's right....Billion. Or at least, that's how it's being reported - as a shocker. This week's decline in share value comes after a court judge has cut back, by 450 million usd, their award against Samsung for copyright infringement of 1 billion usd. Other uncertainty about profit margins on products (notably in China) and a lack of innovation, has reduced the market cap from 650 Billion in September (when the new Iphone 5 launch was impending). It's still a staggering, unbelievable, valuation. Google is worth a mere 270 Billion and Microsoft, only a tiny 230 Billion. So Apple is still way, way ahead. And the ongoing coverage of CEO Tim Cook is generally pretty negative. It seems that if Apple sneezes, commentators get a cold, because their talk of Apple ("in decline", "losing confidence") seems to be deliberate for a company so strong. And we know Apple is sitting on a pile of cash (which in turn, becomes a criticism that "Apple doesn't know what to do next with its cash").
It seems to me that few can ever get their head around Apple being without Steve Jobs. He seems to have been so pivotal, that his death has really damaged the company even still. Always an issue for companies that are inexorably linked to people. When something happens to the person, it reflects entirely on the company. But he left it strong and so it is. Talk of Apple's demise are unfounded. Worse than that, with a 400 Billion valuation.... they're silly.
Only last week I blogged about Tim Cook's announcement that Apple was going to make China it's "number 1 market". However, my point was that it created a marketing conundrum. (http://streamabout.blogspot.ie/2013/01/apple-sees-china-as-their-number-one.html) If Apple stayed premium priced (as it is) then few Chinese could afford it. If it dropped prices, then that would have a global affect on the brand as it re-positioned itself more downmarket. It suffers hugely from lower priced competition anyway in the form of Samsung who outsell the Iphone 4:1. So it was an interesting marketing issue. Today we have the answer. What Apple have done on its China website is to let buyers pay for products in instalments and mostly, over two years. So the price remains the same, but the payment plan is structured to be affordable. Good solution, leave it to Apple. It's only for purchases been 48 usd and 4,800 usd and some additional fees are paid at the end, presumably to cover the cost of credit. An Iphone in China is 850 usd, well outside the average Chinese salary (averages 577 usd per month) and dreams but this way, it puts it into affordable reality. Apple is currently the 6th biggest player in China but only starting. This is a great solution and great marketing. Simple yes, but then you have to think of it and implement it. I wouldn't have.
Apple for once, seems to be in a bit of a marketing bind. Their CEO Tim Cook, currently on a visit to China, said China will be "Apple's number 1 market in the future" even taking over from the US. And who would argue with that. In fact China is going to be the biggest market in the world for most brands in the future, full stop. Remember too, there are Chinese technology companies (I can name 5 already) of note who will also have an impact outside China - this is not a one-way street. The problem Apple have in tackling China and indeed, in competing globally with Samsung (who outsell Apple 4:1) is price. Apple is and always has been, the premium brand ($400/$500) but China needs a low cost brand (under $200). The winning formula for Samsung was of course, to do it better (or copy) than Apple and sell it cheaper - that's proved a winner. The problem with China is they don't have the incomes en masse to support Apple's current pricing. So they simply won't be able to buy Iphones and Ipads in massive numbers at current pricing. Never mind just China, with a worldwide recession, Apple needs to consider its pricing anyway. If Apple reduce their pricing, it will shift the brand values worldwide into a place where I'm sure it doesn't want to go - cheap rather than premium - and affect every market in which it trades. Although interesting isn't it, that a brand can be premium in one market and cheapest in another? Corona beer in Mexico is the 10 cent, cheapest, downmarket beer. In Ireland and the UK it's $4 and premium. Same beer, same bottle, different markets. If Apple don't reduce their pricing but try the old marketing trick of developing a new "low cost" brand - The "A Phone" or something - it will be absolutely transparent and have exactly the same impact. Apple will be cheapened. Of course a cheapened brand is not a bad thing in recession - not at all. One only has to look at Irish Airline brand 'Ryanair' and sees them sweeping across Europe. Cheap and nasty but a huge success. So it's a brand conundrum and a particular problem with a brand as established as Apple. My view is the way out is to move towards value add. In other words, retain the existing pricing (more or less) but then give something with the brand - buy one get one (bogof) or possibly a loyalty scheme (Apple club) giving massive rewards and so on. Subsidise the upfront cost. We will see what Tim Cook does. Already Apple have indicated that they will not be reducing prices....but we'll see. If they're going to crack China, whatever about competing with Samsung, they have a problem and it's not going away. But then I'm talking about Apple and we know they'll find a way, they always do. But it will be interesting marketing to watch.
