As always, none of the numbers are official, so take all of them with a huge grain of salt. The article also doesn't link to a single source, not even an unofficial one.
> Assuming an even split of sales between Gen 1, Gen 2, and AirPods Pro, Airpods revenue was $12 billion in 2019
This itself is a terrible assumption. AirPods Pro launched in November 2019, so had just 2 months of sales. Even otherwise, there is never an even split between the lower and higher priced versions of any product, especially when the higher one costs nearly double.
Not only were they unofficial, the guess work was wrong. And even the facts were wrong. What annoys me is the blog is actually for investment. ( With Email Newsletter suggesting sign up for insight )
>Since 2017, Apple has sold roughly 215 million iPhones per year. These phones cost roughly $1,000 each, and therefore generate $215 billion of revenue for Apple each year. This makes up 81% of Apple’s total revenue
There is no need to guess. Apple actually report ASP when they were reporting Sales Unit Number. In 2017 their iPhone ASP were 618 - 697 depending on Quarter. In 2018 their iPhone ASP were 728 - 793. They stopped reporting unit and ASP in 2019.
Apple Fiscal 2017, 2018, 2019 Revenue was $229.234B, $265.595B, $259.97B And iPhone Revenue was $141.29 , $166.8B, iPhone % of revenue was ~62% to of their revenue.
Not 80%.
The blog post could have been so much better if he spend 10min actually looking up those number.
It's not just the numbers, there are other wild assumptions going on.
> That means almost all iPhone users are still either using wired earphones or none at all.
I'm sorry, what? Non-Apple branded Bluetooth earphones (including AirPod knockoffs) are ubiquitous, and far outnumber wired earphones (in part thanks to Apple and many Android OEMs dropping headset jacks).
I saw them everywhere in Rome last summer. Lots of tourists of course, but I try to go off the beaten path and I saw quite a few locals wearing them too.
Indeed. Here in SE Asia, everybody still uses 3.5mm jack smartphones. It's a rare occurrence to see wireless earpods, and almost always these are cheap Chinese AirPod knockoffs.
Some of the cheap knockoffs are getting really good. Mine get 4.5 hrs battery life, have the optical sensor on the bud that pauses when taken out and wireless charging case including an cloned (stolen) apple SoC that gives the real battery life of the "airpods" and case when the case is opened.
Doesn't match mine either. Here in Japan (at least in Tokyo) it's uncommon to see wired headphones. Most are random wireless headphones, I would estimate 20-40% only being AirPods.
I'm in Hanoi, I see airpods everyday (and no, I don't go to tourist areas). I myself use Huawei Freepods 3, which cost about the same as Airpods (~180 usd).
Go to a random rural town in a midwestern US state and I'm sure you probably won't see people wearing Airpods, which is probably what people are picturing when someone says SE Asia.
We have paved roads believe it or not, as well as a large class of people who use the newest iPhones.
You see a lot of AirPods (I was gifted a set myself) but you see even more wireless over-ear headphones. I probably notice those the most. And wired are still common, though not necessarily 3.5mm.
I dunno... I was watching an NBA game* the other day and 4/5 players had AirPods in as they entered the arena and the other singleton had over the ear headphones. This totally caught me off-guard, and was so noticeable I made a mental note of it.
* I know, not representative of the general population, and USA-centric, but the A list tends to be representative of what people want and, if they can afford it, what they have.
Have you watched The Defiant Ones[1] on HBO? I can't exactly recall if they were giving Beats out to players for free, but there is a segment of the documentary where they talk about how ubiquitous Beats became because players were shown wearing them in the pregame. You could be pretty spot on with your assumption.
Non-Apple branded Bluetooth earphones (including AirPod knockoffs) are ubiquitous, and far outnumber wired earphones (in part thanks to Apple and many Android OEMs dropping headset jacks).
Do you mean they are ubiquitous with people using iPhones? Because here is Australia I would guesstimate that 80% of in-ear wireless earphone used with Apple devices are AirPods.
I think probably 50% of people I know who've bought an iPhone in the last year have bought AirPods at the same time (if they didn't already have them).
Over/On ear headphone are a different story, as is Android.
