Apple is a marketing company. Flash edition.

[9 November 2011: Brian: Cheers for Brian, no? I wrote this barely 2 weeks ago. Now Adobe has killed development on Flash for smartphones. I told you *from the beginning* that having Flash on your device was *absolutely not* a selling point. A few Android fanboys argued otherwise. What say they now? Listen to Brian, all.]

 

It's the iPad! Only better! Cause it has flash!

Probably the nicest honest thing you can say about the Samsung Galaxy Tab tablet is that sales have been underwhelming. Despite creating a device that *borrows* extremely heavily from Apple's iPad.

And runs on the (more popular) Android platform.

Which is open!

And has Flash!

I've detailed the reasons why (pre Kindle Fire) no one will buy a tablet that is not iPad and why no one should buy a tablet that is not iPad. No point in going over this yet again, particularly after having been proven so completely right. 

Rather, I will talk about flash. Or, more specifically, about those who talked up flash as a selling point. Which was dumb. And because Apple so publicly dissed Flash, the Apple haters became all the more fervent in their demand that flash be included in non Apple tablets.

And the weak, possibly dumb people running marketing for Playbook and Xoom and Galaxy Tab and others, charged with determining market requirements, fell trap once more to the grand fallacy that the Apple haters proffer:

that they are a market that matters

Steve Jobs and Apple have famously said they don't do market research. This isn't entirely true. Steve Jobs and Apple have famously said that they build products that they want to use, and not products based on what a bunch of people tell them. This is mostly true. The late Steve Jobs and the present Apple Inc. rarely talk about what they are doing. This is both true and good.

Because, I suspect that if they started talking up what they were doing, planning, working on, thinking about, then there would be no end of loud-angry demands to include or not include feature X and service Y and techology Zed. Which would probably do nothing more than throw Apple far off their game, just as it has thrown the also-rans off theirs. 

My mother has used an iPad. She has zero knowledge what Flash is or does. I have let children, who have never heard of 'Flash' use my iPad.

It works. Great. Easily. Powerfully. Just as Apple said, any benefits of Flash would be far outweighed by its harm to the overall user experience. And Apple continues to sell iPads by the millions. Meanwhile, Tabs can't be found, Xoom appears to be offering a buy anything get one free special, and Playbook, like the TouchPad, is soon to appear in the bins along with the $5 DVDs at the WalMart, I suspect.

Because these companies listened; only, not to the market, but to a very small group of haters and fanboys. HOW DARE APPLE NOT INCLUDE FLASH! CLOSED! BAD! MARKETING! ANd rather than building the best product for the market -- or for a market that did not quite yet exist -- they built a product to satiate the rapatious demands of a tiny tiny group of buyers who, let's face it, weren't going to buy the tablet anyway.

Apple haters my be loud. They may take to social media and find an echo chamber, but they are a blip on a niche market. Listen to them at your peril.

Bet against Apple, sure. But I wouldn't bet on the haters. They won't make you any money.




This is not coincidental.

A couple days ago I wrote that Apple continues to be undervalued because analysts continue to view it as a hardware company and do not understand that just as Amazon is a "platform" and Google is a "platform" and Facebook is a "platform" -- which is extremely difficult to unseat -- so too the iPhone is a platform.

And this notion of a platform is what confuses so many -- including institutional investors and Big Money that ought to know better. This confused notion of the platform is also why $AAPL trades at such a relatively low P/E, particularly compared to Google and to Amazon (and to Facebook in time).

Money believes that if you control the platform, then you effectively own the market. Google believes this. They build out their server farms and pour billions into Android and offer more and more free services, like email, hotel listings, video, videochat and more not just to profit off your personal data. Just as important, possibly more so, is that they ensure that everything collapses inside their platform, which they own, they control and which they -- almost exclusively -- profit from.

Same with eBay.

Same with Amazon. Amazon is yet another closed walled garden web "platform" that opens itself up only enough to make sure that anything that is sold goes through their platform.

