Hacker News Reader

Comment by melling | Hacker News Reader

Rather than pay a dividend, wouldn't it be better to take less margin on a low-end iPhone, iPad, or Mac to increase market share? The iPhone, for example, will always have a small global market share because they only sell high-end phones.

A phone that's $50 cheaper would translate in tens of millions of phones sold.

View on HN

I agree that they can do better than they have in this area, but they are also fundamentally not the type of company that has any ambition to be everything to everyone. In the computer world, they aren't comparable to Toyota or Honda, they're more like BMW or Audi. In mobile, the same holds true to a lesser degree. As a company, there are things they're good at, and things they're not good at. There are things they like to do, and things they don't like to do. If they put too much emphasis on market share, they may get stuck doing things they're bad at so they can accomplish things they don't want to do, at the expense of doing things they want to do, and doing them well.

I don't think I've ever heard anyone make an impassioned argument that BMW absolutely positively must start selling millions of zero-margin $10k subcompact hatchbacks to better compete with Toyota/Honda/etc., or else they're going to die. BMW might do something like this, but it would be because it's a segment of the market they want to get into for whatever reason, not because they feel like they have to. Yet, people make these arguments about tech companies and market share all the time.

I've explained it a few times already. The apps add the extra value to the phone. If another mobile OS has better apps, it will gain the edge. This will become particularly important as mobile converges with the desktop.

That's all true, I just don't think it's as huge a factor as a lot of people think it is. If one OS market share is so small that the result is very, very few good apps being written for it, and many big-name apps are not available for it (like Twitter or Facebook or Candy Crush or whatever), that's a big problem. But up until that point, it doesn't really matter.

For example, IMO Windows Phone has a much smaller app store than iOS or Android, but it's big enough that the size of the app store is probably not going to be the #1 factor (or even in the top 5) when someone is deciding what kind of phone to get.

Consumers might say "I don't want Windows Phone because Windows Phone isn't appealing to me", but it's probably past the point where very many people would say, "I really like Windows Phone but won't get one because there aren't enough apps." Point being, Windows Phone is a very distant third behind Android and iOS in terms of market share. It's in the low single digits in market share, but that's still enough to get over the adequate-app-store hump (IMO at least).

So, I'm not denying that market share is essential to drawing developers, I just don't know if the market share extremes are ever going to get big enough to have an impact on iOS vs. Android.

My main objection is when people (and I'm not accusing you of this) slip into there-can-only-be-one-ishness, where there is an implicit notion that the market being discussed is a natural monopoly, and that the ultimate outcome is inevitably a market share horse race that leaves only one company standing. The argument is always that whoever has the most market share gets more apps, and whoever gets more apps gets more market share, resulting in a natural tendency towards a last man standing situation.

This was such a huge theme in the '90s in the computer industry- so many people just assumed that market share alone would cause Windows to completely take over to a much greater degree than it has. Mac OS would just vanish, and Linux would turn out to be just a fad amongst CS undergrads. Of course, Microsoft still has a monopoly, in the sense that it has 90%+ market share pretty much any way you look at it, but that's a lot different than 100.0% market share that people were predicting it would have. That leaves plenty of room for OS X and Linux and others to find their niche, and those niches are frequently more profitable and/or interesting than the mass market that Microsoft has covered so thoroughly. I wouldn't be surprised if the mobile world shook out in a similar way, long-term.

Of course market share mattered in the 90's. It was a huge problem for the Mac and Linux (and all those operating systems that died). They found niches but Photoshop and most other software , for example, was never ported to Linux because it never had enough market share to port to it. Photoshop was originally a Mac only app but the dominance of Windows meant that it needed to be ported.

Apple doesn't want to sell the most amount of phones, the leave that to Android. What Apple wants is to make the most amount of money off of phone sales. I'm sure they've looked at different price levels and determined that a 10% lower price would not increase units sold by more than 10% ( or more accurately 11.11%.)

Yes, I know. My point is that if they're just going to give the money back in dividends, maybe they're better off trying to gain market share. At some point, having a global market share of 20% means that a lot of software will be written for the other platform first. More eyes means more ad revenue.

