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Applevine News: Consolidated Appstore, iPhone and Macbook Rumors

iphone salesIn politics, or even for the reign of a new CEO, one hundred and eighty days are the usual benchmark for the first measurements of achievement.  In the consumer electronics world, with the instant gratification generation of the Internet driving things, the pace is far quicker.  It’s been only a month since Apple unveiled the iPhone 3G to the world but measurements are flowing.  And like a blockbuster movie touting weekend box office tallies to sustain momentum, Apple too is shrewdly using the press to maintain and build buzz for the phone.

Today, Apple announced that more than 60 million applications have been downloaded at the new “Appstore.”  The majority of these have been free (the average price is 50cents per download) but paid software is averaging a million dollars a day in gross sales.  The store generated $30m in revenue for the first full month of sales, about $1m a day.

That number is impressive.  It paints the picture of a potential software juggernaut but it’s not the whole story.  Apple only keeps 30% of the revenue from application downloads, and at the current scale, that draw will largely be applied to credit processing, hosting and other service fees.  Compared to Apple’s quarterly revenues, the income is pennies. 

iphone salesToday,  value lies in the store’s ability to influence and drive phone sales.  It’s not going to be a direct contributor to the bottom line on its own.  In the future, however, if sales continue at this rate they could exceed half a billion or even a billion dollars (at least that’s what Steve Jobs told the Wall Street Journal in an interview) that could change.  $300m or more in revenue is a lot more than pennies.

In the WSJ report, Jobs said, “This thing is going to crest a half a billion soon…. Who knows, maybe it will even be a billion dollar marketplace at some point in time.” He also noted, “I’ve never seen anything like this in my career for software.”

It’s difficult to counter his famous enthusiasm here.  Without a doubt, the cell phone as a computing platform represents tremendous opportunity.   There is great potential.   Scraping away his agenda, however, a more measured pragmatism should probably be applied.  Unrestricted optimism and projections based on the current sell through patterns seem premature. It’s a factor of modeling how quality versus quantity effects sales.  

In a typical retail scenario, when a product is in the early stages of its life cycle, momentum is high and curiosity/buzz help fuel supplemental purchases.  A new game console buyer, for example, will buy games immediately, and if the console is new to them, they may be more likely to buy titles outside their core areas of interest too.  Later though, once the novelty has worn off, and once they’re acclimated to the product’s best features, their purchases will tend to focus down into narrower areas of interest.  Sport’s titles, first person shooters – whatever suits the user’s particular tastes. Put crisply: early on, people spend more to extend the exploration of their new toy.  Later they settle toward routines.

Early buys are like the impulse buy made while waiting in a retailers checkout line.  They’re spur of the moment. They’re curiosity.  But later, the quality of the product and personal interest weight more heavily at purchase than impulse.

Suggesting pragmatism with projection, some early Appstore numbers hint at that happening here.   First off, the bulk of early downloads have been free.  Of those sold, it’s been about quality.  $9m of the $21m earned by developers in the first month was generated by the top ten titles at the store; games like Sega’s Monkeyball (300k copies sold).  According to further data from Pinch Media reported on GigaOm, less than 20% of an applications users return to use it on a daily basis. 

Looking to the future, the height of the Appstore’s success will be influenced by the quality of the software that is available, and pricing (inexpensive products can override a quality equation).    If the quality is there, a billion dollar market in 12 to 18 months is not out of the range of reasonable speculation. 

But today’s forecasts? It seems too early to guess what will happen when users become more accustomed to their phones and less curious about exploring the platform.

Elsewhere from the Applevine…in other Apple news:

• iPhone Sales Already at 3 million?
Fortune’s blog today published Analyst Michael Cote’s claim that iPhone 3G sales have passed 3 million.  That number is, however, speculative and unconfirmed sales chart by Apple.  It also far exceeds most Wall Street projections.  Accurate? Inaccurate?

Fortune says Cote, who was previously (limited bio) VP of business sales and operations at T-Mobile, has a record for being accurate.  Casting some doubt, no data explaining sources, or the model used to generate it, were provided.  Also, the website for “Cote Collaborative,” his affiliated firm, appears down.  A cached page found through Google shows only limited info from June 12th. As a result,  the blogosphere is quickly taking sides and debating the number.

Analysis – There’s too little info to measure.  Best call:  Wait till August 22nd.   When Apple rolls out the second phase of iPhone country sales, there’s a good chance they’ll add some updated sales statistics to help push the sales buzz.

• iPhone Exceeding Expectations in Japan?
Many feared, and projected, Apple would struggle to break into the Japanese market.  They argued the iPhone, as novel as it is, was not enough of an improvement over already more advanced Japanese phones.  They argued Apple would not be able to effectively bridge cultural (and usage pattern) gaps without greater localization of the offered software.

Japanese journal Tech-On is reporting data that suggests otherwise.  According to Tech On, in July Softbank (Apple’s Japanese carrier partner) accounted for more than half of new mobile subscriptions for the country.  The number was 215,400 out of 391,500.

The report also suggested, Apple was drawing customers to Softbank at the expense of Japan’s larger mobile carriers.  KDDI, as example, confirmed that they had more customers porting their numbers to new carriers (e.g. leaving KDDI) than they had bringing their numbers to them (e.g. leaving other carriers to join KDDI).

That data suggests the iPhone is achieving better than expected Japanese sales.  Softbank’s adjustment of pricing plans earlier this month may help further that into Augst and September. Accuracy prediction: high.

• Macbook Hardware Rumors?
The Macbook has been rumored to be getting a late August, or early September, makeover. Apple has confirmed some sort of "unexplained" product shift that will likely mean the notebooks. That in turn is fueling projections and tea-leaf readings on what will change.  The latest claims that the updates will include a new chipset specifically designed to handle Quicktime video  encoding/decoding.  These chips, if in store, would pave the way for faster video processing and possibly, Blu Ray HD DVD support. 

Rumor accuracy odds:  Many of the rumors circling the Macbook update have speculated about chips changing.  When the narrow details vary but the broader story is consistent, it often seems to have some basis in fact.  With that in mind, a Quick Time encoding chipset is very specific but in the ballpark of what others are projecting too.   Accuracy: It seems sure the Macbook will get some changes.  This set of chips? seems possible, by odds, maybe 2:3 for it happening.  

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