This content is from: Portfolio
The Apple Watch Is More Than a Cool Gadget
Apple’s entry into the realm of wearable technology could have a real impact on revenue and helps widen the iPhone maker’s moat against its competitors.
You know how difficult it is to explain to a nonparent the joy of having kids? The Apple Watch is the same thing. Its hard to explain how great it is to someone who has never worn one.
The other day I found myself using this line to explain why I love the Apple Watch. And just as those words came out of my mouth, I realized how I had just cheapened my kids, comparing them to a gadget. So, Jonah, Hannah and Mia Sarah my apologies.
The Apple Watch, as well as many other Apple products, doesnt make a lot of sense in theory, but in practice it does (I am borrowing from Yogi Berra here). Ive been wearing an Apple Watch for two and a half weeks, and I have to tell you, this is not a watch; its an iPhone extender.
If the Apple Watch were called an Apple Band instead, our perceptions and expectation of this product would be very different. When Apple reinvents a category of products, our initial analysis is stuck in the old paradigm. I remember in 2007, when Apple came out with the iPhone, that commentators were arguing that no one would want to watch movies on its tiny screen. And how were you going to stick a DVD into this little phone? Okay, I made up that last part, but were destined for trouble when we try to apply the functionality we associate with an existing product to a new device that has little resemblance to the original one. That, of course, is the problem with the Apple Watch, even though we wear it on our wrist, it tells time, and Apple did call it a watch.
Being wearable is what makes the Apple Watch so useful. We may always have our smartphone with us, but its not always on us. For instance, my iPhone is on the kitchen table and Im in the living room, and a call comes in. I dont have to run to get my phone, stumbling over my kids toys; I can just answer the call on my wrist. Its very Dick Tracy, but it works.
Most people wont appreciate the on-your-wrist factor until they wear the Apple Watch for a while. In the past Id miss phone appointments all the time: Id have a call scheduled, Id be engrossed in research while listening to music, and I wouldnt hear the reminder about the appointment in Outlook or on my iPhone. Apples vibration reminder gets me to look at my watch every time.
One of the arguments I heard against the Apple Watch just as I did against the iPhone in 2007 is that the screen is so small that no one would want to read on it. Here is what I found: When my son texts that he wants me to pick him up from school in 20 minutes, I get the message on my watch. It emits a slight and not unpleasant vibration, I glance at the text, and I can reply right away.
That brings me to another no-no I heard about the Apple Watch: The screen is too small to type on. Thats true, but it doesnt matter, because the Apple Watch comes with an absolutely amazing version of Siri. Its voice recognition software understands me absolutely flawlessly, even with my Russian accent. Im not sure how, but its better than iPhones Siri. When my sons message comes in, I have a few options. I can hit Reply and dictate my message through Siri. Or, there are a lot of preconfigured buttons that show responses like OK and Thanks. If, on the other hand, my son sends me his five-page essay to look at, I wont read it on my Apple Watch Why would I? Its not made for that.
The design how the watch feels to your fingers and on your wrist, and the ease of use is what youd expect from Apple. Even the battery life is much better than I anticipated: It lasts more than a day and charges quickly. I put my Apple Watch on the charger when I get up, and before I leave for work, it is fully charged. It rained for two weeks nonstop where I live, in Denver (when I travel to Seattle this week Ill feel at home), so I didnt have a chance to test the watch while riding a bicycle to work. But even with my limited testing, I concluded that the Apple Watch is a terrific product.
Just like Apples first iPhone, this watch doesnt have many apps, and the first few I tried were not quite ready for prime time. It will take time for developers to figure out how to make great apps, just as with early versions of the iPhone.
Now that youve invested your time in reading this, let me disappoint you. This is not a product review. A product review has to be rigorous testing all features of the product in different situations and conditions. I did not do anything dangerous: I did not scuba dive or parachute wearing the Apple Watch. I did not even exercise with it. The product needs to be compared with competitive offerings. I didnt do that either. And, most important, the reviewer has to be unbiased. I am a very biased Apple junkie. On my last two-day trip, I had four Apple products with me: a MacBook Air, an iPad, an iPhone and my Apple Watch. I am not even going to try to pretend that Im unbiased.
But heres the good news: I am not the only one. There are something like 800 million very biased Apple users out there, and a lot of them will agree with me.
Figuring out the impact the Apple Watch will have on Apple in the short run is very difficult. Apple sells about 180 million iPhones a year. Unlike the iPhone, which became a necessity, the Apple Watch may be a great product, but it is still a luxury. If 10 percent of Apple customers buy an Apple Watch and its average selling price is $500 (my best guess), that would bring in ... well, and here is the problem. Should I use 10 percent of the total Apple user base of 800 million? In that case Apple Watch sales would bring in $40 billion of additional revenue. On the other hand, Apple sells about 180 million iPhones a year, and if 10 percent of annual buyers get an Apple Watch, that would bring in $9 billion of new sales. The annual revenue range $9 billion to $40 billion is huge, but regardless of where sales fall, the Apple Watch as a standalone division would qualify to be an S&P 500 company. However, in relation to Apples $200 billion in current total revenue, the watch would boost total sales 4.5 percent to 19 percent somewhere between insignificant and a lot.
However, even if sales come in closer to $9 billion, in the long run the Apple Watch will be an important product. As technology improves and the price falls, it will gradually transition from being a nice-to-have to a must-have item, the attachment rate will rise, and the impact on Apples bottom line will grow.
But even more important, the Apple Watch will increase Apples competitive advantage. Its seamless integration with iPhone and iCloud widens Apples moat against its competitors, increasing the pain and isolation for those who dare to use Android.
The Apple Watch answers a question that is paramount for the companys future: Can Apple innovate without Steve Jobs? Until this watch, Apple was just improving existing products conceived under Jobs (a larger-screen iPhone is not an earth-shattering innovation). The Apple Watch, which takes the company into a brand-new product category, was conceived and designed by post-Jobs Apple. It is a terrific product, and Jobs would be proud of it. But then again, thats coming from a geek who is comparing parenting to high-tech gadgets.