Apple has over $200 billion in revenue, growing 25% a year. Where are the next $50 or $100 billion going to come from?
Mobile phones: no, that market is close to saturation. Desktops and laptops? Stagnant. Watch? Certainly not. All of them have room to grow, but not by 10’s of billions of dollars every quarter. Other screen sizes? There’s no indication there would be demand. Music: not large enough.
I can see only two opportunities that are large enough and within Apple’s reach:
- becoming a cable / mobile telelecommunications company;
- becoming a car manufacturer.
Outrageous? Probably. But both of these markets are clearly large enough (over $1 trillion each, globally), and here is my reasoning:
- Could Apple implement a telecom experience that was clearly superior to AT&T’s? Hell, yes! Would you rather send your $100 per month ($200? More?) to Apple or Verizon? If you think of the Apple store experience compared to the Verizon call center, it’s no contest.
- What is your number one complaint about your iPhone? Coverage! Apple would be more motivated to fix this than a telco, because they care about the entire experience of their devices, not just ARPU.
- There are other problems in the customer experience that Apple could solve if it also provided broadband and/or mobile, e.g. wireless setup, security, device integration, etc.
- Apple TV would be much easier to do if the cablecos/telcos weren’t in the way.
- Total revenue per phone could easily double.
- I’m biased, because in the past I used to work with a bunch of automotive companies both in Europe and in the US. But other than BMW and perhaps one or two others, Apple would blow them out of the water in terms of product. Think of your typical General Motors car if you are not convinced …
- Given how much time people spend in their cars with their phones and their music, the experience could certainly be optimized. “Delighted” I never am when getting in the car today; I might be with an Apple car.
Of course, there are formidable obstacles to either. E.g. telcos will not sell iPhones if Apple is one of their competitors. But:
Google may actually be further along with both of these markets than Apple is today. The Google car very clearly exists already. And interestingly, the upcoming Google wireless network, by buying capacity from the existing carriers, elegantly sidesteps the competitive effect for the time being.
(I wrote the post from the perspective of Apple rather than Google, because Apple’s laser-sharp focus on “great products” in their area of expertise narrows down the possible markets considerably. After all, Google could find data in lots of other places that they could sell to the highest bidder … )
I don’t see Facebook playing on this level. And Amazon: maybe. Nobody else left, is there?
So I’m going out on a limb and make the following predictions:
- Google and Apple are going to be in the telco business, and in the car business, within 10 years, in a serious way (not: “hobby”, “project X” etc.).
- Major Nokia-ization aka Amazon’ization is going to happen in both markets. Arguably about time.
- Tesla may well be acquired by either.
And after that, when both are trillion-dollar companies?
Residential construction would be my bet, using some clever combination of 3D printing, iPhone-style design, and ultra-green technologies for 90% reduction of water and energy consumption per house. If the California drought continues as it has, this seems a safe bet: the construction industry clearly is not innovating at the required speed, and all those smart tech Titan engineers live in Califormia and need to solve the problem just for themselves. Their employers will follow.