Monday, December 07, 2009

Why the iPod Touch may be bigger than the iPhone

An interesting piece by Om Malik, All Hail the iPod Touch, draws attention to the latest Flurry report (Flurry have set up a large panel which tracks Apps usage across the most important mobile platforms -- watch out Nielsen). Their November study shows very strong growth in the iPod Touch segment:

The chart below shows Flurry user sessions tracked across iPhone, iPod Touch and Android for the last six months. Over this period of time, the iPod Touch has gained four points, despite its already large installed base. While iPhone continues to grow in user sessions, its share of sessions has dropped, while iPod Touch and Android have increased as a percentage.


Even more powerful for Apple are the consumption patterns Flurry is detecting among the iPod Touch demographic, demonstrating this segment's power as a word-of-mouth promotional army. Anecdotally, we know the "iPod Touch Generation" is made up of heavy MySpace, Facebook and SMS users, who voraciously share their lives with, and influence their ever-expanding social graph. Importantly, this also includes promoting products they like.... (Flurry, Smartphone Industry Pulse, November 2009)

Flurry also say "While it is clear that the iPhone has significant short-term revenue value for Apple, Flurry believes that the iPod Touch holds more long-term strategic value for Steve Jobs and team. As all industry eyes look to the iPhone, the iPod Touch is quietly building a loyal base among the next generation of iPhone users, positioning Apple to corner the smartphone market not only today, but also tomorrow." So the iPod Touch is on the Flurry view the absolutely key part of the Apple strategy. I certainly find their data on usage (and the disproportionate usage by the younger age-group) very arresting. If Flurry are right there are some decisive consequences:

  • Apple know, and has been finding out, month by month, just how important the iPod Touch is. Apple has all the data on usage. Their competitors are only beginning to wake up to the threat posed by the iPod.
  • Apple knows that iPod users also buy tunes and Apps. How many and how much $$
  • Most of Apple's competitors are focussing on the market for mobile phones (carriers, smartphone manufacturing, tariffs, and contracts). They are worrying about their installed base and their existing deals. Apple knows that the mobile space is really about mobile connectivity and the web, where phones are only a part of the terrain, and WiFi is growing like wildfire. Apple knows that its installed base is only coming into view....
  • Apple knows that it at some stage it will be able to push for ubiquity, with a device manufactured at a scale not seen before. China has largely ignored the iPhone, but it will not do so when Apple can sell a device for $49 which it can manufacture for $25/20/15.
  • Apple knows that when it achieves ubiquity the iTunes e-commerce ecosystem will generate the preponderance of Apple's revenues and profits.
  • Apple knows that the Tablet (if it comes) will not introduce a radical discontinuity with the software/media platform which has to be a universal offering. Apps and tunes will run the length and breadth of the Apple media continent.
  • We have seen speculation that the mooted Tablet is either an extension of the iPhone product line or a kink in the MacBook line-up. My hunch is that it will be a development of the iPod Touch concept. No phone contract. No Snow Leopard. But a very nice computer.
Apple's iPod Touch is their 'ace in the hole'.


Eoin Purcell said...

As an ipod touch user for some time (got one for my 30th) I've felt for a while that it was an underrater platform. it avoids the costs associated with an iphone and yet delivers most of the functionality. If they introduce a camer/video cam version, I think they'll own the mobile entertainment space. Genius really.


Neil Schlager said...

Great post, Adam. One factor behind strong iPod Touch sales, albeit a small factor, is its increasing adoption for educational use by schools (at least in the U.S.). I have heard anecdotal evidence from numerous customers that their schools are buying iPod Touches for their entire schools, or for specific classes as part of a pilot program, etc. This presents an opportunity for educational publishers of every stripe.

Adam Hodgkin said...

Educational publishers should try selling digital etextboooks through iTunes, maybe they already are? Month by month access for iTunes-style prices would be attractive (if compatible with Apple's developer license -- not sure that they would be).