In a few months, the number of people wearing the Apple Watch will exceed 100 million. While the technology press spent many years in love with desktop smart speakers and the idea of just interfaces, it was the Apple Watch and the tool on the wrist that ushered in a new paradigm shift in computing. We are now seeing Apple take advantage of the growing number of Apple Watch users to build a formidable healthcare platform. The Apple Watch is a runaway train with no company capable of slowing it down.
Mirages and Head Fakes
We come from a strange distance for the technology industry. As the growth of smartphone sales slowed in the mid-201
Companies that were unable to take advantage of the smartphone revolution with their own hardware placed large bets on digital voice assistants that were supposed to herald the end of the smartphone era. These digital voice assistants will be delivered to consumers via inexpensive desktop speakers placed in the home. Massive PR campaigns were launched that tried to convince people of this future after the smartphone. Unfortunately for these companies, ardent press coverage cannot hide a fundamental design flaw in a product category.
At almost every turn, it was said that Apple missed the voice train due to dependence on iPhone revenues. Management was said to suffer from tunnel vision while the company’s approach to privacy was positioned as a long-term headwind that would lead to poorer results in AI compared to the competition. Simply put, Apple was seen as losing control of where technology was headed after the mobile revolution.
There were sharp signs that stories about smart speakers and Apple, which lacked a coherent strategy for the future, were out of target. In November 2017, I wrote the following in an article entitled “A Stationary Smart Speaker Mirage”:
“On the surface, Amazon Echo is showing sales to a growing product category. An annual sales rate of 15 million + for a product category that is only three years old is quite the achievement. This has led to forecasts of stationary smart speakers that represent a new paradigm in technology. However, relying too much on echo sales will lead to incomplete or erroneous conclusions. The image portrayed by Echo Sales is not what it seems. In fact, it is only a matter of time before it becomes clear that the stationary home speaker is being shaped to become one of the biggest headaches in technology. We are already beginning to see that early signs of disappointment are beginning to appear …
I do not think stationary smart speakers represent the future of computing. Instead, companies use smart speakers to take advantage of a difficult technology phase where there does not seem to be a clear direction for where things are going. Consumers buy cheap smart speakers powered by digital voice assistants without having any strong belief in how such voice assistants should or can be used. The biggest takeaway from customer surveys about smart speaker use is that there is no clear trend. If anything, smart speakers are used for rudimentary tasks that can just as easily be done with digital voice assistants that are found on smartwatches or smartphones. This environment paints a completely different picture of the current health of the smart speaker market. The story in the press is simply too rosy and optimistic.
Finally, smart speakers compete with a seemingly unlikely product category: wearables. “
Three years later, I would not change a thing that was found in the three preceding paragraphs. The clever speaker bubble burst less than 12 months after the article was published. The product category no longer has a sum factor, and despite hopes from Amazon and Google, people do not use stationary speakers for much other than listening to music and rudimentary tasks such as setting kitchen clocks.
The primary problem with the voice is that it is not a great medium for transmitting a lot of data, information and context. As a result, companies like Amazon have had to call back their magnificent vision of voice-first and only voice paradigms. Last week’s Amazon Hardware Processing highlighted a growing display of monitors – a complete reversal from the second half of the 2010s.
Play on the wrist
As companies that missed the smartphone boat opted for desktop speakers, Apple placed a dramatically different effort on a small device with a screen. This device would not be stationary but instead push the definition of mobile by being worn on the wrist.
Jony Ive, who is credited with leading Apple’s push into wrist wearables, referred to the wrist as “The obvious and right place” for another type of computer.
When Apple unveiled the Apple Watch in 2014, laptop computing on the wrist was more of a promise than anything else. Apple created a whole new industry – something that is not found much in the traditional Apple playbook.
After years of deep skepticism and cynicism, the consensus reaction to the Apple Watch has changed and is now positive. Much of this is due to the fact that it is impossible to miss the Apple Watches that appear on the wrists around the world. According to my estimates, 35% of iPhone users in the US now use an Apple Watch. This is a shockingly high percentage for a product category of five years, and it says a lot about how Apple’s intuition about the wrist was right.
Apple Watch installed base
The number of people using an Apple Watch continues to increase steadily. According to my estimate, there were 81 million people wearing an Apple Watch at the end of June. According to Apple, 75% of Apple Watch sales go to first-time customers. This means that 23 million people will have bought their first Apple Watch by 2020. To put this number in context, there are around 25 million people wearing a Fitbit. The Apple Watch installed base increases with the size of Fitbit’s total installed base every 12 months. Exhibit 1 highlights the change in the Apple Watch-installed base over the years.
Exhibit 1: Apple Watch installed base (number of people using Apple Watch)