Apple's "sticky" iPhone
When Barclays' Ben Reitzes refers to the "stickiness" of Apple's iPhone, he's not talking about adhesives on the product's surface. (Indeed, the iPhone seems to us as slippery as ever, which may be why there's such a lively market in protective cases.)
What he's referring to in a report to clients issued Tuesday is a lock-in effect, whereby iPhone and iPod touch owners who buy from the App Store become increasing unlikely to switch to a competing product. Reitzes calls this a "key differentiating factor":
"This software strategy enables a distinctive “stickiness” for the iPhone, which should enhance customer loyalty over the long-term. We believe 'apps' personalize iPhones to levels that competitors cannot match. We also believe strong interest in the App Store is helping to pull through iPod touch units."
Reitzes' note was one of several generally positive reports on Apple (AAPL) issued this week by analysts who track the stock.
- FTN Equity Capital Markets' Bill Fearnley raised his rating on the company from "neutral" to "buy," citing growing investor sentiment that Steve Jobs' medical leave won't be as disruptive as originally feared. (link)
- Kauffman Bros.' Shaw Wu echoed that sentiment, saying that investors today seem less concerned about Steve Jobs' health than his products' high prices. Wu argues that Apple is relatively immune to recessionary pressures because computers and cell phones have evolved into necessities — so essential to modern life "that people are willing to pay a premium to make their lives easier and more productive."
- Barclays' Reitzes sees positive signs in the imminent release of the 17-inch MacBook Pro (scheduled to start shipping next week), expected updates of the iMac and Mac Pro (sometime this quarter), and the upcoming release of Mac OS X Snow Leopard (in June, he says) "with out-of-the-box support for Microsoft Exchange 2007, multicore support, QuickTime X, Open CL, location and multi-touch tools."
Fearnley set his price target for Apple at $140. Reitzes and Wu are staying pat at $113 and $120, respectively.
Apple shares dropped more than 4.5% in Tuesday's market free fall to close at $97.83.
"Symbian, Palm, WinMobile, and BBerry have had apps and online stores where they could be bought for years"
And if they had done it right, or even half right, the App store wouldn't have been such a big deal.
"that didn’t lock customers into those platforms."
REALLY?!?!?!?!?!?
Have you ever tried running a Palm App on a Winmobile? On a Blackberry? A Blackberry App on a Palm or Winmobile? A Winmobile App on either of the other two? Do you even know what you are talking about?
Lets look at the other side of the coin: what if years down the road, people wants to switch phones, not to another iPhone but something different (yeah, how ironic), different brand, different form-factor, different look and wants to keep using those same apps he purchased or downloaded for free? Unless Apple releases half a dozen very different models, they won't be able to accomodate that need. However, phones with the other OSes (no need for introduction) can meet that demand. Yes, the ace in Apple's hand is the App Store. If the other software makers builds an app store that approaches the Apple's in usability and content, their OS will be in a very good position to overtake Apple.
@ mark reid
you are right. apple was just the first to provide a superior user experience and an easy way to get those apps.
if you like surfing around the web to look for symbian apps; have at it. i used to and it was a PITA
The reality is nothing better has come along yet and now apple will be releasing version 2.0 of the device come june.
I resisted Apple products for a long time. The Ipod Touch has blown my mind. As soon as my current cell phone contract is up I'm getting an iphone. No question of a BlackBerry now. I want to be able to do all the things I can do now with the ipod touch, but over 3G.
I actually find myself using a computer less now that I have the ipod touch. It's the only way I check my email.
The iphone isn't a phone with a music player. It's a mobile computer with an incredibly evolved interface.
People seem to think that Apple invented the idea of apps on a smartphone. Symbian, Palm, WinMobile, and BBerry have had apps and online stores where they could be bought for years; that didn't lock customers into those platforms. The iTunes app store has been around for less than a year, but being new to the game didn't stop it from being a success. If something better comes along you can bet that people will jump on a new bandwagon just as quickly.
Great product and concept unless you break it or have it lost or stolen, current Apple/AT&T policy is only one to be allowed to be purchased even if you are willing to pay full price in a 21 month period, mine was stolen.
wow. an analyst finally gets it right for once. this is why talk of a iPhone "killer" i so silly. The iphone happens to be a device attached to a killer service (the app store). They feed each other. a device that sells a service for a service that sells a device.
you don't know what you are missing.
if 3 people out of 1000 is on the iphone, apple annual sale will be 20 million units
I guess you are one of the have not. really, you should try it before you knock it.
The App Store is Addictive. I have spent almost as much money on apps as I paid for my ipod Touch. I just don't see how anybody else will compete with Apple in this arena.
Sticky is right. I'm stuck on Apple.
Ben is right on with this one. Once into the App Store users are 'platformed in'. What's great is the whether it's today iPhone, a cheaper iPhone down the road, or an iPod Touch, you're still in.
For an example, an existing iPod owner upgrades to the iPod Touch. Once they see the apps and mobile browsing features they will never go back. After entering the Apple ecosystem with this purchase, this user will will eventually need a new cell phone, the iPhone will be the obvious choice so they can keep the platform and drop a device from their pocket. Somewhere along this path they may also need a new computer — they may have never considered a Mac but here the halo effects works it's magic and a PC switchover occurs. Now, if Apple ever updated Apple TV to make a serious play for the digital living room, then this juggernaut would simply feed on itself and be almost impossible difficult to stop.
What he’s referring to in a report to clients issued Tuesday is a lock-in effect, whereby iPhone and iPod touch owners who buy from the App Store become increasing unlikely to switch to a competing product.
Uh, yeah… Isn't that supposed to be best marketing practice? There is always a tension between lock-in and growth via openness. The question for Apple is how they balance those two concerns (and Apple should start to be a bit concerned about not looking like Microsoft, with the potential finding of iPod or even iPhone monopoly…)
I've enjoyed this thread. Just so you know, we use a combination of MS and Apple.
Personally, I don't mind paying extra for Apple because I save a lot of time and frustration (in which case I'm far more productive), and my business has lower support cost.
As long as I am locked into a platform which works as advertised and is sold at a price which brings my overall support and IT costs down, who cares about being "locked in"?
With Apple, it's like being locked into a fairly priced five-star beach-side resort (look, nothing is perfect, but is it very very good most of the time, but not always), so I'm not complaining.
Compare that to being locked into a different platform and OS which is half the price: we end up spending far more of the difference in time, stress, and money getting it to work.
Which would you rather be locked into?