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Comment by bambax | Hacker News Reader

I think you're right, but I also think that this strategy is dangerous: as PG used to say (maybe quoting somebody else?), don't let anyone fly under you.

If you want to pursue the strategy of the very high end, you have to be innovating all the time, in a very big way, which is not what yesterday's event was about.

Or you can count on a core of very loyal customers who will buy your products no matter what, at any price; those people exist but there aren't enough of them to fuel Apple's growth forever.

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Doesn't that say that market segmentation doesn't work as a strategy?

Staying mid / high end seems to be working fine for the Mac 25 years on, and has started out pretty well for the iPad (though we'll see now the Fire has bought it a serious low price challenger).

Sure it's a risk, but so would getting involved in a low end race where they have no experience and where profit depends on a high volume low margin model they're not familiar with.

Incidentally PG's piece is here: http://www.paulgraham.com/start.html

It's primarily about start ups - saying starting low and working up is easier that the other way round, but I'm not sure how it applies to mobile. Nokia owned cheap phones, Apple piled in at the top and that's worked out pretty well for them so far.

Market segmentation is serving different segments with different products; what you're talking about is market abandonment ;-)

It's true that it has served Apple incredibly well recently... but it nearly killed them once.

There was a very interesting talk at the business of software conference of 2009 by Geoffrey Moore:

http://blog.businessofsoftware.org/2010/03/video-of-geoffrey...

that talked about innovation and how you need to out-differentiate to stay on top of the game; the position you never want to be in is to be "best in class" because best in class is for suckers: it consumes enormous amounts of resources for luxury features that customers won't pay for. You want to be out of this world (or good enough).

What Apple did to Nokia is they invented a completely new product that was much more than a "phone"; what is happening now is that

1) Android is becoming "good enough" (even Windows phone, according to some pundits)

2) Apple doesn't seem to care about "goodenoughness"

3) but Apple's products are not an order of magnitude better, as they used to be. They are flirting dangerously with best-in-class territory.

You think the Mac strategy is working out fine? Well, it might just about be coming back to respectability now, but frankly that's after 20 years where for much of that time it was a borderline irrelevant platform.

Apple's business, if you look at where they now get their revenues from, is all about phones. How's that sustainable? Short answer, it isn't really. They might have the fashion devices but they only have one of them and it's on a fairly slow refresh cycle. If any of HTC, Samsung, LG or any other of the Android vendors come up with the Next Big Thing in technology fashion, Apple don't have another card to play and the idea that one company in such a competitive market can lead both fashion and technology in perpetuity simply isn't credible. Yet with Apple the only player in their ecosystem, if they stumble the whole ecosystem stalls. If one Android vendor stumbles, another takes their place, the ecosystem keeps going and the vendor has the opportunity to catch up at their next release.

Apple might currently have the biggest selection of apps, but with Android fast closing in market share (indeed, looking likely to overtake) and some vendors deciding Apple's policies are too restrictive and switching away from the iOS platform, how long will that stay the case? Once iOS is no longer the dominant platform for app vendors, their more restrictive policies will start seeing the market fall behind its competitors and, just like MacOS, iOS slowly becomes a ghetto with limited software availability.

So what are the alternatives? True low-end iPhones? (I can't see a 2+ year old design doing well for very long against newer models in such a fashion-conscious sector.) Not great for Apple; more design and manufacturing expense, more complex supply chains, lower margins and the first-mover profits that Apple are currently enjoying are gone. Quite simply I don't think there's any precedent to suggest it's possible for Apple's current profitability from the iPhone to be maintained, and very little reason to believe its market position is sustainable.

iPhone isn't a fashion product. It's a rounded rectangle with a touchscreen on one side, and it has been for 4 years. Fashion changes more quickly than that and has more personality; Apple's design is more timeless, resembling 40 year old Dieter Rams designs more than anything recent.

The Mac remained profitable through that entire period.

The internet with it's land grab mentality has taught us to focus too much on market share, not enough on profit.

Android already has larger market share of the phone market but Apple rakes in the lions share of the profit. Off a single digit marketshare (iphone as a % of the phone market) Apple makes more than half the profits in the industry (http://www.asymco.com/2011/01/31/fourth-quarter-mobile-phone...).

When I wonder which model is sustainable, the questions I have are about the companies struggling to make profit from massive marketshare, not the one making good money from modest sales. I'm not saying Apple are nailed on, just that the whole industry is very very uncertain and there are questions and issues across the board.

Picking up a couple of specific points:

As for a 2+ year old design doing well against newer models. The iPhone 4 (15 months old) is the biggest selling phone in North America. The second biggest selling phone? The 27 month old iPhone 3GS. This is less of a fashion market than a lot of people make out. Plus if you're looking for precedents, I'm not clear where we see one for HTC, Samsung or LG doing anything particularly innovative in this sector. Good phones yes, market changing, I don't see it.

The Mac as a "ghetto" with limited software availability? Do you have a Mac? The Mac has for years had a far more active independent developer community that Windows ever did. For c. $30 (less now in the AppStore era or if you shop around) you could pick up high quality bits of software to do just about anything. When I got my first Mac 6 years ago (Windows user for 20 years before that) I was staggered by the ecosystem. Windows always ruled the corporate software sector but the Mac was never a ghetto.

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