Not just 20% market share, the top 20% most engaged, most spending mobile users. Out of a market very soon to be 6-7 billion strong. They may not always be the best market, but I'll try to serve them first every time.

800 million credit carded users today. More iPhones sold in a quarter than yearly global PC sales in the mid 1990s. That is big enough for a lot of things.

It seems like it's now closer to 15%.

http://9to5mac.com/2014/02/12/smartphones-are-now-a-95-andro...

Once again, I understand the "we sell BMW's" attitude. What I want you to understand is that the shear volume of Android will make it the major software platform, much like Windows is the major software platform, and the Mac is often treated like a second class citizen.

Android isn't one platform. Most of the growth is in AOSP forks that are non-Google.

I do understand Android as significantly larger, but the users are significantly worse. While there are still sub-markets that are decent, most Android users don't spend much money and don't use their devices anywhere nearly as much as iOS users. Nor do they tend to care as much for quality over price. I want customers that really really want my solution, not just the cheapest solution.

Apple can be seen as a sort of "BMW" when looking at their USP, but it's not really like that at all. Can I make Apps that run on BMWs? It's not a very good analogy of the platform aspect of iOS.

I feel it's a question of where I want my product; on a "Walmart" shelf or a "Nordstrom" shelf?

I'd also contend that Android cannot be seen as one platform. At the very least it's bifurcated into "Samsung-Android" and "Everyone-Else-Android".

iPhone 5s actually proved the exact contrary seems to be true...

Do you mean the 5c?

I'm pretty sure that the margins are high on that phone. It's still expensive for what you get.

No, I mean that Apple sold shiploads of iPhone 5s without lowering the price at all. It was even more expensive than the iPhone 5 in many countries

The 5c was a case of a missed fashion trend, not price.

Elaborate please?

I'm surprised the opinion is controversial.

Every complaint I've seen against the 5c was that it looked unprofessional, was too colorful, or looked cheap.

People didn't buy the 5s over the 5c because it was expensive or offered more features or power. They bought it because it was the only option that looked like a phone and didn't attempt to call attention to itself as a fashion statement.

Apple banked on the lower price offering requiring further differentiation and uniqueness to sell well. In fact, it requires less differentiation and more generic appeal to be acceptable to the larger market.

They designed themselves into a tight niche, instead of opening themselves to a real market. Big mistake.

> Apple banked on the lower price offering

This is a common mistake. The 5C was not lower priced, that was a pre-announcement rumor that turned out to be incorrect. The 5C was lower costing to make. It was intentionally made to "look cheaper" because they didn't want to offer the 5 as the 2nd phone they felt not enough people would buy the high end 5S. Now they sold fewer 5C's than they would have if they used the 5 but more 5S's and made more money because of the cheaper parts for the 5C.

> larger market.., instead of opening themselves to a real market. Big mistake.

Last I checked Apple makes more than half of the industry profits. I'm sure they would shocked to learn that they have missed the "real market"

Actually, I think that 80% of the smartphone market profits would be more in the ballpark.

This is the first time I read this point of view. I don’t think it is as widely shared as you believe. Every complaint I read about the 5C is that it is not cheap enough.

> In the year-ago quarter, Apple accounted for 77.8% of the mobile phone industry's earnings before interest and taxes. In the fourth quarter of 2013, that figure grew to 87.4%

http://www.fool.com/investing/general/2014/02/13/apples-shar...

Why bother chasing the chimera of "market share" when you already have "total revenue dominance"?

Dividend amount is usually based on extra cash generated by a company. However, lower margin does not directly translate to less cash generated by the company.

A phone that's $50 cheaper is not appreciably different to a consumer paying $100/mo for 2 years for service. $2600 is not that different from $2550.

You are overlooking that in many places in the world, you have to buy the phone outright.

I rather sell one watch at $10000 than a thousand watches at $10. Simply put, less customer care and the only customer I care for is probably a king or a president.

Hans Wilsdorf - Founder of Rolex

Reply on news.ycombinator.com