There is no doubt that Apple is making incredible money. In fact, for the first time in the last quarter, they exceeded one hundred billion dollars in revenue. But the most interesting thing is that they have a lot of cash. Almost 200 billion, more than any other companying the world. That’s a whopping 180 from where they were two decades ago. When Apple had just escaped bankruptcy.
So how did they manage to make so much money so quickly to become the most valuable company in the world? Well that’s what I’ll explain in this article. This is Greg with Apple Explained, and this topic came in first place in the last voting poll, if you didn’t get a chance to participate, make sure you’re subscribed and polls like this one will begin appearing in your mobile activity feed. Alright now one of the biggest reasons Apple is doing so well today, is due to their business strategy, which was way ahead of its time.
In the 1980s, computer companies like Microsoft made money by allowing their operating system. But Jobs refused. Instead hedging his bets on hardware sales .It is believed that you can create a great product only if you have control over the hardware and software. And you can only charge a hardware bonus if it’s objectively better than the competition.
The problem with this strategy in the 80sand 90s, was that most customers didn’t see the difference between Macs and PCs. At least not enough to justify the Mac’s higher price. As a result, Apple controlled only a small portion of the computer market. Thus, their focus on integrating and updating hardware and software would be even more important for consumers as the industry moves to mobile phones.
Apple first caught a glimpse of this withMP3 players. There were many cheap models on the market, but their iPod managed to escape. Eventually, it occupies almost eighty percent of the music player market. And that’s because optimization is key to battery life, portability, and ease of use.
With something that Apple already had experience with, other companies like Sony and Microsoft didn’t. Navigating your iPod with a click button made it easy to browse your music. His implementation program was practical and easy to understand. And adding music was easy, because almost everyone was familiar with iTunes.
I’m not talking about the iTunes music store that works continuously with the iPod. Apple designed their hardware to operate flawlessly with their software which operated flawlessly with their services. And consumers are beginning to realize the true value of iPod integration.
Which is why they didn’t mind paying a premium for the device, even though there were alternatives for half the price. The high profitability and sales of the iPad contributed to Apple’s enormous growth from 2001 to 2007, where the company grew by almost 25-100 percent annually.
This was the beginning of Apple’s most profitable era. And they had a unique opportunity to do what no other technology company could do; that is, creating an ecosystem where every product becomes a wild success. This was crucial to Apple’s explosive growth.
They couldn’t simply release new products that sold sportive well, like the Macintosh in its early days. They needed each device to model like the iPod, which controlled their market with high gross margins to distribute revenue. And that’s exactly what happened. Apple went very fast and released the iPhone in 2007.
It became a quick hit and immediately boosted Apple’s annual revenue. But the iPad, released three years later, took things to a whole new level. Everyone expected the Apple tablet to cost at least a thousand dollars. So when Steve Jobs announced it’s starting price of five hundred dollars, the hype surrounding the product grew even more than with the iPhone.
By the time it went on sale, the iPad had become the best -selling consumer electronics in history. By 2011, Apple had more than $ 100 billion in revenue. They will be the most important company in the world. This happened two weeks after Jobs resigned as Apple CEO.
Now if you are wondering what day is in the life of Steve Jobs really like. I’ll be making a video about that soon so be sure you’re subscribed for that. But one aspect of creating products that sell well, is that achieving market satisfaction becomes inevitable.
Which means it’s pretty much impossible to find new customers, and you can only make money from existing customers upgrading the devices they already own. Apple has tried to fix this by focusing on single emerging markets such as China and India, where their products are unknown.
But due to the price sensitivity of these countries. Sales of Apple products did not increase as they had hoped, and a new strategy was needed to increase revenue. So Apple took two approaches: first, was the decision to increase prices of almost every product in their lineup.
This, for the most part, took place in 2018. When the iPhone and iPad’s base price increased by fifty dollars, the Apple Watch by seventy dollars, the Mac mini by three hundred, and the Mac Book Air by two hundred. These price increases were pure profit for Apple, as the cost of manufacturing these products remained largely the same.
Second, it was to focus on growing their business with their services. Which allowed Apple to take advantage of their user experience along with recurring monthly payments. This is what led to the emergence of Apple TV Plus, Apple Arcade, Apple News Plus and Apple Fitness Plus.
These services were also very lucrative as their costs were fixed no matter how many people signed up. So how effective are these strategies in generating revenue for Apple? Well, after all of the prices increases of2018, Apple had their most successful year since 2015, totaling 265 billion in revenue.
But what happened next was amazing Through the next two years. Apple began rolling out various subscription services to their existing users. Apple News plus launched in March 2019, the Apple Card in August 2019, Apple Arcade in September 2019, and Apple Fitness Plus in December 2020. Dissatisfaction with the new service has increased the company’s revenue. Setting a new annual record in 2020, at over274 billion dollars.
But with the exception of the latest blockbuster product from Apple, I would like to see the latest version of the Consumer Data. Although they do employ some targeted ads on their News app and App Store. It’s on an extremely a small scale and collects much less data than companies like Facebook or Google. And I think Apple deserves some credit forth is. User data has become more valuable than oil, and Apple could begin fracking their user base at any time to generate tens of billions in extra revenue. From the outset they received.
Understand that they are in a unique position to pay more for their products by providing advanced knowledge and treating their users with respect by handling their private data responsibly. And so far that approach has been the most profitable, as Apple remains the most valuable tech company in the world, with sales potential. High volume of high margin products. Alright so that is how Apple makes so much money, don’t forget to subscribe to catch an upcoming video about a day in the life of Steve Jobs. And I’ll see you next time.
