Analyst: Apple Is a ‘Loyalty Story’
Horace Dediu, the managing director and founder of Asymco, recently shared his thoughts on Apple’s (NASDAQ:AAPL) success during an appearance on Bloomberg TV’s “Surveillance” program. As noted on Asymco’s website, Dediu previously worked as an industry analyst and business development manager at Finnish smartphone maker Nokia (NYSE:NOK) before founding Asymco. Dediu has developed a reputation as one of the most prescient and thoughtful mobile industry analysts working today, and he is often consulted by various news media as an expert on Apple.
“Apple is actually a loyalty story,” Dediu said when asked what his number one message on Apple is. “I think it’s always been a loyalty story, but no one knew it would be so during the iPhone era.” He cited several precedents in the mobile industry that suggested the iPhone would not last as long as it has.
“IPhones of course came after a whole lot of other brands out there,” Dediu said to Bloomberg TV. “Remember the Razr? Remember the BlackBerry (NASDAQ:BBRY)? These things tended to go up and down very rapidly. There was no persistence to that market.” He also noted that his own experience at Nokia also reinforced this trend and made him wonder, “Is iPhone really a flash-in-the-pan?”
However, Apple’s iPhone has inspired an unprecedented level of loyalty from its user base. Dediu noted that the “churn,” or user migration, between iPhone and Android is “mostly Android people upgrading to the iPhone.” The analyst pointed out on “Surveillance” that many Android users’ first phones were basic phones “that were really feature phones that had Android running on them and were not used as Internet devices.” In this sense, many former Android users are simply upgrading to iPhone as their first true smartphone.
Besides discussing Apple users’ loyalty, Dediu also commented on mobile shoppers’ tendency to make purchases on tablets instead of their smartphones. Recently released data from the IBM (NYSE:IBM) Digital Analytics Benchmark service showed that the majority of online mobile sales during Black Friday were made through Apple’s iOS and that tablets accounted for nearly twice the amount of mobile sales that came from smartphones.
Although the average Apple user “owns more apps and pays more for them,” Dediu said on Bloomberg TV that making an online purchase via a tablet is actually a “browsing experience.” However, it should be noted that Apple benefits from this transactional preference, since the most recent data from IDC show that Apple’s iPads still held a 29.6 percent share of the worldwide tablet market in the third quarter.
Finally, Dediu offered his thoughts on Apple’s international growth. Dediu agreed with the Bloomberg TV host that the bull market case for Apple is based on “the aspiration internationally to own an Apple product.” Although the iPhone is currently weak in some emerging markets, including India and Indonesia, Dediu said, “It is not a question of whether we are going to be there but when we are going to get to the right strategy and infrastructure.”
The analyst cited the iPhone’s explosive growth in Japan as evidence of its increasing appeal to markets beyond the United States “Now, 70 percent or more of the smartphone sales are iPhones [in Japan],” observed Dediu. He also predicted that Apple’s recent distribution deal with China Mobile (NYSE:CHL) will likely give Apple “a nice rise into the next year.”
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