Extraordinary result for Google in one night....and it is stunning. Stunning. Overnight, Google's Map App for Iphone has gone to number 1 in the Apple App list. It is the top free App overtaking games and YouTube. Mind you, Apple's Maps aren't what you might call.... great. Remember Tim Cook's apology after it was shown that an air plane runway had appeared in a main shopping area. It lead to tabloid questions as to whether Pilots depended on Apple's Map? Because if they did, we're all doomed. (Sure they do). Imagine getting into the pilots seat of an aircraft, turning to you navigator co-pilot and saying, "you can relax, I have my maps on my iphone". Really. Although to be fair to Apple, they're giving their competitors a fair shake on their App store - like Google. Google have spent 7 years getting this product better and better and they added everything they can - from Apartments to roundabouts. "It's as smooth as a videogame" one report said and swiping (50% of map usage is mobile), moves the map experience along....which is pretty much described by all as, "beautiful". Swear. A beautiful Map App. As you look at the map, you can swipe up an "info sheet" telling you about the bars and even more bars in the area. Restaurants, Theatres etc. too. It gives easy zoom in and out and multiple routes of getting from A to B. And controlled by a Siri-like voice from Google Now. Public transport details are there too. And the App is here too https://itunes.apple.com/app/id585027354?mt=8 You should get it. Everyone else has. And it comes as no surprise - it deserves everything that's been said. It's just a case of "here's how it should be".
Today, the Apple IPAD gets a new family member, the mini-Ipad. In San Jose Apple will unveil their mini under the slogan "the biggest thing to happento the Ipad since the Ipad". The picture above is a leaked image. A small tablet (about 7 inches), similar in size to both Google and Amazon, it's exactly what Steve Jobs didn't want to do, so new CEO Tim Cook is out on a limb here. It's likely to be accompanied by a wide-ranging announcement of new software and products creating a Wow! factor. And expect a spectacular launch. It will be a smaller ipad or, if you like, a bigger Ipod touch, giving the usual fare of movies, itunes and so on. But it will be more portable to allow it to compete with the Kindle Fire and Nexus 7. In particular, it will be the lower cost Ipad and that's the key. An opportunity to bring the expensive Apple product into mass hands at a lower price without damaging the brand itself. In a way, the mini Ipad will allow you to read a book as a paperback rather than as an Ipad and if anyone can make a Kindle better than Kindle, it's Apple. I expect it to cost about 100 usd. This is a big announcement by Apple and one can't help wondering if it's intended to steal some of Microsoft's thunder with their launch of Windows 8 on Thursday. Methinks it is. It will also show Apple as the great innovator. This too is October. The ideal month to launch potential Christmas present brands and I get the feeling that the mini is going to do terribly well. After all, who would be disappointed with an Apple in their stocking? We will see. It's a lesson in producing excitement of a low cost product without damaging the mother brand. No mean feat.
The use of "scarcity" as a marketing trick is one that has gone on for decades. In olden times, shop keepers would pay customers to form queues which in turn, got the attention of passing trade whom also wanted to join the queue. A well known Irish travel agency did exactly that, each Christmas. Paid customers to queue over the Holiday, generating both PR and a sense of scarcity for their product - if it's going this quick, you'd better get one now! Apple are the masters of this trick since they started. The Iphone 5 launch has become the latest victim. Seemingly, we're told, demand was just so huge, the phone sold out. You might know that the Iphone 4 sold out in 20 hours and the Iphone 4S in 22 hours. You'd think with that experience, Apple would have multiplied its stock levels for the iphone 5? But that wouldn't be the point. They have stock, they just want to create demand. Not a chance of getting one now we're told, it has sold out in 60 minutes, 20 times faster than the Iphone 4S so now, you've a two week wait minimum - scarcity. I have no doubt the Iphone 5 launched well, but that was to be expected because of all the chatter. However, I don't expect anyone with a brain in their head to think the demand wasn't anticipated and this "sold out" nonsense, is something more than that. But yep, online hacks everywhere are buying into it! Fairly astute Techcrunch goes with the headline that this sell out shows "Apple's dominance". They should know better. It's a trick, nothing more, to show success and create what we call "pent up demand". I quote: "I guess I shouldn’t be surprised anymore that Apple product launches somehow continue to exceed expectations, the machine reliably churning out another hit. But I am. Mostly because of how rampant the obsession is to buy the next generation of iPhone as soon as possible".
Oh dear Techcrunch. I'll bet the next one sells out as fast too. Nobody, least of all me, disputes Apple's greatness and worthy of its high value. Equally there's no doubt, the Iphone 5 will be a huge success and compete properly with Samsung. But I've no doubt too, you're seeing the oldest marketing trick in action. Start a queue, you'll create a demand. Job done. And everyone falls for it - again.
