Everything’s Coming Up Milhouse

Tuesday, 23 October 2007

Apple’s Q4 2007 financial statement is just chock full of good news. Profits are up, revenue is up, iPod sales are up, iPhone sales are strong. But the big news is the Mac.

Apple sold 2.2 million Macs in the quarter — 34 percent higher than the year-ago quarter, and 400,000 more than the previous quarterly record (which was just three months ago). During yesterday’s conference call with analysts, Apple stated that half of the customers who bought Macs in Apple’s retail stores were new Mac users.

I don’t think there’s any single explanation for why this is happening now. There are many factors at play, and almost every single one of them is in Apple’s favor.

The key problem Apple has faced for two decades with attempts to gain new Mac users is a strange one: most people buying a new computer never even considered buying a Mac. It’s not that they’d never heard of Apple or didn’t know the Mac existed, it’s that they somehow assumed Macs were for some nebulous group of “others”, when the truth is that many of these people would be delighted with a Mac. This, I think, is how the iPod “halo effect” is helping Apple sell Macs. Don’t over-think it, because it’s not exactly rational or logical; it’s not people thinking to themselves “Well, since I love this iPod music player from Apple, that means I should buy one of their computers, too.” What the iPod has done is made more people just even consider — maybe — buying a Mac.

Consider this: Do you know of anyone — anyone at all — talking today about switching from the Mac to Windows? I don’t. Not even Dvorak/Enderle-style muckraking Apple-tweaking pundits are claiming that anyone is switching from the Mac to Windows, because it’s just so preposterous.

As a long-time Mac nerd, though, this seems crazy. The 1990s, for Mac users, seemed fraught with the very real possibility that the Mac would disappear altogether — or at least disappear from relevance. The Mac lost users to Windows for a variety of reasons. For many, it was a forced migration mandated by IT departments “standardizing” on Wintel — corporate art departments forced to switch. For others, it was voluntary: people who switched because Windows 95 was good enough, people who wanted faster Intel-based CPUs, people who were frustrated by technical limitations in the old Mac OS even though they preferred the Mac UI. Not to mention the fact that many of the Great New Things came out as Windows-only products. (Napster, for example — there were Mac clients eventually, but the Napster phenomenon started on Windows.)

This bottomed out around the beginning of the Mac OS X era; everyone who was going to switch from the Mac had done so. What Apple was left with was a very solid, very loyal user base.

Today, there are a lot of really good reasons to switch to Mac, above and beyond the same old reasons that the Mac offers a superior overall user interface and user experience, which was really all the Mac was left with in the 1990s (that, and the third-party Mac developer community that was drawn to the fact that, even at the nadir of the Mac’s market share, the Mac remained the platform for producing software that emphasized the user experience above all else — “The Show”, as Brent Simmons described it back in 2002).

To wit:

  • The web is really coming of age, and is the biggest platform, by far, in the world. Windows’s market share of 90 or 95 percent pales next to the market share of the web, which is effectively 100 percent. You can’t buy a computer that doesn’t ship with a web browser. When the Next Big Thing happens these days, it usually happens on the web — and that means Mac users don’t miss out.

  • Apple’s switch to Intel CPUs was seamless, and the existence of Windows-on-the-Mac solutions like Boot Camp, Parallels, and VMware makes the idea of switching a lot less scary. Windows really is the new Classic: in the same way that the Mac OS Classic environment eased the transition for existing Mac users switching to Mac OS X, Boot Camp/Parallels/VMware ease the transition for Windows switchers. This wasn’t possible when the Mac was based on the PowerPC.

  • Microsoft hasn’t done anything interesting with Windows since XP. Windows-vs.-Mac arguments tend to be inflammatory, but there’s nothing in Vista — nothing — that would tempt a Mac user to switch. And given Microsoft’s pace of Windows development, it seems obvious that Vista is it for this decade: that come 2010, Vista, with a few subsequent service packs, is going to be all Microsoft will have to show for the 2000s. It was a long wait for Vista and it didn’t seem worth it.

  • Apple’s retail stores are an enormous success. No other PC maker has anything that even vaguely resembles Apple’s retail chain.

  • Windows lost a huge chunk of the nerd market. Nerd switchers, in and of themselves, don’t constitute a significant enough number of people to account for anything other than a tiny blip in Apple’s Mac sales. But nerds are the people who recommend computers to friends and families; it seems inarguable that there are an awful lot of nerds recommending Macs today who weren’t five years ago.

  • Young people love Apple. Arguably, this is another aspect of the iPod halo effect. I’ve been linking to a series of recent stories about the Mac’s tremendous rise in market share on college campuses; this one from Harvard shows that the difference is significant even between freshmen and seniors: 35 and 27 percent, respectively. Strong back-to-school sales account for an enormous chunk of Apple’s record-breaking quarter. And consider the long-term effect: hook students on the Mac today — and keep them happy — and Apple has gained new Mac customers for life.

The Mac has never experienced sustained growth at this sort of pace. Breaking this quarterly sales record isn’t a fluke — it’s part of a trend. What we’re seeing now is what Mac enthusiasts have been hoping to see for 20 years: more people deciding to buy a Mac. The question now is how big can this trend get.