Enough people have asked me about the watch that I should probably put my thoughts here.
First, let me paint the picture for you. You’re sitting on $160 bn. You’ve tried paying dividends, but you just can’t pay enough without investors getting antsy. You need to actually put it to use somewhere.
The phone side of the business is now mature. The free lunch of new hardware is over. This year you even had to abandon all hope of cramming the new A8 into the same small form factor; it just plain wouldn’t fit. You spun it as a positive. People want bigger phones, right? Fine, let’s give them bigger phones. Power wall crisis averted. Maybe next year you will be able to fit an A8 into a 4″ device again.
So what do you do with the money? Well, you could invest in software instead of hardware. That sounds like a reasonable idea. So this is the year you should throw some weight behind the new programming language you’ve been working on. This is the year you should launch the new graphics API. This is the year you pay down on dev tools like adaptive UIKit, Playgrounds, Testflight, an iTunesConnect rewrite, and whatever else you can think of. Hey, how about that payments project? Throw that in too. “Sure, we have enough cash to shoulder some liability for Visa!” At least that gives you something to do with it…
But even if you hire every software engineer on planet Earth (as if that is even possible, before Brooks’ law kicks in), you can’t make any appreciable dent in $160bn. And hiring an appreciable fraction of software developers isn’t in your DNA. You’re a hardware company; that’s what you’re good at. That’s where the bread is buttered. You need a new hardware market. Something plausibly disruptive, but with no clear winners yet. And something where UI innovations are a key part of the problem.
Gruber is dead on the money when he talks about the Watch pricing stunning the tech press:
When the prices of the steel and (especially) gold Apple Watches are announced, I expect the tech press to have the biggest collective shit-fit in the history of Apple-versus-the-standard-tech-industry shit-fits. The utilitarian mindset that asks “Why would anyone waste money on a gold watch?” isn’t going to be able to come to grips with what Apple is doing here. They’re going to say that Jony Ive and Tim Cook have lost their minds. They’re going to wear out their keyboards typing “This never would have happened if Steve Jobs were alive.” They’re going to predict utter and humiliating failure.
He then goes on to explain that the reason the rest of the tech press will be wrong is because the Watch has some feature(s) that nobody is talking about. Well, that much is probably true. However that’s not why it will sell (if it will sell).
What Gruber has forgotten is that he is a member of the tech press and has a lot of the same biases as the whole rest of it. And this isn’t a tech product. It happens to contain some technology, but that’s an implementation detail. The Watch isn’t a tech product in the same way that the iPhone wasn’t a computer. Sure, the iPhone has a CPU and a graphics chip and makes calls and so on, but those details actively misled tech reporters into understanding the iPhone in terms of either phones or computers, of which it was neither.
Nobody could have understood in 2006 that Apple was going to destroy the handheld games market for example. Recall this was a time when Apple could hardly get Bungie to release Halo on their platform as originally announced, and was now shipping a device with no hardware input. “How could it possibly be a gaming platform?”, the press would have said, if it had even occurred to them as a possibility, which it didn’t until much later. And yet today iOS mops the floor with the likes of the Nintendo DS.
So I think our biases blind us to understanding what the product really is.
Now we’re going to play a game. One of these is an ad for sportswear. The other one is a real Apple Watch ad. Assuming you haven’t seen them before, which one is which?
Round two. We’ll set an Apple Watch ad against a luxury clothing brand ad. Which one is which?
The point is, you’d be hard-pressed to tell these apart. I think that is a clue. Apple isn’t positioning this as a tech item. They’re positioning it as a fashion item. And that’s probably the place to start understanding it.
The Watch has gotten a critical reaction, to put it mildly, from the tech press. Wikipedia cheerfully reports that less than 5% of US consumers plan on buying it in the first year.
What I think this analysis misses is that the Watch isn’t going to be marketed like any other Apple product. Well, we can already see that, from the ads. But what I mean is this: with most products, Apple has an event, they demo the product, they put some copy on the website, done. That is how you market tech products, sure. By the way, did you notice that the only device we got pricing for was the cheap one that is closest to a tech gadget? That would be because Apple knows their audience. The only one tech people are interested in is the $349 cheap model. The other two were not really being marketed, certainly not to us. They were just announced to stave off the inevitable leaks from the Asian supply chain.
So how will the expensive lines be marketed? In Nicki Minaj videos of course, as Dr. Dre intended.
People have been puzzling over the Beats acquisition since it happened. Is it about the Beats Music app? Or is it about producing a line of multicolored headphones?
No, stupid. It’s about getting a marketing department who knows how to create a fashion brand from thin air. It’s about the watch. It’s always been about the watch. Just in case you want proof, here is a gratuitous photo of Apple execs poorly concealing the Apple Watch during talks with Dre:
Now hang on a minute. Beats manages to scam millions of people into buying bad headphones on the basis of celebrity endorsements. And this is the playbook for the Watch at Apple? We’re in trouble. They’ve really jumped the shark.
Well, maybe. We might be in trouble. But I think that simplistic analysis is a little unfair to Beats.