Investors have believed fervently in the notion of the digital web platform for two decades now. The platform is the network, in their view, and owning the network generates greater value and more revenues with each and every new participant. The platform, then, becomes its own de facto market -- and monopoly.

This is why Amazon has a P/E of an astonishing $135. It's why Google has a P/E of $20. 

And it's why $AAPL has a lowly P/E of $13.

Because Apple has no platform. Apple is a hardware company. 

But what if this is no longer the case?

What if the iPhone is the network? What if the iPhone is the platform?

What if the iPhone is able to deliver the uber-high though temporal profit margins found in leading hardware but sustains them -- even grows them -- because it is also the platform?

If so, iPhone alone could become a trillion dollar business in just a few years, as more and more of the world joins this "network". 

The idea is not crazy. 

Would Path exist without iPhone? Would Instagram exist without iPhone? How few would ever use Evernote? Of all the hundreds of millions of Android devices in use around the world, *most* Google mobile searches come via the iPhone. More and more shopping is taking place via the iPhone and iPad.

It is not necessarily because iPhone is so much better than any other piece of hardware on the market. The iPhone is becoming the platform -- for everything mobile and social.

Now what do we have here, just days later?

Well known Sanford Bernstein analyst Toni Sacconaghi magically declares iPhone "a platform". And states that to determine Apple's true value, we must view iPhone as..."a platform".

Investors worry that Apple’s business is so heavily predicated on sales of the iPhone — the source of almost 2/3 of profits — that the company is at risk of being pushed aside at some point if it ever turns out a Razr-like flop.

“However, we believe that rather than being a transactional company with volatile revenues, Apple is a platform company with stable, almost annuity-like revenue streams, driven by strong user lock-in,” writes Sacconaghi.

The apps and other content that go into Apple’s i-devices give it 90% or greater customer repurchase rates, he notes, with an implied “annual churn” for the iPhone customer base of less than 5%, which is “far better than the 15%+ reported for most cable/telco companies,” he observes.

The upshot, he says, is customer loyalty, as proven by anecdotal carrier remarks that iPhone subs stay customers of telco plans longer than most cell phone users.

Sacconaghi computes the “lifetime value” of an Apple iPhone customer at $700 to $900, $600 to $650 for the Mac, and $275 to $300 for the persona who buys an iPad.  

You are welcome, Ms Sacconaghi.

All your games are belong to Apple

Is it a good thing that more Microsofties are joining Apple than the reverse?

This one is, according to NextWeb, and it probably means something:

Apple has named former Microsoft Product Marketing chief Robin Burrowes as the head of App Store Marketing for iTunes Europe, becoming the latest games executive to join Apple’s ranks. Burrowes worked at Microsoft for seven years, where he was responsible for product, business and marketing management of Xbox LIVE across the Europe, Middle East and Africa (EMEA) region.

Burrowes was one of the main figures behind the promotion of Microsoft’s latest Xbox dashboard update and previously worked for MSN and UK retail store HMV. His LinkedIn profile suggests that he joined Apple in January, to help the company promote its iTunes service and App Store across Europe.

As MCV points out, Burrowes isn’t the first high-profile British gaming figure to make the jump to Apple. The Cupertino-based company welcomed former Nintendo PR boss Robert Saunders early last year, adding former Activision, EA and Xbox PR boss Nick Grange to focus on PR for its hardware products.

"Help promote its iTunes service and App Store across Europe"? If that's true, than it's a step down for Mr Burrowes.

Though I suspect it's not true.

Apple may not have been quick to understand the power of the app with respect to the original iPhone, but Apple and Steve Jobs most definitely understood the money in gaming.

These hires, no doubt, point to an even more aggressive push into the gaming industry. Apple may not be planning on a console, for example, but we should assume they are interested in making games more social (e.g. multiple iPhone/iPod users competing as a group), and enabling more awesome games developed that leverage the iPad, say, than have specific functions iPhone users can engage with while mobile.

