Saturday, February 06, 2010

King Camp Gillette, II

On Thursday, January 28th, I asked, "To what extent is the iPad a potential heir to King Camp Gillette's "disposable razor" approach to profits?"

I was pleased to see, today, that someone else had the same thought, blogged on the 29th. Also, because he is obviously more tuned-in to Apple than I am, he explained far better than I--and with much greater sensitivity to the sources of income than I had--where and how Apple is following King Camp Gillette's philosophy:
I think Apple wants to give the iPhone and the iPad to as many people as possible at cost or with a small profit. . . . Now why would they do that you might ask?

The key reason, I would argue, is that Apple wants the magic of recurring revenues. This is the dream of many companies - to have millions of folks paying a small amount of money every month for using a service. What makes Apple stand out is the fact that they have an army of developers who are writing code for some very cool apps. Yes, there is an app for that. In fact, there is an app for almost every idea ever thought of.

Not only has the app store been widely successful, but Apple also has iTunes, and iBooks along with iTV coming down the road. So this is what I believe Apple’s business model is going to be: with 125 million people who are giving Apple their contact and credit card information, Apple has a huge base of customers, much like the newspapers and magazines did in the ’60s and ’70s, but on a much smaller scale. Now Apple can upsell products to those customers at will. The genius part about all of this is the fact that other people are creating products to be sold through the Apple store. Apple just reinvented the King Gillette model in a thoroughly modern way. Hats off to you, Steve.

That’s my take on Apple’s stealth business model.
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