How Many iPadPro Will Apple Sell?

This month and most likely this week you can start ordering iPadPro, the newest and biggest tablet from Apple that is competing to be a laptop replacement.  This is the holidays season and Apple had always sold significant number of iPads during this period. The results will be reported in its fiscal Q1 2016, which isn’t until end of January 2016. And even then we will only know the aggregate number of iPads, not the break down of models.

Why wait till January, let us model iPad numbers now. We will do this in two parts

  1. Predict the total iPad unit sales
  2. Predict the mix of iPad Pro

Here is the chart of per quarter sales of iPad since its introduction in 2010.



As of end of September 2015, Apple had sold a total of 292 million iPad, a combination of all models (iPad, new iPad, iPad Air, Mini ). Take a closer look the quarter by quarter sales. Apple reports its biggest numbers during Q1 that coincides with Holidays. Overall, year over year same quarter sales are declining.

In 2013 the Q1 sales were 22.8 million, in 2014 it went up to 26 million, but down to 21.4 million in 2015. To predict Q1 2016 numbers let us use one more data point – sales as a percentage of past total sales. To add better precision, let us use total sales  up to 4 quarters prior to current one and plot the graph.


The downward trend is expected as the install base is growing with each quarter. But the trend line here gives us better precision of sales for Q1 2015. The Q1 numbers are 57.4%, 26.5% and 12.7%.  The upcoming quarter is no different and will see near halving of same quarter the prior year. That points to 6.3% of sales from inception to Q4-2014 or  18.97 million units.

Since iPadPro is positioned as laptop replacement it is bound to steal some share from MacBook Air and bring in some new customers. But not much given all Mac models sell just 6 million units a quarter. A close approximation is adding another 5% to 18.97 million for a total of 19.1 million iPad, Mini and Pro.

Now to computing iPad Pro units in this 19.1 million.

Before iPad mini was introduced in November of 2012, Apple had four iPad models – iPad, iPad2, iPad 3rd gen (New iPad) and iPad 4th gen. It has sold a total of 98.1 million iPad units till the prior quarter (Q4-2012).

What is the mix of iPad vs. iPad mini since then? Thanks to analysis from Localytics we have data on the mix of models in the install base.

According to this data, as of October 2015 (close to end of fiscal Q4 2015) iPad mini models account for 28.3% of the install base of 292 million units. If we considered the numbers post Mini, the mix is 57.4% iPad and 42.6% iPad mini.


As this is aggregated over several quarters, the percentages represent the steady state mix for Mini vs. iPad.  We can use these numbers as proxy for future quarters. That is, had there been no iPadPro the upcoming quarter will see 57.4% and 42.6% mix for iPad and Mini.

It is safe to say those who prefer the Mini are not the most likely ones to switch to or buy the larger sized iPadPro.  With the assumption that utmost 1 out of every 10 who picks iPad will switch to iPadPro, here is the final prediction for Q1-2015 iPad sales and model mix.


So Apple will sell about 2 million iPad Pro and the total unit sales is going to be less than 20 million.




The 2.5% Freemium

Here is one number to keep in your mind: 2.5%

That is going to be the ceiling on your freemium conversion rate. That is the percentage of users who will ever pay anything.  The rest will remain free users for ever.  This number should sound familiar to you. That is the number most start with as we have seen in early examples, Evernote, Dropbox, LogMeIn and countless other apps.  And it appears that is the number most freemium businesses end up with as well.

There is no data to support the claim that, “just wait for users to fall in love and start paying for it”. Or to the claim, “more will pay up to buy goodies and add-ons”.


Where is the data for my claim you ask? Well we do not have extensive data on every freemium startup that started five years ago. Most die out or do not make significant enough cash to join unicorn clubs on valuation. We are going to look at the data on two of the biggest winners – one who had an exit and other with known private valuation.

King Digital, the maker of Candy Crush genre of games with freemium model went public and last week was acquired by Activision for $5.9 billion. That is a valuation number that is tad lower than its IPO day an year ago. And a key metric reported is most users are not paying a dime and the percentage who spend remains 2.5%.

Dropbox has a private valuation of $10 billion. It reportedly has 400 million users but only 150,000 paying customers. Considering these are businesses, if we give a generous number of 50 paying users per business and add a few more for personal users, we still hit a number of just 2.5% paying customers. All of Dropbox future revenue growth is not going to be from covering free users but from a focused enterprise product and GTM strategy (which Box did 3 years ago).

If the percentage of paying customers top out at 2.5, what options do freemium businesses have?

They do the only  thing they know is revered in the startup space – they grow. They  spend more on customer acquisition. They hire growth hackers. All in the hope of keep finding 2.5% in every million users they add.