And, yes, something cool built into the mythical Apple Television.

Promote iTunes in Europe, my ass.

Apple hates Chinese people. Or at least Apple customers do. Farhad Manjoo says so.

A needlessly provocative headline, you're thinking, but justified, I believe. 

The downside to being almost universally loved is being singularly hated. 

This is what Apple faces now that its profits have reached the stratosphere. And its profits that matter because conditions in Chinese factories have long been very well known and are far worse in places other than inside Foxconn-run Chinese factories.

Yet Apple is only now being singled out because "Apple plants" use "slave labor". The latest example from the normally insightful and highly rational Farhod Manjoo:

Last week, Apple reported one of the most amazing earning results in corporate history. During the last three months of 2011, the company made $13 billion in profit—more than twice as much as it earned during the same period in 2010, and more than just about any company has ever earned during a single financial quarter

Manjoo begins, tellingly, not with China, Chinese, factories or anything other than Apple's profits.

Next, Manjoo focuses on...iPhone profits!

Apple’s revenue on the iPhone alone exceeded Microsoft’s revenue from all its operations, and its likely profits on the iPhone—estimated to be nearly $9 billion—topped overall profits from Google, Microsoft, IBM, Intel, and nearly every other company in the world.

Then, Manjoo jumps from Apple's profits to Apple's customers:

Apple’s production practices have been a subject of consternation for several years. In 2010, after a spate of suicides at Foxconn, Apple’s primary manufacturing contractor, I argued that all of Apple’s customers bear a moral responsibility to push the company to improve its working practices. 

There is nothing provided to justify why *Apple's customers* bear a moral responsibility. 

Firstly, aren't us Apple customers pumping money -- billions of American dollars -- into China? Isn't the actual government of China subsidizing numerous in-China factories employing Chinese workers to build Apple devices for Apple customers.

This is a good thing, right? Manjoo thinks otherwise, which is his right. What is not right, of course, is to first single out Apple than single out Apple customers for a "moral" failing.

Why not include Xbox customers? Asus customers? Every business that purchased a Lenovo computer? Anyone that owns an HP? A Dell? What kind of blind irrational nonsense would lead someone to single out Apple customers?

In the last few weeks, two journalistic accounts have brought renewed attention to Apple’s factories.

Are these "Apple factories"? Are the conditions in these "Apple factories" worse than the norm? Worse than others in use, such as by Samsung, for example, or Motorola?

Why does "Apple" make people say and think stupid stuff?

When working conditions are pitted against the bottom line, it always chooses profits over people. It’s time for Apple to change that. 

I call bullshit. Justify this. Do not simply link to a New York Times story. Explain to me how Apple "always chooses profits over people." You have a reputation, Manjoo, and not one bulit on hyperbolic nonsense.

Forget any other companies that may be doing exactly the same as Apple in this instance. Justify your own words...

CEO Tim Cook should launch a long-term plan to completely remake Chinese contract manufacturing—a plan that improves factory conditions, raises wages, and, over the long run, reduces the number of workers needed to make electronics. 

I think this is a shockingly naive, borderline stupid statement.

Apple should "remake Chinese contract manufacturing"? What absolute dumb bullshit.

Can Apple remake manufacturing in the US! 

China is a nation of over 1 billion people, run by a communist government, with an annual GDP of over $7 trillion US dollars.

$7 trillion.

But Apple is going to remake how the Chinese people work? What xenophobic horseshit. If Manjoo says Apple should leave China, for example, or simply states that Apple should demand changes, using its economic leverage, and than move to Malaysia, say, or Brazil, if Foxconn and the People's Republic of China do not comply, fair enough.

The notion that Apple can shift China is simply one of the worst cases of Apple Derangement Syndrome I've witnessed in a long time. 

