An Apple Fanboy Studying Amazon
What was it like being a customer of these two brands during Q4 2017?
Reading and talking about quarterly earnings often times feel too much like work (I don’t love). Yet I want to learn more about great brands. Therefore I needed to find a slightly more self-entertaining way to go through this … Let’s go.
As a customer of Apple in the quarter ending December, 2017:
I am now one of the 1.3 billion “people” (active devices) on Planet Earth that actively use Apple products.
My iPhone iPad Mac everything roughly print $0.5 to Apple every single day, because I use some of Apple’s services. And all the other 1.3 billion “people” (active devices) on Planet Earth print 50 cents to Apple every single day too.
And in 2017, 110 million of folks like me decided to subscribe to Apple’s services. I am talking about new subscribers like me who religiously (and almost automatically) give 50 cents to Apple every day. I am also an active user of other companies like Facebook and Instagram, but I don’t drip money to them at this rate at all. Not even close.
I have also started to own new peripherals, especially wearables such as the AirPods and the Apple Watch. I have realized I gave Apple the most money buying the iPhone and then followed by the money I have spent on Apple wearables. This just started happening in 2017. I didn’t see that coming at all.
As a customer, Apple wins my wallet (and heart) by focusing on how I feel about the experience with its products. They tried to figure out ways to make my entire music listening experience better (or great as they would like to say). They worked hard to make me feel empowered and accomplished when I snapped edited and shared a selfie. They tried to make the backup process less painful (still painful). They tried to enhance this delightfulness when I used my Macs and my iPhones.
If I also buy into their approach on making Planet Earth healthier by buying forests and solar panels, their take on how to protect our privacy, and how they try to push their suppliers to be a bit more responsible and moral, I become more content with my decision to choose Apple.
Now, let’s look at this as a customer of Amazon in the quarter ending December, 2017:
First thing first, I am three rather distinct customers of Amazon:
The business owner (or a guy who needs help to run his own online operations).
Amazon.com-self, the shopper:
I did almost 50% of all my online purchases through Amazon. During the 2017 holiday season, for some reason, I spent a whopping 20% more on amazon.com. This was because I have those damn DASH buttons and Ms. Alexa to help me buy more unconsciously rapidly regularly, because of the Amazon Basics products that I come to love, and because of how my Prime membership removed my physical and psychological checks to practice delayed gratification.
Speaking about Prime membership, I gained a lot more new Amazon Prime buddies, partly thanks to the amazingly cheap Amazon Echo devices that millions of people bought. We decided to spend a lot more money on the benefits and content that we Prime members get to subscribe to and enjoy (45%+). We dripped a lot more money to Amazon a lot more regularly through subcriptions, even though it’s still small compared to the money I printed to Apple (e.g. in Q4 2017, $3 billion vs $8.5 billion).
I sell my water-spraying toilets on Amazon.com. Amazon has become so great at fulfilling my shopper-self purchases they allowed me to use this resource of theirs through FBA (Fulfilled by Amazon) to sell my stuff. 20% of what I give to Amazon now comes from using these services.
The seller + the business owner:
Amazon worked hard to make me buy stuff on amazon.com through their websites, internet technologies, datacenters, etc. They offered me to use these resources of theirs through Amazon Web Services (AWS) to run my own bullseyewashlet.com online shop, my cloud data warehouses, my digital services, etc. I feel extremely proud (and safe) because I use the same backend technologies that Amazon, BMW, the NFL, Disney and many more rely on. In fact, more than 60% of all cloud-related services were owned by AWS. I also gave Amazon 40% more money through AWS. It’s that great.
Amazon also learned a lot about how I (or us humans), as a shopper, seller, browser, voice assistant user, etc, behave. Those diaper ads and self-help books suggestions are results of their massive machine learning and AI capabilities. These are also available through AWS. I can also leverage this expertise by adopting Alexa. In fact, I can integrate Alexa into my upcoming smart water-spraying toilets. Yes, the dream of asking Alexa to move the stream of lukewarm gush of water forward a little bit to hit the bullseye is now a reality.
Amazon can keep me happy in many ways.
As a shopper, the overall experience I get from (amazon.com + Wholefoods + Amazon Go + Amazon Basics + Prime Member benefits [drone deliveries soon please and wait Amazon Key what?]) + content [The Marvelous Mrs. Maisel, yes!])^(Echoes + Alexa) will keep me around for a long time.
As a customer of AWS, the seller, the happier my amazon.com self is, the better AWS will become, and the happier my AWS self will be.
As a customer of FBA, the business owner, the happier and more vibrant our amazon.com selves are, the better FBA will become, and the happier my FBA-self will be.
Also as all three customers, I know Amazon put almost every single dollar they earn right back into their businesses. Jeff Bezos has said multiple times about how they would aggressively re-invest most of their revenue into their capabilities. If I buy into this mantra, it almost feels like the money I spent as a shopper gets reinvested into tools that I get to use to make me a better seller and business owner.
The most amazing thing about Amazon, is how even if I am pissed as a shopper, they still have a chance to keep getting money from me as a seller/business owner. They also leveraged their strengths so well with FBA/AWS etc. I was thinking, what would it be like, if say, Apple uses the same model, where they make their core competencies available to me?
Examples of what Apple is great at:
- Design and User experience
- Supply chain (the ability to make and ship 80 million complex palm size super computers in 90 days globally arguably makes Apple the best supply chain in the world).
If Apple behaves like Amazon, that means I can buy Jony Ive’s service and help me design a toilet so beautiful that you would want to lick it, and make the experience sitting on it insanely great. I can also use their supply chain to manufacture my toilets and scale it globally.
Another thought I have is, I could perhaps also describe myself as customers of Apple’s App Store (the developer) or business owner that uses Apple solutions. However, I don’t know yet if this comparison is sensible because the money I bring to Apple might not be as direct and significant as the money I give to Amazon as those different customers. What makes Amazon’s business model intriguing is how the different versions of me contribute significantly to Amazon’s business.
Lastly, Apple’s strength and vulnerability are the same — the iPhone. No matter how I tried to look at it, the fact that the iPhone is so huge make it almost impossible to argue otherwise. It is 70% of its business, and I would argue that the majority of the services and “others” revenue are driven by the iPhone. For example, iCloud on Mac is tiny. Apple Music is designed to be mobile. There is no comparison between the AirPods (an iPhone-first pheriphral) and the Magic Mouse (a Mac pheriphral). With this view, it is almost impossible to say Apple is struggling, given how much and how long the growth has been for its massive iPhone business. Perhaps the most mind boggling of all, is how happy and satisfied we customers are with the iPhones (and AirPods!). While it is reasonable and sensible to point out the potential risks with the iPhone’s business, but when a brand has this level of satisfaction and growth in its products, at such scale, with such consistency quarter after quarter, it is irrational and illogical to conclude that Apple is doomed.
Whereas for Amazon, I could also say online store’s sales contribute the most, but AWS actually contributes significantly more to its bottomline. I would argue AWS, even if amazon.com starts to really disappoint, can still function and grow independently, thanks to its scale, the amount and variety of significant corporate customers it has acquired, and the capabilities it is gaining every day in ML and AI.
(I want to dive into how different brands are approaching ML/AI too … maybe another time …)
Alright, time to reorder some snacks and listening to some podcasts.