I like math. There are just so many ways to use math to solve problems or to adjust an embedded perception. For example, how can you tell if a company’s product is successful? Or, faring poorly? Marketshare.
The problem with marketshare as a business metric is obvious. It does not tell the whole story. iPhone marketshare? Low. Revenue and profits? High. Mac marketshare? Low. Mac revenue and profits? High. What about Apple’s poor selling HomePod?
Does anyone think that Mercedes-Benz gives a rat’s patootie about having a single digit marketshare in the automobile or truck industry? McDonald’s marketshare for food sales is tiny relative to grocery stores. Marketshare is the worst of the major metrics.
What about HomePod? Word on the streets is this. HomePod is a dud in the talking speaker race, once dominated by Amazon’s Echo line but now with Google nipping at the leader’s heels.
Let’s look at the math.
Since absolutely none of the major talking speaker vendors– Amazon, Google, Facebook, Apple, et al– talk about real sales numbers, we have to depend upon the guesstimators gone wild VHS video for anything that resembles a fact, even if it’s just made up numbers.
numbers guesstimates say Amazon is winning, Google is catching up, but HomePod is a dud. How much of a dud? Maybe 200,000 sold each month. That compares, guesstimate speaking, to 4-million Echos and 2.4-billion Google Homes.
Yep, comparatively speaking, those made up numbers don’t look too good for Apple’s HomePod. But let’s look at the numbers a different way and this time let’s use some of my made up guesstimations.
Let’s say, for example, that Amazon’s Echo has an average selling price of, oh, why not $70? Apple’s HomePod has an average selling price of $350. If Apple sold 600,000 HomePods in the first quarter of 2018 that would translate to $210-million. If Amazon sold 4-million Echos in the first quarter at $70 each, on average, that would bring in a mere $280-million in revenue.
$210-million vs. $280-million. Suddenly, HomePod doesn’t look so bad, does it?
Let’s move to annual sales revenue. If everything stayed at the same rate, and it won’t, Amazon would sell 16-million Echos by the end of 2018, which would bring in revenue around $1.12-billion. At 200,000 at month, Apple would sell– all things remaining the same, and they won’t– 2.4-million HomePods at $350 each, or annual revenue of $840-million.
$840-million vs. $1.12-billion.
Now, let’s look at gross profits from the perspective of guesstimated numbers. Amazon, notorious for selling its own hardware near cost, might have a 20-percent gross margin (I’m being kind). Meanwhile, Apple often sports about a 35-percent gross margin on its hardware.
You see where this is going, right?
Amazon’s 20-percent gross margin on $1.12-billion in Echo sales for 2018 could be $224-million. Not bad, right? How about Apple’s HomePod? 35-percent gross margin on a mere $840-million in HomePod sales could bring in… insert drum roll here… $294-million.
Apple’s HomePod, $294-million. Amazon Echo, $224-million. Or, put another way– HomePod almost $300-million in profits; Echo barely $200-million.
Just as Apple’s iPhone, iPad, and Mac are, on average, priced higher than competitors, but bring in a disproportionate amount of revenue and profits, so too HomePod.
Hey, it’s just math. Guesstimated, of course.