You would think after the first 10 million users they will understand segments, value and pivot to a better product and pricing strategy.

Unfortunately that sounds boring and defeatist compared to the sexiness of growth hacking. Hack all you want, as King Digital acquisition says there is only so much value market assigns to user growth that hardly pays anything.

Wouldn’t you rather start here?



Twitter Building Product for its Customers – Brands

I am sorry to break this to you. Despite the fact that you have 15K tweets, 100K followers and call yourself a power user, you are not a customer for twitter. At best the term user describes you and I. At worst we are the raw materials. The real customers are those who pay for its value. So brands that pay for the data, get in front of us with messages and get us to do something are the real customers for twitter.

There is nothing wrong with that. Just making it clear.

Three recent major product announcements from twitter reflect their realization and focus on its customers.

  1. Direct Message Changes –  They removed the 140 character limit on DMs and added group messaging capability. I do not have data on how many DMs are exchanged between non-brand users as  way of communication. Anecdotally I can say all DM I received are promotional messages sent using a third party broadcast tool. I do have data on length of email messages that serve as proxy for DM length.
    We most likely will use twitter DM only as a mean to communicate privately with those with whom we do not have other connections – i.e., no email address, whatsapp, phone for text etc.
    There is no reason to believe DM pattern will be any different from emails. A recent analysis by The Journal says our median length of emails sent from mobile phones is 20 words. At an average word length of 6 (with spaces), 140 characters is more than enough. And more and more of our usage is moving to mobile and tablets from laptops.

    So the the only possible explanation for a DM feature couched as user experience enhancement is to help brands send longer messages.

  2. Moments – It is positioned as a way to get those new to twitter get to know it. For “power users” a way to find hand curated happenings. Do we really lack ways to find what is happening and popular? The different News apps use algorithmic ways to serve us what is popular and (remotely) relevant. That is a crowded field and some of popular darlings like Flipboard are being crowded out by platform players like Apple. So the only possible use case is for brands to insert “Paid Moments” and have Moments integrated into the timeline.
  3. Poll – This is a annoyance to all of us, users. And if you are a marketing research practioner you will be up in arms about how silly it is. It is as scientific as Fox News poll asking its viewers if Hillary Clinton is hiding something. Don’t even bother publishing your results from a twitter poll you did on your followers. The only valid use case is for brands to get people to interact with it. The results the brand will collect are immaterial but a crazy enough poll question will get the question and the brand in front of more people. A simple click of button makes it a low calorie effect than typing a reply. Brands will use it simply as awareness generation tool. Our timelines will be filled with such silly polls.


Overall I see three new product features that are not about users but about brands. That is fine as twitter has to build products for its customers. The focus is on customers not users. That explains the declining user numbers.


You Better Sit Down for this, with a Plate of Bacon

bacon-f30008721255829ce6102c8289919403283a4928-s700-c85Nothing seems to gets us more motivated to rekindle our curiosity, cast a gimlet eye and read up on statistics than the news of bacon. Specifically the news from WHO stating eating bacon increases our risk of cancer by 16%.

Where have have seen similar research?  There was one about sitting and the increased risk of colorectal cancer. Very similar study based on observational analysis. But that was enough for most to call, “sitting is the new smoking”  and even go on to call, “sitting is fatal”.  Of course most used this as reason to ask standing desks at work and the vendors who sell these are only happy to use this study for their marketing.

As I pointed out then,

So at 1.24 times relative risk if you are sitting down for 8 hours of work the incidence rate goes from 5% to  6.2%. But what other factors have higher relative risk that you should worry about?

No media or blog bothered to do this analysis with sitting but with bacon they ask the exact same questions I do every time with such studies. Explaining the bacon results, Vox writes

Since a person’s lifetime risk of colorectal cancer is about five percent,  daily meat consumption seems to boost that absolute risk by one point to 6 percent (or 18 percent of the 5 percent lifetime risk).

Right way to look at things. Despite being a vegetarian I agree the WHO statistical study means not much to an individual’s cancer risk.

The point is there are many such studies thrown at us from all different places – studies on

We choose to accept, adopt and move on to solution phase without ever stopping to question unless it is about bacon.

I am glad that media looked at the bacon study critically  but I am not holding my breath that this will be repeated for other studies.  Unfortunate. In general we would do well to look past such studies.

“This study is really a pile of rubbish, and no one should waste their time reading it,”

Now, does standing up and eating bacon cancel out the effect?

