This morning’s Observer column:
A few months ago I bought a “smartwatch”. I did so because there was increasing media hype about these devices and I don’t write about kit that I haven’t owned and used in anger. The model I chose was a Pebble Steel, for several reasons: it was originally funded by a Kickstarter campaign; a geek friend already had one; and, well, it looked interesting. Now, several months on, I am back to wearing my old analogue watch. The Pebble experiment turned out to be instructive. The watch was well made and well presented. It had reasonable battery life and the software was easy to install on my iPhone. The bluetooth link was reliable. Its timekeeping was accurate, and it could display the time in a variety of ways, some of them humorous. One could download a variety of virtual watch-faces, and so on.
So why is it not still on my wrist? Well, basically most of its “features” were of little or no actual use to me; and for much of the time, even apps that I would have found useful – such as having the watch vibrate when a text message arrived – turned out to be flaky: sometimes they worked; more often they didn’t. Which of course led to the thought that if anybody can make the smartwatch into a successful consumer product that “just works” it would be Apple. And indeed it was amusing to note how many people who, upon seeing the Pebble on my wrist, would ask me: “Is that the new Apple Watch?”
Well, now the Apple Watch is here and we will find out if the world really was waiting for a proper smartwatch to arrive…
Once upon a time, Apple was called Apple Computer Inc. This was partly because the Beatles had a lock on ‘Apple’, but it was also an honest description of the company.
But now? Well, the company still makes computers. (Some very nice ones too.) But consider this:
In the period that ended Dec. 27, Apple sold $51.2 billion worth of iPhones. Those sales comprised nearly 69 percent of the company’s total sales for the quarter — a record portion by a long shot. Indeed, Apple was so successful at selling iPhones during its first fiscal quarter that if it had sold nothing else — no iPads, no Macs, nothing — its total sales would still have been the third highest it had ever recorded.
The commentariat is busy opining that there are dangers in being a one-trick pony — which if course there are. Still, it’s one hell of a pony.
In theory, Apple is a computer company. In practice, its most important product is a handheld computer called the iPhone, as this NYT piece makes clear.
Toni Sacconaghi, an analyst at Sanford C. Bernstein, says the gross profit margin for the iPhone is close to 50 percent. Because the iPhone is Apple’s most popular product — with more than 39 million sold in the last quarter — it accounts for a disproportionately large percentage of Apple’s overall profit, somewhere between 60 and 70 percent, Mr. Sacconaghi said.
“Apple is now so big that it takes a lot to make it grow appreciably,” Mr. Sacconaghi said. It’s producing an impressive interrelated ecosystem of products and services, including its forthcoming digital watches, its new digital payment system, its revived Mac line, refreshed iPads and new software operating systems. Even if all of its ventures succeed, none are likely in the next year or two to rival the financial impact of the iPhone. “The iPhone is the core of Apple right now,” he said.
In a sense, it’s the core of the stock market as well. Apple is the biggest company, by market capitalization, in the world. Apple accounts for about 3.5 percent of the weighting of the Standard & Poor’s 500-stock index. And, through Thursday, because its stock has performed magnificently while the overall market has not, Apple accounted for 18 percent of the entire rise of the S.&P. 500 index this year, according to calculations by Paul Hickey, co-founder of the Bespoke Investment Group. And the engine driving Apple shares is the iPhone.
Wading through the throng in an Apple store the other day, I had a look at the new iPhones. The iPhone 6 didn’t seem much of an advance on my 5s, but the even-bigger one, the 6 plus, seems odd. It’s far too big to be a credible phone, but too small to be a useable tablet. So why, one wonders, will people buy it?
One answer, I suppose, is that people buy preposterously large Samsung phones, even if they do wind up holding something the size of a dinner plate to their ears. (Or making calls surreptitiously, using headphones.)
Ages ago, I bought an iPad Mini with a SIM card for writing on the move, and kept my phone for texts and the occasional voice call. The Mini has turned out to be one of the most useful gadgets I’ve ever owned. Just big enough to be useful; just small enough to slip into a jacket pocket. The new iPhone isn’t a persuasive argument for abandoning that system. It ain’t broken, so I won’t be fixing it.
This morning’s Observer column.
To the technology trade, I am what is known as an “early adopter” (translation: gadget freak, mug, sucker). I had a mobile phone in the mid-1980s, for example, when they were still regarded as weird. It was the size of a brick, cost the best part of a grand and exposed me to ridicule whenever I took it out in public. But I didn’t care because the last Soviet president, Mikhail Gorbachev, used the same phone and he was cool in those days. Besides, it had always seemed absurd to me that phones should be tethered to the wall, like goats. I still have that Nokia handset, by the way: it sits at the bottom of a drawer and I sometimes take it out to show my grandchildren what phones used to be like.
Over the decades since, I have always had latest-model phones – just like all the other early adopters. And of course I used them to make phone calls because basically that’s all you could do with those devices. (Well, almost all: one of mine had an FM radio built in.) And then in 2007 Steve Jobs launched the iPhone and the game changed. Why? Because the Apple device was really just a powerful computer that you could hold in your hand. And it was a real computer; its operating system was a derivative of BSD, the derivative of Unix developed by Bill Joy when he was a graduate student at Berkeley. (Note for non-techies: Unix is to Windows as a JCB is to a garden trowel.)