> I'm sorry, what? Non-Apple branded Bluetooth earphones (including AirPod knockoffs) are ubiquitous, and far outnumber wired earphones (in part thanks to Apple and many Android OEMs dropping headset jacks).
Maybe in new sales, but not in deployed use.
I’ll buy a quality headset or in-ear and it might last me a decade.
The terminology "true wireless" became popular because of the wire linking the two sides on older bluetooth headsets.
When you think about it, the new usage (wireless = no wires at all) is more accurate than the old (wired, but not connected the the phone itself by wires)
In my environment we tend to call "Headset" something that is set up for quality conversations (think gaming or office headsets - large earmuffs and microphone boom being defining quality) and "Headphones" things that are intended primarily for consuming/listening (which may incidentally have a microphone, typically inferior).
Understanding that may not be wider usage, I feel there exists a need (or at least benefit) for two words - something which is good/intended for listening, and something which is good/intended for conversing.
They are absolutely great... for person with the AirPods. For the rest of the poor suckers on the call, it's headache time.
As I'm currently in operations, vast majority of my team spends 4+++ hrs a day on calls and conference calls. We'll take a $20 3.5mm Logitech with a boom over a $100 bluetooth with a boom over $200 bluetooth without a boom in a heart beat. Anybody with airpods [or Samsung etc equivalents] has been taken out to the back alley and shot by now.
Correct, these are all estimates. And the sales split is unclear, but both Airpods 2 and Airpods Pro have the benefit of launching before the holidays. They got a disproportionate number of sales from those 2 months. Even if everyone went with the $150 version (which is impossible), Airpods revenue would still be $9 billion at 60 million units. The point still stands though, Apple is making a killing off Airpods. Whether the exact number is $9 billion or $15 billion isn't as important.
I am of course not debating that AirPods are successful. However,
- If one random sales estimate is $6 billion and the other is $12 billion, it is clear that there isn't enough information out there, or something else is amiss. This isn't just a margin of error difference, and would completely change the graph in the parent article.
- There is nothing useful to be taken away from comparing its sales numbers against a bunch of SaaS companies. Here's a better idea - put it on a graph along with sales of Echo, Fire TV, Philips Hue, Chromecast, Roku, Ring, Tile, Duracell AA Battery, GoPro etc.
I would find an estimate like "AirPods make more money than Spotify" interesting; its a sort-of poetic "the hardware you use to listen to the music is worth more than the music itself", at least in a limited scope (of course, the entire audio hardware industry is larger than Spotify, but is the entire audio hareware industry larger than the entire music recording industry? idk).
Spotify rents music that it itself rents from 3 companies that own most of the music. Why would those 3 companies not just raise their rents if Spotify starts making a decent profit?
Spotify has been around since 2006 and just eked out a tiny profit last year. Unless they plan on owning music themselves, I don’t see why the music owners wouldn’t try to capture most of the profit.
I have met audiophiles. The impression I get is that having nice headphones "on the go" is not a priority and people live with the low quality of small-and-wireless headphones.
Very few audiophiles are sitting at their desk using Airpods, though. In that market, wired headphones rule supreme. (Many people are using wireless noise-cancelling headphones, however, not for audio quality but because "work" is too loud for people to work. At my last job, they even had Sonos speakers around playing music all day. It was crazy!)
1) I don't know the estimates but I see it on the streets. Everyone and their dog has AirPods. I already have seen people with Pro version as well. I do not see people walking with their GoPros. If I go skiing I don't see people with their GoPro (people mostly just go skiing and then do some pictures with their phones from what I noticed), Chromecast I have seen some but not as many. There is no comparison.
2) There is one interesting thing. Everyone would say "make software" because it is easily scalable and you want scalable business. You don't want to make physical things, because making business on physical things is not scalable. Now Apple is showing that making physical things makes loads of money if you are Apple. So still making physical things can make more money than making SaaS.
"If you are Apple" is the key part of it. A software company can be successful with a bunch of programmers and their laptops, and can go head-to-head with Google, Facebook or anyone else. That describes all the startups on the list. To emulate AirPods' success you need:
- a chip design/fabrication team
- a battery design team
- procurement specialists and high-volume vendor contracts in Asia, with assembly lines ready to go at moment's notice
- a logistics, operations and distribution pipeline in every market in the world
- the most successful product in the world (iPhone) which you can attach your sales to
- billions in marketing and advertising budgets
- premium retail locations across the world
AirPods are NOT a startup, and should not be compared to other startups. "Make software" is definitely still good advice for the vast majority of entrepreneurs out there.
