September 13, 2019
September is a major month for two types of people: fashionistas (NY Fashion Week) and Apple fans. On Tuesday, Apple held its annual September event, and as anticipated, the company announced a series of new hardware products. We'll summarize the new iPhone, iPad and Apple Watch, and take a deeper look into four new additions to the Apple ecosystem: the Apple Arcade, Apple TV+, its health research program — and the U1 chip.
We'll also learn about Point Nine Capital partner Christoph Janz's three rules of freemium, look at how Amazon is tackling last-mile delivery challenges, and learn about a Chinese ecommerce giant.
SHINY NEW GADGETS
So Apple announced new products on Tuesday. New iPhones, iPads, and Watches are all en route.
iPhone 11, 11 Pro, and 11 Pro Max
This year's iPhone announcements covered the table stakes technological updates that are needed to support the broader Apple ecosystem. Rather than the jaw-dropping, revolutionary leaps of old, this year's next gen devices represent largely incremental improvements to the iPhone lineup to keep it competitive against competitors and ensure it can keep users bought into Apple-branded hardware and services (which Apple believes are the future of its business).
The mainstream iPhone 11, which replaces the XR, will come in six colors (the lilac-y purple had Twitter abuzz with longing) and has enhanced camera features (including the ability to take slo-mo video, for which Apple has coined the new term "slofies").
For higher end customers, the iPhone 11 Pro and Pro Max will have "Super Retina XDR" OLED displays, three cameras, and a matte finish. They'll also finally come bundled with the fast-charger adapter — answering one of buyers' long-standing gripes.
Apple made a big deal out of the new iPhones' cameras, as well as the new Night mode. This new feature is significant, as it helps iPhones compete with Google's Pixel devices and Samsung's Note 10 and S10 phones, all of which already have this feature. It's also worth noting that this isn't the first time Apple has had to play catch-up on mobile specs: the first Androids to have Portrait mode gained that feature in April 2014, while iPhones didn't get it until September 2016.
The sixth-generation iPad is being replaced with a new seventh-generation version optimized for the new iPad OS. As with the iPhones, the improvements — including improved brightness, a better viewing angle, an A10 Fusion chip, and Smart Connector — are what's needed to keep it up-to-date.
Apple Watch Series 5
There's also a new Apple Watch coming down pipeline. However, while the hardware itself isn't significantly different from the previous generation, there are some pretty interesting uses coming into play.
Most significantly, Apple announced three new health studies that'll be conducted via Research for Apple Watch and iPhone. These studies, which are being conducted with major names in research and health care such as the World Health Organization (WHO), will study a range of conditions:
Apple Hearing Health Study: uses the Noise app on the Apple Watch to analyze loud noise's impact on long-term hearing health using the Noise app on the Apple Watch. Apple says this is the first study to examine how everyday sound affects humans' hearing.
Apple Women's Health Study: uses the Apple Watch and iPhone's new menstrual cycle features to examine how menstrual cycles can screen for conditions infertility, polycystic ovary syndrome (PCOS), pregnancy, menopause, and osteoporosis.
Apple Heart & Movement Study: examines how signals like walking pace and flights of stairs climbed relate to quality of life, hospitalizations, falls, and other markers of cardiovascular health.
Collectively, these studies indicate that Apple is beginning to leverage its massive user base to make data more accessible to major research organizations. In theory, this may address some long-standing challenges in medical research — recruitment of diverse populations, poor self-reporting of measured outcomes, and difficulties gathering long-term data, just to name a few — and could be a great way to get more representative sample data... with the major caveat that Apple users are more affluent on average and skewed toward certain geographies.
More broadly, Apple is really leaning into the Watch's health-monitoring applications. Check out this video touting real-life stories of people whose Apple Watches saved their and their children's lives:
A HARDWARE COMPANY NO LONGER
Apple's boldly announced new services, which demonstrate that the company is continuing to expand beyond its core hardware business. The Apple Arcade (a $4.99 gaming service that'll allow subscribers to play over 100 games across an iPhone, iPad, Apple TV, or Mac) and Apple TV+ ($4.99 a month, with a yearlong free trial for purchasers of a new iPhone, iPad, Mac, or Apple TV), along with its health research program, demonstrate that it's no longer content to merely be a hardware company.
Apple is aggressively leveraging its popular hardware to lure customers into its streaming service, which should worry competitors such as Disney+ (covered in one of our past newsletters), which it has undercut on price, and Netflix, which is facing increasing pressure on all sides. Dan Rayburn, principal analyst at research firm Frost & Sullivan, predicts that the lack of contracts and relatively low pricing for all streaming services will lead to significant churn.
ONE MORE THING?
The new U1 chip wasn't discussed much today, but there are indications it could be very significant. Because the U1 chip has improved spatial awareness, precise pinpointing of other U1 chips, and improved accuracy, it could give iPhones exciting new functionality.
Among these are Tile-like location services for keeping track of your keys, wallet, and other easily-misplaced items; AR applications; and "point to AirDrop" that'd enable iPhone users to share files with others by simply pointing their iPhone at the intended recipient's iPhone. If and when those features come online, they could make today's iPhones quite a bit more exciting from a hardware perspective.
The Three Rules of Freemium
Point Nine Capital partner Christoph Janz proposed three questions that companies should ask themselves and ideally answer affirmatively before they choose to launch a freemium product:
Does your paid plan have a gross margin of 80—90%?
Does your free plan attract the right audience?
Is your product inherently viral?
Janz warns that freemium ultimately works only if a certain percentage of free users do one of three things: 1) eventually convert to paid, 2) refer payment customers, or 3) provide valuable feedback that'll improve the product.
Amazon's Shipping Challenges: Will Out-of-the-box Solutions Work?
Amazon must continue to innovate and find solutions to a complex and costly business model: the last-mile delivery — the most expensive part of its logistics and shipping chain. Wharton's Senthil Veeraraghavan and Northwestern's Tarek Abdallah discuss in a recent podcast and article that the expiration of its ground shipping contract with FedEx and the steadily decline of its deliveries through the U.S. Postal Service (USPS) are putting pressure on Amazon to invest in its "last-mile" delivery infrastructure.
Abdallah summarizes the issue: "The real problem for Amazon is: How do they continue to be competitive as an ecommerce platform while increasing their quality of service in terms of same-day delivery and whatnot, but still without compromising on their healthy revenues?"
Introducing China's Ecommerce Giant That Isn't Alibaba
With 366 million active monthly users, Pinduoduo is the Chinese ecommerce platform that sits second to Alibaba, and is larger than better-known platforms like JD.com.
First and foremost, much like Amazon, the company focuses on rock-bottom prices to appeal to the country's price-conscious customers. In addition, the platform offers a social component by providing discounts based on group buys, which encourages users to recruit their friends to join them as customers. Furthermore, in contrast to most ecommerce platforms, Pinduoduo is designed for browsing, rather than searching — its search bar is even hidden at the bottom of its front page.