While there is no evidence to suggest that Apple’s factories are any worse than those of its competitors—in fact, many of them use the same contractors to make their devices—no company benefits more from low-cost Chinese labor than Apple. If it continues to deliver monster earnings, scrutiny of its factories isn’t going to stop.

Finally, acknowledgement that these aren't really "Apple factories" and that stating so earlier was bullshit. But again, there's that whole "profit" issue. 

"No company benefits more from low-cost labor than Apple."

Prove this. 

Yes, Apple earns the most profits. But companies (and platforms) that sell *more* devices using *more* Chinese labor actually benefit *more* from low-cost Chinese workers. Those same workers that build Apple devices can and do build devices for Microsoft and HP, for example. Those companies do not have the profits Apple has -- and this is not because of *the exact same labor*.

Manjoo must know this, right? Than why state otherwise?

But merely improving working conditions is only a short-term fix. The larger problem for the tech industry is that, in terms of human toil, today’s manufacturing methods are unsustainable. There are 200,000 people on the iPhone assembly line alone. The work is dull, repetitive, dangerous, and low-paying.

Foxconn’s executives have suggested that their long-term goal is to get humans out of the process completely. By 2013, the company plans to install a million robots at its plants, and as industrial artificial intelligence improves, it will surely rely more on machines than men and women. 

Okay, good. This bit makes some sense and I'm prepared to accept that Manjoo just had his Apple blinders on and that's why all the above was so stupid. 

Get the workers -- the labor -- out of the equation. Go with robots. Robots paid for by Apple, it should be noted. 

I'm all for this. Apple can put more money into aggressively disintermediating Chinese labor. Only, wait. Does that make things better or worse for those 1 billion poor Chinese?

With its vast resources, Apple could speed up this trend by investing billions in robotic factories. This, of course, raises another ethical dilemma—is it really humane to replace human workers with machines? As awful as working conditions at Foxconn might seem to Americans, the jobs are prized in China. If pushing for improved conditions results in more automation—and, thus, fewer jobs—are we really doing those workers a favor?

What the fuck?

Is Manjoo actually telling us to ignore everything he's written? That the very solution, a solution he proposes, may actually not help? Now I'm just lost. What is he saying?

Manjoo ends with:

Apple would be wise to invest in that future. When your iPad is made by a robot, you’ll finally have nothing to feel guilty about.

Okay, so we've arrived at: Apple should give Foxconn more of its money to put robots in the factories and displace the hundreds of thousands of human beings now building Apple devices. That will liberate me -- and him -- of our collective guilt.

Only, is our guilt the issue? I think this last sentence is probably the most revealing. Manjoo has no (rational) solutions. He just wants his guilt to be assuaged. Perhaps you do as well. Only, guilt, dear reader, probably will do no one any actual good. It will only allow us to more easily ignore reality.

Which is easy, I understand, but not productive. 

Manjoo had an opportunity here to offer helpful suggestions and propose workable solutions to a difficult problem. Instead, he pointed his finger at the richest company, blamed them and no one else, than told each of us that if we can turn our eyes for only a few more years, we can then release ourselves from the guilt.

Fail.

According to MIC Gadget:

On the 30th of January, thousands of hopefuls stood for hours outside a labour agency located in the Chinese city of Zhengzhou. The lines stretched more than 200 meters along the road, and the people who were waiting in line with their applications just hope to get a job at Foxconn as the electronics contracting giant ramps up hiring for its iPhone plant at Zhengzhou.

Foxconn is working with the city of Zhengzhou to double the size of the workforce at its facility there, recruiting an additional 100,000 employees. 

The salary at Foxconn’s Zhengzhou factory is CNY 1650 (basic salary), and the salary would be increased to CNY 2400 – 3200 after the appraisal. What’s more, workers do not need to pay additional money for dormitory and food. Foxconn incorporates the food and housing allowance into the basic salary. 

 

Apple is a marketing company. Samsung copycat edition.

