Part of the problem we humans have– actually, just one among many and too many having to do with how we select our politicians– is the seeming inability to see behind or beyond the headlines of an article.
My case in point has to do with headlines about the new Pokémon Go craze that’s sweeping the nation, the world, and probably three or four alternate universes somewhere, and might be corrupting our youth, but has most definitely been identified as the cause for traffic jams and a few deaths. What’s the headline?
Visual Sucker Punch
Everyone knows that there’s headlines and there’s link bait; the latter of which is like a headline but more scurrilous in nature. This is the basic understanding:
1 a heading at the top of an article or page in a newspaper or magazine: a front-page headline.
• (the headlines) the most important items of news in a newspaper or in a broadcast news bulletin: issues that are never long out of the headlines.
• [ as modifier ] denoting a particularly notable or important piece of news: air accidents make headline news whereas car accidents are seldom publicized.
Now, create an article of fiction, drop in anything about Apple and Pokémon Go, and you’ve got an instant hit article. Like Apple making $45-billion profit from Pokémon Go. The inspiration for my headline pumping comes from The Guardian in the U.K., home to plenty of scurrilous headlines, but the one that caught my eye was about how much money Apple could make from the Pokémon Go game on iOS.
Apple stands to rake in $3bn in revenue from the Pokémon Go craze in the next one to two years as gamers buy “PokéCoins” from its app store… A pack of 100 PokéCoins costs 99 cents in Apple’s app store, but the price can go up as much as $99.99 for a pack of 14,500.
Thanks to the Pokémon Go craze, Nintendo’s stock price has doubled, and Apple’s stock price has jumped 5-percent. Maybe with this $45-billion profit windfall, AAPL will go up even more.
It could happen.
Here’s the deal and some of the math. Apple gets a cut of 30-percent from the revenue generated by App Store apps. Pokémon Go is generating plenty of revenue and analysts estimate it could bring in more than $10-billion over the next two years.
Blame It On Math
See how short-sighted that estimate is? At a 30-percent commission, Apple would generate about $1.5-billion a year. But that estimate assumes the craze does not continue to grow, and assumes it might even stop after two years. iPhone sales are going strong after nearly nine years, so let’s see how far we can take this.
At the current rate, in 10 years Apple could have as much as $15-billion in profits added to the App Store. I say profits rather than revenue because once costs are met, and they already are– the App Stores are massively profitable– every piece of revenue beyond cost is pure profit.
Wait. There’s more. Pokémon Go is rolling out to new markets elsewhere in the world, and while it’s not likely to be a big App Store profit maker in Mideast countries who view Pokémon as a devil’s toy, let’s say it grows to be four times as large 10 years from now.
Ipso facto and alakazam, Apple has a new revenue and profit stream that could top $6-billion a year and bring in as much as $40-billion between now and then. That is if Apple and Nintendo can keep the craze going along at least as well as the iPhone.
You see the problem with such hockey stick math, right?
PowerPoint. Excel. Evil.
I have always had a problem with PowerPoint presentations and Excel spreadsheet projections. Everything is based upon specific assumptions and assumptions have this terrible history of being completely wrong, which then nullifies the so-called facts contained in the PowerPoint slides and makes the corresponding Excel spreadsheet projection look like a certain presidential candidate’s (who goes bankrupt more often than all presidential candidates combined) plan to cut taxes and reduce the national debt seem a little less plausible.
But $45-billion in profit? Sure. Why not? Nobody will remember my projection this time next year anyway.