"The Apple Watch is a Complementary Product"

Roy Murdock has written an essay on the Apple Watch. I really enjoyed reading this piece even though I tend to disagree with some of his points.

For example:

The Apple Watch is not a seriously compelling product, nor will it ever be as (a) useful or (b) revolutionary as the iPhone. Apple knows this, and despite what pundits and analysts might think, it doesn’t care.

I could be wrong, but I still think Murdock is jumping the gun here way too fast. To say that the Apple Watch will never be a compelling product is very, very bold claim. In all seriousness, when the iPod came out in 2001, he could have said the exact same thing and truthfully, most would probably believe it.

Next:

Apple Watch was not designed to be a high-growth, standalone product. It was designed to be a companion to the iPhone. As such, Apple Watch success will be a direct function of iPhone success. As long as the iPhone continues to sell in mind-boggling quantities with a mind-boggling growth rate, the Apple Watch will enjoy a growing market as a complementary product with recurring revenues every 2 years or so, in line with the iPhone.

I agree and disagree with this. Yes, today the Apple Watch is not designed to be a standalone product. But once again, neither was the iPhone or the iPod to start. I personally think every product goes through transitions that are similar to human life. First, they’re highly dependent and require constant attention. Then they begin to find their way, though they need some help. Eventually they don’t need help. And finally, they become fully independant. Clearly the Apple Watch is in the beginning and so it’s highly dependent on the iPhone. Will that change? Absolutely.

What I agree with, however, is that the Watch will find much of its success because of the iPhone. To me, I see the iPhone as the gateway to the Apple Watch in the same way the iPod was the gateway to the Mac and then eventually the iPhone. As iPhone continues to grow, so will the Watch, but that’s not because they need each other. It’s simply because they are siblings living under the same roof.

Murdock goes on how First-Gen Evangelists (FGE) are giving the Apple Watch a pass even though it really doesn’t deserve it. Here’s what he concludes with:

The smartwatch form factor is not revolutionary and does not enable a large potential market for uses. The FGE argument is not compelling due to the lack of different inputs and outputs made possible by the device, which will narrowly constrain the app market. Apple doesn’t care, and will make a tidy profit from the product as a function of increasing iPhone sales while sacrificing a bit of its reputation as a cutting-edge innovator that only ships revolutionary new form factors, “Steve Jobs would be ashamed!”, etc. etc. A worthy tradeoff for investors at the end of the day, with iPhone sales growing 80% YoY in China, and no slowdown in sight.

It’s a really good piece and I highly suggest you read it. While it does come off a bit pessimistic, I tend to agree with many of his points. Murdock could end up being right in the long run. Only time will tell (pun intended).