Pixel Envy

Written by Nick Heer.

Every Product is a Killer Product

AAPL is up today by nearly $13. It’s yet another day of steady, solid growth as reflected by their shareholders. They didn’t launch a product today, nor win one of their many lawsuits. It’s just a Tuesday. That’s Apple’s corporate strategy in a nut.

Apple’s competitors see things a little differently. Google, for instance, doesn’t sell products. Rather, they’re an advertising company that uses products and services as advertisement vehicles, much in the same way radio stations have worked for decades. Where Google differs is in the targeting of ads. Radio stations follow a particular format, listened to by a particular demographic. Advertisers can guess at what those listeners might be interested in. Google builds up a silo of data gleaned from your email, web searches, friends on Google+, and videos watched on YouTube. A giant heap of personal information that allows Google to provide services for free which are, for the most part, decent.

Microsoft’s revenue is mostly generated through licensing their software. Around 25% of their revenue comes from hardware sales, which is not insignificant, but cowers in the shadow of Windows and Office. Since Microsoft doesn’t sell computers or phones, the majority of their revenue must come from licensing. Direct sales of their software are always going to be dwarfed by sales to equipment manufacturers.

By contrast, Apple’s business model is simple: make products and sell them. There’s no need for ads in web services because one needs to have an Apple product to make real use out of iCloud. There are no licensing shenanigans to worry about because Apple designs the whole product as a unit. That means customers will receive the same stellar experience no matter what iPhone they buy, rather than the disparate platforms one has to contend with in the Android and Windows Phone families.

Apple’s business strategy is not reliant upon a killer product, like some magic bullet. Every product is a killer product which is improved over time as new features are demanded by consumers. The iPhone and the iPad are both lines of products that have significantly contributed to Apple’s bottom line, but they are in a long line of killer products introduced since 1997. And that’s the big secret: a long period of steady improvement and steady growth, with great products as the backbone.