How Many Apple Watch Did Apple Sell?

topic-apple-watch-allApple announced its fiscal 2015 fourth quarter earnings today. While they break down unit sales for iPhone and iPad they did not do that for Apple Watch. They included it with iPod and other accessories revenue and report a single revenue number. Arguably unit sales are likely not that great by Apple standards. How do we find out?

Fact that Apple won’t report the breakdown should not stop us from estimating it probabilistically. Here I will give you estimates at 3 confidence levels for Apple Watch revenue. Based on possible average selling price of ASP the unit volumes will vary.

Let us start way back in Q1-2013 when there was no Apple Watch (it was introduced in April 2015, and this is the first full quarter of Apple Watch sales). Looking at financial reporting by Apple we have access to revenue from iPod and accessories. Until 2014 Apple reported iPod separately but combined them all as Other Hardware (Apple TV, accessories etc) since 2015.

iPod sales was on the decline for a while, with the last reported number at Q4-2014 at $410 million. Let us extend that trajectory to the rest of 2015. Here is the past twelve quarters of Other Hardware revenue with breakdown of iPod and the rest.


And a chart version to see the trajectory and mean values.


You can see the Accessories revenue (sans iPod) bounces around a mean until the quarter Apple watch was introduced. During those quarters the mean of Accessories revenue was $1,541 with a standard deviation (sigma) of $340.5.

In Q4-2015, the just reported quarter, Apple’s Total Other Harware revenue is $3,048 million and excluding iPod it is  $2,728 million.  What the standard deviation tells us is what portion of this $2,728 can be attributed to Apple Watch.

Here is the logic.

  1. At the mean value of $1,541 we are 50% confident accessories share is just that so Apple Watch share is $2,728-$1,541 = $1,186 million
  2. At one sigma over mean we are 84% confident accessories share is $1,882 and Apple Watch share is $845 million
  3. At two sigma over mean we are 97.7% confident accessories share is $2,222 and Apple Watch share is $505 million

watch-numThat is a probabilistic prediction at three different confidence levels. We are over 97% confident that Apple made just $505 million from Watch but we are 50% confident the best case is $1,186 million.

Now to the unit sales. We have to model this for different average selling price (ASP). I am guessing the range is from $400 to $600 with very few if any of $18,000 unit sold. So here it is Apple Watch sales at three different confidence levels.

I predict with 97% confidence Apple sold about million Apple Watches this quarter.

Not a big number compared to iPhone volume.

Making User Experience Count

Photo courtesy: Flickr user Andy BrightWe accept it as truism. Yes, User Experience or #UX counts and is the most important aspect of a product or service. User experience is not just about the design, user interface or measured only when customers are using the product. It is measured across the entire lifecycle. It is about making things easy and frictionless.

Make it easy for prospects to know about your product. Make it easy to buy. Make it easy to onboard. Make it easy to get to results after first use. Make it easy for continued use. Even make it easy to switch.

All these intuitively make sense. But leading with User Experience, however noble this sounds, is no different from leading with tech specs and product features. What is missing in our push for frictionless user experience is data – Data on these key questions

  1. Who is the customer?
  2. Why are they hiring the product?
  3. What are their alternatives?
  4. How do they make buying decisions?
  5. What aspects of the product do they value and are willing to pay for?
  6. What product factors influence repeat business?

Without data on these we risk focusing on improving wrong aspects of user experience. Wrong because those do not affect customer buying decisions or their value perception. Take for instance a widely read short piece on user experience by Chief Product Officer Neil Hunt of NetFlix.

AAEAAQAAAAAAAAS1AAAAJDQ4YTI4Mzk5LTRlNTUtNDU1Yy04NTg0LWVjZjA3NzYyOWJjZANeil makes a case why the toiletries at hotels are poorly designed and present bad user experience. He describes the profile of user (wears glasses) and context (about to take bath) and puts forth a recommendation.  He goes on to make design recommendations for better user experience. Makes sense.

But have we answered the six questions on customers?  Take for instance the question of how these customers make buying decisions. How many travelers – leisure or business – do you think will make a buying decision based on user experience of shampoo bottles?

Answering this or the list of six questions is not difficult. We have several methods at our disposal like ethnographic research, conjoint analysis or randomized trials (like AB testing) to get customers to reveal their preferences.

Before getting that crucial data why go down the path of optimizing user experience of one small part of the lifecycle? At best you please those who are already your rabid fans and at worse you incur huge opportunity cost of not focusing on the the right things that drive adoption and grow business.

For instance, an observational study may reveal customers assign more value to check-in process and free breakfast over shampoo bottles at the bathroom. You may be delivering better experience with design change but won’t move the needle on what matters.

User experience is indeed key but leading with it is same as leading with technology (feeds and speeds). Start with the customer and answer the key questions before solving the wrong problem.