Days of the big iphone reveal are now over
After a decade of the most extraordinary success and growth it appears Apple has reached iphone saturation point. Despite the launch of the iphone X, with facial recognition technology baked in, Apple sold 1.2pc fewer handsets in the final quarter of 2017 than in the same period a year earlier.
There was no new “super cycle” for iphone sales. More bullish investors had hoped the iphone X would spark upgrading on a scale last seen when Apple increased screen sizes in 2015.
Instead, although the iphone X was Apple’s bestseller, its wizardry failed to convince the masses still using an iphone 6 to part with £1,000.
The disappointment is not really surprising. Mobile operator executives have grumbled privately that the new flagship did not have any “must have” new features and that its abandonment of the home button may have been an innovation too far for many less technophile iphone users.
More broadly, the consumer excitement that greeted the smartphone revolution has cooled. Although there is still massive interest in an iphone launch, the days when Apple was guaranteed a slot on the BBC News at Six are rightly gone. Apple investors will at least have $163bn (£115bn) to dry their tears.
Donald Trump’s tax overhaul has prompted tech giants to repatriate the hundreds of billions of international profits they had stashed offshore. Apple said it is going to pay off its debts and gradually give the rest to its shareholders.
It is not all bad news on iphone sales. The launch of the iphone X lifted the average selling price to just shy of $800. Forecasts claim unit sales in the next quarter will be up on last year, so it may be that the new design and features are just taking longer to capture consumer imaginations and wallets than did the more obvious virtues of a bigger screen.
And regardless, there are now something like 800 million iphones in use. Apple has very tight control over the experiences of the biggest, richest audience ever assembled. Even if it is only able to maintain, rather than increase, unit sales, there are endless ways to use the iphone as a foundation for new growth in services.
Perhaps the iphone XI, whenever it appears, will be the one to reignite iphone sales growth. Apple is said to be working on mixed reality glasses that blend computer graphics with the environment and will doubtless require the latest iphone to function although, as ever, the demand for such breakthrough technology is unclear.
After 10 years of development, most iphone users would still quite like a battery that lasts more than one day. Google’s results this week revealed more worrying trends for investors than Apple’s did. There have long been concerns that the rise of smartphones, with apps increasingly replacing web browsers as the front door to the internet, would threaten Google’s lucrative search business. There are now signs the fears are justified.
Google missed its profit target because it had to pay more than expected for traffic on mobile devices. This means it paid Apple and others more to send search queries through the Google search engine so it can serve up advertising next to the answers. On smartphones, Google has to share the spoils of its success more than it does on the old desktop web.
With mobile accounting for an increasing share of Google’s business, the higher costs rattled Wall Street.
None of which is to say Google is not an absurdly successful and wealthy hegemon of the digital age. There is no doubt, though, that it feels challenged by the dominance of mobile consumption. Google’s emphasis on Youtube video consumption growth, despite the fact the service is barely profitable, is telling. It is apparently better for Google to emphasise its relevance to the mobile future, even if it weighs on company finances today.
There is also a rising competitive threat to worry about. Thanks to massive usage of its mobile apps, Amazon’s advertising business is booming and could one day challenge the duopoly of Google and Facebook. Putting aside the conflicts inherent in the world’s biggest marketplace becoming one of the world’s biggest sellers of advertising, brands are keen to see a third big player emerge.
Transparency is not an Amazon strong point, but it said advertising was a “key contributor” to its very strong financial report this week.
Despite its fiddling with driverless cars, smartphones and thermostats, Google has no meaningful business outside advertising and is challenged by mobile. Compared with other tech giants it looks vulnerable.
‘The iphone X was Apple’s bestseller, but it failed to convince the masses to pay £1,000’
Google fears are justified