The fact that the iPhone could also make voice calls seemed, suddenly, a trivial afterthought. What mattered was that it provided mobile access to the internet. And that it could run programs, though it called them apps…
Further to my Observer column yesterday, this from Bloomberg.
Apple Inc. (AAPL) will reap fees from banks when consumers use an iPhone in place of credit and debit cards for purchases, a deal that gives the handset maker a cut of the growing market for mobile payments, according to three people with knowledge of the arrangement.
That’s a small cut on millions of daily transactions. Adds up to a formidable revenue stream.
This morning’s Observer column
In the long view of history, though, the innovation that may be seen as really significant is Apple Pay – an ingenious blend of contactless payment technology with security features that are baked into the new iPhones. Apple Pay will, burbled Tim Cook, “forever change the way all of us buy things… it’s what makes the iPhone 6 the biggest advancement in the history of iPhones”.
The idea is to do away with the rigmarole of having to pull out a credit/debit card, insert in a store’s card reader, type a pin, etc. Instead, you simply bump your iPhone (and, eventually, your Apple Watch) against the store’s contactless reader and – bingo! – you’ve paid, and the store never gets to see your card. Why? Because Apple has stored the card details in heavily encrypted form on your device and assigned each card a unique, device-specific number, which is accepted by the retailer’s contactless reader.
This only works, of course, if the retailer has already signed up with Apple. Cook claimed that 220,000 US retailers have already opted in to the system, as well as six major banks, plus MasterCard, Visa and American Express – which means that 83% of all US credit card payment volume can theoretically already be handled by Apple Pay.
If true, this is a really big deal, because it puts Apple at the heart of an unimaginable volume of financial transactions. In a way, the company is now doing to the card payment business what it did to the music business with the iTunes store…
The moment I saw Tim Cook introduce Apple Pay I thought: this is the big deal. Reassuring to learn that Dave Winer thought so too:
The way we pay for stuff today is as archaic as the way we bought music before Napster and the iPod. A few years ago, it was clear that all the big tech companies were going to become banks. What else could they possibly do with the piles of cash they were accumulating? They’re going to lend it to us, and we’re going to pay them interest. Over time, the fact that they make hardware or support customers, or have retail stores, will be interesting anachronistic sidelines. Apple, Amazon and Google investors will judge their companies on how well they work as financial institutions. It’s something investors understand, and the money you make in finance comes without the headaches of having to actually make anything.
Apple has hundreds of millions of credit card numbers, and they’ll be useful until they completely replace the banks. Apple is bigger than any of them, and has bank-sized financial resources. And the way we pay for stuff today with little plastic cards, some with chips on them, is backwards. The chips in our phones are much more capable. And putting them on our wrist in a big form factor isn’t interesting. They will be embedded in our keychain next, and then in our actual bodies. It won’t be much longer before we are at least part computer.
Anyway, Apple will be a much better bank than BofA, Citibank or Chase. Consumers will have more rights from Apple than we were given by the bankers and their Washington cronies. Apple still is a fucked up mega-corporation, but they don’t have any reason not to treat us a little better than the guys they’re replacing. It’ll make for the feel-good Christmas commercial, this year and every year from now on.
Apple is simply doing the obvious thing: following the money.
This morning’s Observer column.
Thirty years ago (on 24 January 1984, to be precise), a quirky little computer company launched a new product and in the process changed lives and maybe the world. The company was called Apple and the product was named after a particular type of Californian apple – the Macintosh.
With astonishing chutzpah, the company announced the product to the world via a single advertisement screened during the Super Bowl on 22 January. The film was directed by Ridley Scott and showed a dimly lit auditorium in which ranks of drably clad zombies are being harangued by a despotic figure shown on a huge screen. Into this auditorium comes a beautiful female athlete who runs towards the screen carrying a large hammer, pursued by goons attired in riot police gear. Just as the despot’s rant reaches a climax, the athlete stops, whirls the hammer four times and then launches it at the screen. When it strikes, the screen explodes and the camera pans to the zombies, whose mouths gape in bewilderment. “On January 24th,” intones a voice over the closing scene, “Apple Computer will introduce Macintosh. And you’ll see why 1984 won’t be like Nineteen Eighty-Four.”
Most people who saw the ad were probably baffled by it. But for some of us, the symbology was clear…
This morning’s Observer column.
It’s 4.30 on a gloomy winter’s afternoon. I’m sitting with my grandson having one of those conversations in which grandsons explain complicated stuff to their grandads. He is four years old, omniscient in the way that four-year-olds are, and tolerant of my ignorance of important matters.
The conversation turns to computing and he inquires whether I have Talking Tom Cat on my iPad. “No,” I say. “What is it?” He explains that it’s a cool game that his grandma has on her iPad. There is a cat called Tom who listens to what you say to him and then repeats it in a funny voice. Also there’s a dog who does funny things.
So I dig out my iPad and we head over to the app store where, sure enough, Talking Tom Cat 2 is available as a free download. A few minutes later it’s running on my iPad…
Read on to find out what happens next.