Hey, did you hear the news? Apple’s HomePod is a numbers hit. I saw the math. HomePod, on the streets barely seven months, already took a bit out of Amazon Echo and Google Home. Didn’t you read about that?
This is an old story for Apple; seldom the first to a market, but the one that slowly, steadily, assuredly walks away with all the money. You saw it with smartphones. You saw it with tablets. It’s been that way with the Mac for years? But talking speakers? How?
Speak? Or, Sing?
Here’s the speed reader version of what’s going on in the so-called talking speaker space. Amazon was the first mover and moved millions of little and inexpensive Echo devices that use Alexis instead of Siri inside. Yes, it’s true that Echo is a hit and even though Apple’s Watch sold more units, Watch is a failure.
That’s what happens in the era of fake news on the misinformation superhighway, right?
A few years after Echo became dominant and Apple was criticized for ignoring the market, Google entered with a few Home devices. Those sold well enough to cut Amazon’s marketshare down to about 70-percent.
What about HomePod?
Well, nobody has any real numbers regarding what sells and what doesn’t– you know, actual unit sales numbers– but guesstimates run amok, so let’s go with that. The research company CIRP did some research and guesses and this is what they came up with.
Math don’t lie. In marketshare, Amazon’s Echo is the clear leader with 70-percent of the market, while Google has improved and Apple’s HomePod remains a blip on the radar. A grow blip. But a blip.
So, exactly how is Apple’s HomePod a numbers hit?
Let’s do some napkin math. Amazon’s Echo devices average less than $100 per unit sales, while Apple’s HomePod retails for 3.5 times that at $350. See how that math works? Suddenly, HomePod is competing well against Echo when it comes to what matters– revenue and profits.
Since we don’t have actual sales numbers to examine we have to do what the researchers do. Guess.
Do the math. Let’s say 1-million of these talking speaker critters have been sold the past year (it’s more, but I like easy math). Let’s say Amazon’s sell for an average of $100 each. That’s 700,000 times $100. That’s $70-million in revenue. Apple, on the other hand, got 6-percent of 1-million or 60,000 units, but sold them at $350 for a grand total of $21-million.
See how that works? That’s only revenue, but in barely seven months Apple just under 30-percent of the revenue Amazon has. I’m leaving Google out of the equation here because it doesn’t matter.
Now, let’s do a little more math. Important math. Profit math. Apple gets enormous gross profits from hardware products while Amazon gets hardly any. I deem it safe to say Apple’s gross margins on each HomePod likely are five times Amazon’s on each echo.
Translated another way, with not even a full year for comparison, and not even one holiday period, Apple’s HomePod could be pulling in half the talking speaker industry’s profits. Nobody knows for sure because the numbers are made up guesstimates, but doesn’t that sound exactly like how Apple would conduct business in the talking speaker segment of the tech industry?
Oh, and shouldn’t we really name Amazon’s Echo devices as stalking speakers?