First of all, Beats products aren’t bad. They’re just overpriced. You can get a better headphone for less money. But “there exists a better product” does not a scam make. They’re certainly an upgrade from the EarPods, and let’s not crucify people who choose fashion over function because they have different preferences.
The second thing to understand is the historical context. Back before Beats, the marketers were selling shoes. Air Jordans probably don’t make you run faster, but Beats do make you hear better (relative to EarPods as a baseline). As far as fashion brands go, Beats are actually the good guys, selling people a product that actually helps them.
The story of Beats is a marketing team that left the world of shoes to sell something better. Then they took a detour around the headphones business to sell something better still–a subscription music service. I think their work on marketing the Apple Watch is a natural step for them, and doesn’t give me any pause about the product quality. They are doing what they do: finding a better product to sell.
And at any rate, it solves a big problem for Apple. They just figured out how to spend $2bn marketing a new Apple product. Only $158bn to go…
That’s a good question. I don’t think Apple itself really knows. I suspect that the WatchKit announcement that consisted of a logo and some vague statements is probably the complete set of things Apple itself has decided.
The only thing they are really sure of is not repeating the same mistake they made under Jobs. This time, they will have an SDK. What’s in it? Shrug. But they’ll definitely have one, because hoo boy they learned their lesson from the last rodeo.
My theory is that initially the Watch apps will fall into a few broad categories. One is health. My sense is, the people working on health stuff at Apple actually believe they can make a dent in the health of most people who live in the first world. Whether that is true remains to be seen, but that’s what I think they believe.
The other category is the froufrou apps that are vaguely social or do lightweight communication, perhaps to the groan of developers everywhere. But perhaps to the elation, I think, of designers. I think our bias as software developers is to see the invisible at the expense of the visible. There is, I think, a vast and untapped world of one-button apps on your wrist, that are not very interesting to most software developers in about the same way that web browsing on a phone was not interesting to Nokia N95 owners. “What’s the big deal?”
The question has come up at various times in the past. But this is, I think, the first time in awhile where the idea is really plausible. Apple might be going off the deep end.
Still, I don’t think so. They were plausibly going off the deep end when they were entering the phone market, and that turned out rather well. It seems likely to me that the same story will play out here.
And it really is the same story. You may think Apple getting in bed with product placement is pretty bad. But I don’t think it is any different from Apple getting in bed with AT&T for the iPhone’s original launch. And since that time they have, I think, been more of a force for change than any other single entity, including people whose job description it actually is to reign in the carriers. In my mind, this is a classic Apple play: you play by the rules until you can make them.
Nor is it particularly unusual for Apple to enter new segments. This is, of course, their whole business model, from the iPod right through to today. There is a whole marketing problem that is outside their core competency here, but it is dead center in the middle of Beats’ core competency, so I have a very hard time imagining how this thing can go off the rails, unless they screwed up the badges and sent Beats to engineering instead of marketing.
It is too early to say how this thing will go, but I think you’d have to try pretty hard to make it a complete failure. On the other hand I think we are about to have a negative press storm that will handily eclipse all the Antennagates by at least two orders of magnitude.
Apple has experience there too. The press has a habit of being stupidly-in-hindsight bearish on Apple. See, e.g., the iPhone launch. Perhaps more relevant to us, I expect hackers to rise up on some grounds or other like we did in the early days of the app store (which produced some useful reforms, but not a change to the core vision). I’m willing to believe that this time, like last time, Apple knows better than we do on average, although it is going to be noisy for a bit.
The biggest threat that I see to Apple Watch isn’t something that most people are concerned about. It’s the risk that the watch could follow the path of Google Glass. That it could be, like the Segway, another example of out-of-touch nerds with technology looking stupid.
Apple is trying very hard to stave off this problem, by getting fashion people involved, by producing solid gold editions, courting the watch people, and a whole shotgun of other strategies. But designing your way out of the problem is not a strategy that is known to work. It might work. Or it might not.
The tried and true way is to provide an advance so breathtaking that people will tolerate looking dumb. The iPhone could have easily suffered from Google Glass syndrome, except web browsing from the checkout line was enough of an advance that people put up with carrying an unsightly slab of plastic in their pocket at all times (and there was some precedent for this from e.g. Blackberry), and eventually enough people did it that it was no longer weird. Google Glass tries to do the same thing your phone does but without pulling out your phone, which as far as I can see is a solution in search of a problem. But I think if it had come before the smartphone, now it would be the smartphone users who were the glassholes.
And here is where I think the Apple Watch faces its biggest crisis. What is Apple Watch besides a kind of Google Glass that sits on your wrist? Gruber thinks there is something else up Apple’s sleeve. That is almost certainly true, but a good reason not to announce something is because you’re not sure it will ship in time. Reading between the tea leaves here, I think a lot of things Apple wants to do won’t make it on the cutting floor this time around. I suspect Apple is relying, primarily, on the features you’ve seen already and on the strength of the design and marketing departments to carry them over the glasshole zone for the first generation.
And that’s uncharted territory for all of us.