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Judging Apple Watch’s Success

Mike Murphy, writing for Quartz, “Two Years After Its Launch, the Apple Watch Hasn’t Made a Difference at Apple”:

Apple’s biggest launch since the iPad in 2010, the Apple Watch was expected to be a hit: Given the massive financial success of the iPhone, it stood to reason that a companion device might be something customers craved.

Not so much. Apple has never shared hard numbers on how many wearables it has sold, and doesn’t even break out Watch sales in its quarterly earnings report. Instead, the device is bundled into Apple’s “Other products,” which the company says includes, “Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories.”

These articles come out like clockwork every 3 months, as Apple’s earnings report draws near. Apple told us they were not going to report hard numbers on Apple Watch right from the start, six months before it shipped. They want to keep them secret for competitive reasons.

Two years and two iterations after its launch, the Apple Watch has not proven to be as indispensable as the iPhone, or even as lucrative as the Mac, the iPad, or Apple’s services businesses. It’s unclear whether an iPhone-like overhaul, or attempts to market the watch directly to athletes or millennials, will ultimately make a difference.

(“Two years and two iterations after its launch” — I don’t know if that’s a mistake, if Murphy is counting WatchOS releases, or if he’s counting Series 1 as a full hardware iteration. But it’s sloppy writing. Most people would surely agree that there’s been only one iteration since launch, the Series 2 watches released last September.)

The nut of every “Apple Watch is a dud” story is the fact that it’s clearly not an iPhone-size business. But that can’t be the only measure of success. The iPhone is the biggest and most successful consumer product in the history of the world. Nothing compares to the smartphone market, and it’s possible nothing else will in our lifetimes. You and I may never again see a product as profitable as the iPhone — not just from Apple, but from any company in any industry. Or maybe we will. It’s a complete unknown.

But if Apple gets it into its head that they should only work on iPhone-sized opportunities, it would paralyze the company. In baseball terms, it’s fine for Apple to hit a bunch of singles while waiting for their next home run. According to Apple, they had more watch sales by revenue in 2015 than any company other than Rolex, and Apple’s “Other” category, which is where Watch sales are accounted for, had a near record-breaking holiday quarter three months ago, suggesting strongly that Watch sales were up over the year-ago holiday quarter.

These two facts are both true: Apple Watch sales are a rounding error compared to the iPhone, and Apple Watch is a smash hit compared to traditional watches and other wearable devices.