Apple sticks Five Fingers in the Air

Apple’s big Special Event last week was marked by a noticeable lack of excitement in the days running up to it.  A few years back, everyone would have been on tenterhooks, but it seems that it’s increasingly becoming a so-what event.  If you use Google Trends to search for the word iPhone, you’ll find that it used to peak around these events, but they’re no longer generating the level of interest that they used to.  If you filter those searches down to news mentions, it’s apparent that these Apple events are not really news anymore.

The Google Trends graph tracks the relative number of searches for the word iPhone over time and shows clear peaks around the Apple launch events up until 2015, when interest started to fall, with little enthusiasm for the more recent announcements.  However, if you do the same analysis for Google Shopping, it’s a very different story:

Whilst the press may not be interested, consumers appear to keep on buying.  Statista recently looked at the average selling price of iPhones and found that after a decade of relative stability, it’s starting to grow: the press may think about the new phones, people keep on buying them.  Moreover, this month’s Apple Special Event may have told us a lot more about Apple than any previous one.  For me, the big news is not the launch of Three iPhones and a Watch.  It’s the fact that they’ve just stuck five fingers in the air to the rest of the industry.

The first two fingers in the air are a very clear signal to Android and all who sail in her.  Around the time of the iPhone 5C there was a lot of debate about the danger of $100 Android phones which were “almost” as good.  Analysts felt that Apple needed to address the low-cost competition and the 5C was viewed as their answer to the challenge.  “C” meant Cheap.

“C” didn’t mean cherished.  Customers largely ignored it and kept on buying the flagship models.  The important thing to realise here is that Apple is all about experience and image, not about price and technology.  It’s like a Michelin starred restaurant – you don’t go there just because they can cook – you take that for granted.  You go for the experience and you’re prepared to pay for it.  Apple’s customers saw the 5C as the equivalent of a chicken shop and ignored it.  (Ben Thompson describes this very well on Stratechery, which is well worth subscribing to if you’re interested in this stuff.)

Last year’s iPhone 8 and iPhone X can be seen as an experiment to test that proposition.  The message that came back last week was clear – customers had voted with their wallets to make the iPhone X the best-selling smartphone in the world.  Apple’s new series of phones are unashamedly top end, with price tags to match.  In other words, low cost competition is irrelevant. You can either afford an iPhone , or you need to start saving for one.  It’s arrogant, but as with any high-end experience, if you get it right, your customers will make you a star.  And if you’re running Android, Apple’s not bothered – you can just go away.

Once Android was out of the way, the next fall guys to get the two fingered treatment were the network operators.  It may not seem much to include an embedded SIM (or eUICC) in the phone, but it’s mobile kryptonite to the operator community.  They have always put their faith in physical SIM cards as the one thing which binds their customers to them.  Despite the GSM Association trying to push the embedded SIM concept for the last eight years, operators have fought it tooth and nail.  The main reason for that is that when fully implemented, it effectively allows a user to change their network operator on the fly.  For that reason, operators have been doing their best to keep it out of phones ever since, as it’s a key step on their downward route to being considered as no more than an airtime utility.

Apple had previously slipped embedded SIMs into their tablets, but putting them in a mainstream phone is one hell of a slap in the face for the network operators.  It’s a public acknowledgement that everyone now recognises the unequal relationship between Apple and the operators and that Apple has the upper hand.  It’s probably happened now because there are no more large networks that provide attractive exclusive relationships with Apple – China Mobile was the last of those.  From hereon in, Apple is the master and the networks are the slaves.  It’s been amusing to see the operators fawning responses.  T-Mobile’s CEO tweeting that “I love that @apple is offering dual and eSIM… … it makes it easier for everyone to switch to T-Mobile”.  AT&T were a little more circumspect with “eSIM I think is a great innovation”.  You get the feeling that they might have a merry smile on their faces, but their laughter has an echo which is grim.  Apple’s two fingers to the operators makes it very clear that the partnership is over and Apple is the boss.

The fifth and last finger in the air is a thumb, giving a resounding thumbs up.  The thumbs up was the FDA certification for the Apple Watch 4’s ECG.  Apple has been recruiting key people from the digital health space over the last few years and it’s not always clear what they’ve been working on.  Apple have been doing good work with ResearchKit.  Launched back in March 2015, it was quietly updated earlier this year and continues to grow.  It’s a fairly well-kept secret which has had relatively little media exposure – it’s the tortoise to Google DeepMind’s hare, but it illustrates a commitment to work with users and medical researchers to harvest data and analyse it. 

The FDA certification is a milestone which tells us that Apple is serious about health.  It’s also a statement about what the Watch is.  Watch 1 is probably best described as an experiment – an attempt to own the wrist.  It trumped its rivals, but didn’t do much else.  Watch 2 tried to be a health and fitness product; Watch 3 was an attempt to persuade users to leave their iPhone at home, which was more a heresy than a product theme, but Watch 4 and that FDA approval tells us what Apple really hopes for – to push the mantra that “the more you know about your health, the better you can look after it” – a headline they use to promote ResearchKit.  And the better that Apple can look after you.

Many analysts have seen Watch 4 as a threat to Fitbit, but I doubt that Fitbit were in Apple’s sights.  It’s far more likely that they see the real competition as the Amazon / Berkshire Hathaway / J.P. Morgan healthcare initiative.  The health battle, at least in the US, is not about devices, but about the personal health relationship and the trust that requires.  Nobody does relationship and trust better than Apple.  Whether they have the corporate DNA to extend that trust and relationship from personal apps to true healthcare is yet to be seen – the Watch 4 could end up being just another health monitor for those who don’t need one.  But this is a long-term game, where the cards may well fall for the tortoise.  Time alone will tell.

Putting all of that together suggests an Apple which has never been more confident in itself.  It knows what matters – its customers.  It knows what doesn’t matter – its competition.  And it knows, or at least thinks it knows, what the Watch is for.  We’ll need to wait for the next Special Event to see if it’s as confident with its other products.