The tech press and mainstream media have simply run out of adjectives to describe Apple’s success.
The words “Apple Watch,” can’t be Googled without pulling up the words “genius” and “dominating” in front page headlines. It’s probably the only mass-marketed consumer good released in the last five years that has inspired a journalist to describe it as life-changing in a piece that described how the Watch helps deaf/blind wearers navigate, even in urban environments, aided by complex haptics-based technology. That certainly qualifies as life-changing application.
However, searching “Google+life changing,” “Facebook+life changing,” “M-Pesa+life changing” and “water desalination+life changing” pulled up not a single similar headline across three pages of results for each search. Apple builds outstanding products – and its fan base is manically loyal and effusive in singing its praises.
For that reason, Apple is also on its way to becoming the first company with a trillion dollar market cap with free cash reserves scraping at $200 billion. Just last week Apple reported its strongest second quarter in company history driven largely by the powerful sales of the iPhone 6 and iPhone 6 Plus. Apple saw a 33 percent spike in its quarterly profit, year over year, with revenues of $58 billion and a net profit of $13.6 billion.
“We continue to see a higher rate of switchers than we have seen in previous cycles so we are extremely excited about that,” Cook said in reference to the 135 million phones Apple has sold this year - almost half of which (around 62 million) were iPhone 6’s.
But are those switchers there? Recent data indicates that perhaps after an initial pop of enthusiasm - consumers really aren’t switching en masse to Apple. Some figures indicate a trickle of consumers away from Android - others show Apple actually losing ground to Android in the first quarter of 2015.
PYMNTs takes a look at the numbers and why payments people should care.
The Case of the Moving Market Share | Market Share is Down
According to a report from Kantar’s Worldpanel ComTech, the iPhone has actually been losing market share in most markets for the last several months.
They report this happening specifically in the U.S., Japan, Great Britain, France and Spain - all of which, they say, saw declines as part of a continuing trend. China saw its first declines in eight months.
What’s interesting in the numbers is that “Apple’s iPhone 6 and 6 Plus already represent 18 percent of all iPhones in use in the U.S., and 64 percent of the iPhone installed base is an iPhone 5 or newer. That may, as they report, be good news for the Apple Watch that interacts only with these newer models,” noted Carolina Milanesi, chief of research at Kantar Worldpanel ComTech. And it's potentially good news for Apple Pay, since it requires users either have an iPhone 6 model or an iPhone 5 and an Apple Watch to pair it with, but does highlight the vulnerability associated with linking a payment method to hardware that the consumer has to buy to access (versus download an app from any phone).
More importantly, Kantar reports, in the bigger picture, it looks like enthusiasm for the iPhone 6 in late 2014 has not developed into a sustained trend in early 2015, according to Kantar.
Apple’s smartphone share has declined from a peak of 47.7 percent in December to 36.5 percent in March - putting Apple’s market share right around where it was in September at the time of the iPhone 6 launch - at 32.6 percent of the U.S. market.
According to the report, Apple’s market share has also seen very little year-to-year change - except to go down slightly. In April 2014, its market share was 36.7 percent.
Android, on the other hand, has seen its fortunes improve in the U.S. market - currently commanding 58.1 percent - up from its low point (when Apple surpassed it in December 2014) of 47.6 percent.
The report also indicates the global picture is mixed.
“In the first quarter of 2015, the iPhone 6 and 6 Plus continued to attract consumers across Europe, including users who previously owned an Android smartphone,” Kantar’s Milanesi said. "On average, across Europe’s big five countries during the first quarter, 32.4 percent of Apple’s new customers switched to iOS from Android.”
Year-to-year the international picture is better as Apple saw pick ups in market share in Great Britain, Germany, Italy, China and Australia. Apple did lose significant steam in Japan - where the iPhone has lost 12 percent of its market share in the last year.
The Case of the Moving Market Share | Market Share is Up!
Now because no week of Apple coverage would be complete without at least two sets of completely contradictory data - comScore also released market share figures for Apple this week, that showed just the opposite movement pattern. According to comScore, Apple ranked as the top smartphone manufacturer with iOS phones holding 42.6 percent market share, while Google Android led as the No. 1 smartphone platform with 52.4 percent platform market share. comScore’s numbers are higher than Kantar’s, and they also show Apple actually making slight gains in market share, about 1 percent from the previous quarter, and Android’s market share being down by around the same amount.
As for accounting for the difference?
Both companies track similar information and draw their analysis from proprietary consumer panels. They have observed slightly different trends.
The comScore data also showed Apple to be the No. 1 smartphone maker in the world, which is consistent with past results. Samsung also maintained its No. 2 spot - though it did lose about a percentage point of market share according to comScore figures.
So What Does This Mean For Apple Pay?
Apple is of course mainly in the business of selling devices - which these days is primarily smartphones. So it matters very much from a macro picture which way that trend is moving.
From the point of view of Apple Pay - it doesn’t matter all that much, because whether the slowly rising comScore figure is true, or the more static Kantar number is the case, it still reveals a mobile payments platform that is constrained by users who need to buy new gear.
So, let’s do the math.
If Kantar’s numbers are right, 18 percent of all iPhones in the U.S. are ready and capable of enabling Apple Pay. There are 80 million iPhones in the U.S. according to comScore’s March 2015 report.
That means that there are 14.4 million potential Apple Pay enabled users in the U.S.
Emphasis on the word – potential. They have the capability of using it.
We also know from our InfoScout survey work done in March, that 85 percent of consumers who could use Apple Pay (iPhone 6 owners and in stores where Apple Pay could be used) haven’t yet given it a try. That means that 15 percent have.
That makes about 2.16 million people who’ve given Apple Pay a whirl, at least once.
Eighty-five percent of these users say that they use Apple Pay “every chance they can OR every time they remember.” Those two things are constrained by (a) the number of places that Apple Pay can be used and (b) the number of times they remember.
So, best case, that puts the number of Apple Pay users who use it “every chance they get and/or every time they remember” at about 1.8 million. But only about 5 percent of those who can use Apple Pay, use it on a regular basis.
That would put the number at something like 600,000.
Of course, one could add to that those iPhone 5 users plus Apple Watch buyers but that’s likely to be a pretty small subset, and not enough to really move the needle.
So now you know why sales of iPhone 6’s and 6 Pluses is pretty important to Apple.
Without a stampede of users clamoring for it – and even our best case at 1.8 million isn’t exactly a stampede – merchants will sit on the sidelines and wait.