I always chuckle at the Apple haters who insist -- vociferously -- that Apple is a "marketing company" and that people buy Apple products because they are weak and are marketed to, nothing more.

This is not merely a lie. It is stupid.

And if you actually watch/view any Apple advertisement, the focus is on the product and its benefits -- to you.

On virtually any (open source!) (free!) Android product, by contrast, it's always focused on the 'coolness' and hipness and design and the fetishization of the device.

So much so that it's so patently obvious to all that only the Android fanboys with the most severe case of Apple Derangement Syndrome refuse to accept the truth.

Which is why I am not at all surprised that Samsung's head of marketing doesn't want us to think about Samsung products but instead, wants us to "feel" various, well, feelings about Samsung products.

This is not surprising. Samsung has attempted to wholesale copy Apple in device design, branding and distribution. They beliee, apparently, that there's a market for people that (secretly) want Apple but can't bring themselves to admit it.

And Samsung has been damn successful with this 'we are Apple but not really Apple' strategy, dominating the Android market.

Now, Samsung wants to copy what they *think* Apple's marketing strategy is: all about feelings...

As a user of Apple products, I can say my feelings toward my device are derived, first and foremost, by their clearly superior usability, build quality and functionality.

If Samsung wants repeat touchy-feely Android fanboy business, they better bring the quality as much as they bring the marketing.

From Samsung's head of marketing, whom, I confess I did not know this and am surprised to learn this, is a woman:

Samsung marketing executive Younghee Lee wants consumers to stop thinking about her company.

Instead, Lee wants consumers to start feeling something about Samsung and its products.

As head of marketing for the Korean electronics maker, Lee said she wants to figure out “how I can engage with consumers from the bottom of their heart, and not just be a big and functional and rational and reasonable brand.”

Lee, who worked for cosmetics brands L’Oreal and Lancome before joining Samsung four and a half years ago, said she wants consumers to love Samsung, to be obsessed with the company and its products.

Nowhere is that more clear than in the company’s current U.S. ad campaign, where the Korean company positions its products as the cooler alternative to the iPhone, despite the cultlike atmosphere that surrounds Apple.

Next time you hear a mindless Android fanboy/Apple hater talk about "marketing", just remind them that the biggest, baddest maker of ANdroid, is a copycat brand that relies heavily on marketing of the kind perfected by a make-up company.

Tim O'Reilly nearly brought to tears. By Apple.

Last week I called out Internet gadfly, Tim O'Reilly for saying "stupid shit". (Cause that's how I roll)

This wekk, O'Reilly ups the ante:

The account of how Apple's factories substituted n-hexane, a neurotoxin with well-documented long term adverse health effects, for alcohol to wipe those shining screens clean, gaining a miniscule advantage in drying time but exposing workers to a lifetime of disablement, nearly brought me to tears. 

That's evil. 

If O'Reilly isn't lying to us, though I suspect that he is, shouldn't he demand of all smartphone makers -- Apple, Nokia, Samsung, Motorola, HTC and numerous others -- to conduct their business practices i a way he approves of? Why only one? Is it the profits?

Samsung sells more smartphones.

Nokia sells more mobile phones.

Is it boilerplate Apple Derangement Syndrome?

I suspect it's for no other reason than most on the Internet: page views.

Apple to not buy Hollywood

BigBlog makes me laugh. They are shameless.

A few days after I write that Tim Cook of Apple now controls so much free cash, that he should consider buying up "premium content" such as "Disney and Hello Kitty".

Suddenly, BigBlog now debates:

APPLE SHOULD BUY HOLLYWOOD! Per TechCrunch. 

APPLE SHOULD NOT BUY HOLLYWOOD! Per GigaOm.

Not the first instance, nor the most blatant...

They read my stuff but resist giving credit. Wonder why that is?

I tell myself it's less about me being smarter than them and working harder than them than it is that I refuse the to drink the Silicon Valley kool-aid.

I suspect it's a bit of both.

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