Apple

Why is Apple making a gold watch?

As expected, the gold version of Apple’s watch is very expensive by consumer technology standards - $10,000 and up, depending on the band you take. And, also as expected, this made a lot of people’s heads explode. 

There are really two different conversations here: will people buy a $10,000 Apple watch, and why did Apple make one? 

To the first question, Apple is clearly breaking lots of rules with the watch. There are plenty of $10k watches on the market already that sell just fine, but those are normally mechanical ones, and mechanical watches are sold primarily on the complexity of the mechanism, where of course the gold Apple watch is internally identical to the $350 aluminium model. Mechanical watches are also expected to last: no-one quite knows how long an Apple watch will last (the battery is replaceable, but is the screen? And how long will the software be viable?) but it’s probably not something that your grandchildren will own*.

On the other hand, there is no a priori reason why a watch should have to follow those rules. Plenty of other $10,000 luxury items are far more ephemeral, and once you're selling things for other than purely utilitarian reasons questions like 'value' and 'resale' miss the point. Apple is certainly trying something that’s new to both the tech industry and the luxury goods industry, but it's not necessarily outside the bounds of (rich) consumer behaviour. If we only ever bought things that had rational use cases and the best value, we'd all be wearing boiler suits, or hoodies. 

Ultimately, though, how many people buy the gold one is probably immaterial. The Swiss watch industry sells about half a million precious metal watches a year, and though the size of the overall watch market is not a good indicator of the market potential for smart watches, the size of the market for precious metal watches is probably not far off as an indicator for the gold Apple watch. Even a hundred thousand gold Apple watches at (say) $15k each would be ‘only’ $1.5bn a year, or less than one percent of Apple’s 2014 revenue.  

So (and this is the question that actually matters) why bother? One could argue that it’s a vanity project, or that Apple’s doing this just because it can, or that a few hundred million dollars still matters at Apple (as indeed it does). But I think it’s more interesting to compare it with Apple retail. Despite its prominence, this is only about 10% of Apple’s revenue. It’s much more important as marketing. And it's great marketing. 

Apple stores are huge rich-media billboards on every major shopping street in the developed world: I can't think of any other company that has shops as big as that in such premium locations in as many places. Apple retail is a self-funding marketing operation. So too, perhaps, is the gold watch. Apple might only sell a few tens of thousands, but what impression does it create around the $1,000 watch, or the $350 watch? After all, the luxury goods market is full of companies whose most visible products are extremely expensive, but whose revenue really comes from makeup, perfume and accessories. You sell the $50k (or more) couture dress (which may be worn once), but you also sell a lot of lipsticks with the brand halo (and if you think Apple’s margins are high, have a look at the gross margins on perfume). 

Meanwhile, though other companies are already making metal smart watches, I struggle to imagine Samsung making solid gold watches. Apple's brand might or might not work there, but no other CE company's does. That is, if this is marketing, and if it works, it's marketing that no-one else can do. 

On another tack, perhaps the biggest message that this sends is that the Apple watch is not a technology product. It’s a post-‘feeds and speeds’ product. Today we have prices and release dates for the watch but no tech specs at all - because they’re irrelevant to the user experience. This is a product sold on delight, and experience, and on the feel and pleasure of owning and wearing it and looking at it (which of course means Apple retail is a huge advantage). It’s sold on a butterfly, not on the storage capacity. The value of the gold may be just that message - it’s not a geek’s product at all. One might call the gold a marketing detox - an emancipation of tech from the tech industry.

Finally, whatever your opinion of all this, it doesn’t really matter. Apple’s watch is, after all, coming to market at a lower entry price than any previous new category from Apple. So we can go out and buy it for $350 or $1,000 and get on with working out what, beyond delight, it’s good for - how it changes attribution, and user acquisition, and dwell time, and changes how you use your smartphone, and all the shifting metrics of the mobile internet. 

 

* There was some speculation that Apple might have a plan here - that it might buy back the gold watches, or replace the insides, perhaps - because a $10,000 object that's outdated is different to one that's $600. This may well still happen. 

New questions in mobile

The mobile platforms wars are over, for now - Apple and Google both won. But nothing is settled. The nature and scope of Android is unstable, interaction models themselves are in a flux between apps,web, messaging and notifications, wearables are emerging and Facebook and Amazon haven't given up on controlling the interface. Time for new questions. 

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