Perhaps it was (relatively) easy. What made it easy was precisely that it was Apple: full & willing integration with the iOS ecosystem. A couple UI clicks/taps, if not outright automatic, and your AirPods are happily talking to the device you want to hear from.
All competitors have to cope with interface limitations and API inadequacies. Even one extra obligatory UI step can practically ruin the experience (as compared to AirPods).
Getting to the point where deep integration is easy ... is hard.
This is the big takeaway. The article saying “AirPods are X single digit percentage of apples revenue” (even if slightly wrong) means that there are probably other single-digit-billion-dollar verticales not worth it to Apple to exploit.
Of course you can make money making physical things.The only problem is you either make them premium or you have to sell zillions of units to make profit. We have "Apple" in every industry ( fashion, automotive, catering,etc.), however that's still only a handful.Making software is probably more likely to earn you tons of meney.
Its a conglomerate and many brands, but LVMH is probably the closest comparison of an Apple to fashion.
It’s a luxury brand group, but has price points that go from attainable to stratospheric.
If I had to pick one label, I would choose Burberry (fitting, since Apple went on a Burberry hiring spree a number of years ago, and not just for retail but in design) or Marc Jacobs (which is part of LVMH).
And none of those have high profit margins. So while the revenue may be good, the profit isn’t.
We know that Roku doesn’t make much of anything from hardware sells - the CEO said they aren’t trying to make a profit from the hardware, but ad sales and subscription revenue.
The difference between 9 and 12 billion matters absolutely nil for the main point of the piece. Seems like you just feel the need to somehow dismiss it? Why?
We also have no idea what the margins are on AirPods. It's not at all accurate to apply overall Apple gross margins (which include high-margin offerings like their services and iPhones) to AirPods, which are likely one of their lowest margin products.
I mean sure? Does that really change the point of the article?
Even 25% of those numbers gets us to really impressive revenue numbers.
Additionally the author's conclusion that although Airpod revenue is relatively good for a technology company, it's small compared to Apple's total revenue and as compared to the future value of services revenue this hardware enables.
I bought my wife AirPods gen 2 earlier this year, and then bought her the AirPod pro with noise cancellation for Xmas. Not common I’m sure but everyone said that noise cancellation was a godsend for taking meetings via phone and she concurred.
Apple infamously has high margins on its hardware.
If we were to consider that, the comparison is guaranteed to be dramatically worse (in the favor of Apple).
Shopify, Snapchat and Spotify have yet to earn a single net dollar in profit. They're all still losing money as of their most recent quarters. And their lifetime losses are epic to say the least. Twitter also may still be negative for its lifetime, given its very substantial past losses.
If Apple has even modest 10% margins on the Airpods (it's more likely to be 2x to 3x that), it's at least a billion a year in profit right now. That's probably more than Spotify could earn on its zero margin business even if you gave them $20 billion in sales.
They have high margins on products that retail for multiples of their relevant competition. The same is not true for AirPods. I find it extremely unlikely that their margins are greater than 10%.
Given Apple’s absolute dominance in supply-chain, I find this very unlikely.
The reality is, Apple (either through the Apple brand or through Beats), was the only electronics company that could realistically achieve the economies of scale to sell truly wireless earbuds at this MSRP in 2016, but that doesn’t mean the margins don’t get bigger every single month. It’s true that the margins might be lower for another company, but audio is an insanely high margin industry. Even in retail, the markup between retailer cost and MSRP is often at least 50% — it Is often higher. And if you have the scale and supply chain to own literals every part and churn out a headset, it’s even higher.
> Assuming an even split of sales between Gen 1, Gen 2, and AirPods Pro, Airpods revenue was $12 billion in 2019
This itself is a terrible assumption. AirPods Pro launched in November 2019, so had just 2 months of sales. Even otherwise, there is never an even split between the lower and higher priced versions of any product, especially when the higher one costs nearly double.
Another source (https://hypebeast.com/2019/12/apple-airpods-stats-third-larg...) estimates the sales at $6 billion, half of what the parent article says.