Nov 09

The world’s biggest little market share

Apple has 'em right where they want 'em

It's Mac's 4% vs. the PC's 96%

Now wielding a fearsome 4% market share in computers globally, Apple finally has its competitors right where it wants them.


Because this huge gap in market share is laying bare a huge gap in profitability. And this one doesn’t bode too well for the big guys.

Apple simply has a better business model — racking up record profits quarter after quarter. Its market cap is now not only 5x that of Dell, it’s bigger than Dell and HP combined. There’s even talk of Apple pulling in more cash than Microsoft by the year 2012.

What the hell is going on here? Actually, it turns out that our PC friends were right: PCs are more affordable than Macs, and most people don’t think Macs are worth the premium.

Unfortunately, they stop reasoning one sentence too soon. There are millions of people in this world who will eagerly line up to pay a premium when they believe a product is actually worth it. BMW isn’t about to go under because their cars are more expensive than those from Honda.

Now that I’ve dumped on the validity of market share numbers, let’s look at … market share numbers. But this time, let’s look at a few that highlight Apple’s unique situation.

In computers over $1,000, Apple’s U.S market share in June was an almost unbelievable 91%. In October, 47% of the actual dollars spent on desktop computers in the U.S. were spent on Macs. And just to make themselves thoroughly annoying, Apple follows the same model in an entirely different product category. They also now out-profit Nokia, again doing so with a relatively tiny total market share.

Bottom line: you might think twice before you invest your money based on a head count. Market share is critical if you want to own the world — not so much if you want to change the world.

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  • Drew Hall

    Couldn’t agree with you more. Remember…GM once had a huge market share, but it was those better business models that are now if first place. I’m not saying Macs will ever get to 95%, but seriously, a 10% global market share would mean Apple is probably the most profitable company this side of the big oil companies in the world.

  • Stephen Sonnenfeld

    Put simply, because you know I’m a simple guy, companies optimize profit margins by commanding premium prices and/or reducing cost of goods. Apple excels at both, which is not something that can be said for most other brands in the PC/Consumer Electronics space. And Apple doesn’t just have slightly better margins than their competition, they have way better margins. I remember reading once about how Apple manages their cost structure not just by taking cost out, but by being really smart about their supply chain. The example cited was when they introduced the Nano, which required a shitload more flash memory than previous iPods, so they went out and pre-paid like a billion dollars to secure memory and therefore eliminate what could have been a critical cost variable. Of course they could only do this because of the strength of their balance sheet. People always talk about virtuous circles in marketing, but Apple’s may be the most virtuous of all. It feeds off itself and continuously makes them increasingly insulated from competition. Their only real competition at this point seems to be the general state of the economy, not any of these crappy brands that nibble at their heels.

    Now that you’ve turned me into a little Apple groupie like yourself, it may be inappropriate for me to ask this question, but when are you going re-name the blog “Cult of Mac II?” We need some diversity here. How about some good agency bashing posts?

  • Liebman

    “There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”

    — Steve Ballmer, Microsoft CEO, 30 April 2007

  • Steve

    Alas, my hesitation to move from the “dark side” and switch to a Mac is based entirely on cost/benefit ratio. I long for the day when Apple adjusts their pricing model just a tad. I suspect a slightly lower premium would easily push their market share into double digit territory. But for now, I have to give them all due credit for sticking to their model and reaping the benefits. In the end analysis, it’s all about profit. And clearly, they’ve got the right formula for making money! Thanks for reminding all those Marketing folks that there’s more to success than market share.

  • bryan Birch

    Ken, not only a smart guy, smart writer.
    This is the best presentation of this info I’ve seen to date.