Fear of an Apple Planet

Jaws are on the floor. Apple’s earning results sailed right above every single expectation and it was the first time a technology company posted earnings of this size. MG Siegler has a nice round-up on TechCrunch on some of the more notable numbers. Everything Apple did last quarter was incredibly impressive.

And yet, I’m worried.

It’s not because Apple is doing anything wrong.

It’s because almost every other company facing them is fucking up so badly.

Apple is at its best when they have someone to compete against. Existing markets or new ones — they need to feel the thrill of the hunt. When they don’t, well, things start to get a little unpleasant for their customers.

The best way I can think of to describe Apple’s problem when they don’t have worthwhile competition is with the famous Henry Ford line: “Any customer can have a car painted any color that he wants so long as it is black”. Apple has always carried around a little piece of that. The products Apple has produced for ten years have been the products that they want to produce. Apple is justifiably proud of this — they love bragging about how they don’t need focus groups.

This has worked out pretty well for customers. Which means it’s worked out pretty well for Apple. Deservedly so. But even though Apple is deeply and culturally dismissive of focus groups, they are hyper-aware of what their competition was doing. When Steve Jobs introduced a new product, he almost always started out by talking about what was currently available on the market. Remember when Jobs introduced the iPhone? He walked the audience through the major smartphones on the market at the time and peeled all their features back with a scalpel, revealing just how much disease was underneath.

Now the major changes in iOS have always been relatively obvious: developer support, copy and paste and notification handling chief among them. And while there’s no doubt Apple would have worked on those features at some point, I can’t help but think that if it wasn’t for Android — or even Palm — these features may have suffered in comparison.

It’s hard to point to any significant missteps on Apple’s part. The products that most readily come to mind are the mice released under the second reign of Jobs. There was the original hockey puck mouse, a product of such immediate and obvious terribleness and yet Apple kept it around for two years. This was followed by two other subpar mice. For over a decade, Apple kept releasing relatively crappy products.

You may say it’s a minor thing, as are other efforts like Ping and iAd. And I agree with you. But think about this: It’s not that these products don’t have competition. They do. And yet they suffered. Why?

Because the game wasn’t big enough for Apple to care. What’s the fun of hunting mice when there are elephants out there?

The problem is, all the other predators are starting to look like they can’t take down any prey of their own. In every major area worth considering Apple is so much healthier and stronger than their competition. Revenues. Profits. $100 billion in cash on hand. Is there a single company that’s able to go toe to toe with the folks from Cupertino?

In platforms, Android is Apple’s only major competitor. But it’s unclear they’re going to be able to untangle themselves from the fragmentation net. iOS probably surpassed Android last quarter — with all three of their major product lines.¹ What happens if they release a fourth? Blackberry, Microsoft, the Kindle Fire: not even worth talking about at the moment.²

It’s not just the number of devices out there: Apple’s killing it with developers. They handed out $700 million to developers last quarter. Android handed out…well, they don’t say. But if it’s true that Android developer revenues are about 7% of iOS developer revenues, can we assume $49 million? That means the average Android app brings in $120 and some change compared to the $1,400 from the average iOS app.³ It’s tragicomical: the average Android developer can’t even cover the cost of the device he’s developing for.

The competitive situation for tablets is even worse. The PC market is moribund and being rapidly cannibalized by the tablet market — whoops, I mean the iPad market. The set-top box market is a hobby for Apple, but it’s already trouncing Roku and Boxee, who, with almost $50 million raised between them, are both most assuredly not treating this like a hobby. Doesn’t matter. They’re getting spanked anyway.

And Apple’s not slowing down anytime soon. As Dan Frommer points out, it’s just the opposite. So who’s going to compete? Right now the only company that slowed down Apple’s sales last quarter was…Apple. Why? They didn’t accurately forecast just how nuts demand was going to be for the iPhone 4S.