Wear OS will eventually gobble up the market share, but watchOS will keep most of the profit
In the beginning, there was Palm. Or Windows. Or Nokia. Or BlackBerry. Anyway, then came Apple.
The iPhone quickly became the industry standard for smartphones. Without offering any amazing new features, it captivated consumers in a way the existing offerings just couldn’t. I spent far too much and chained myself to AT&T to get one, and there’s a good chance you did, too.
This did not last. Someone at Google had the idea to try and make the smartphone more accessible to people who didn’t want to or simply couldn’t spend an arm and a leg with Android, and everything changed. Today, depending on the exact time of year, eight of every 10 new phones sold are powered by Android, but Apple makes more money than almost every other phone maker combined.
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We’re about to see this happen all over again with wearables. In fact, it has already begun. Last year wasn’t a great year for wearable sales (or any other goods, it seems), but it was a particularly bad year for Apple.
That doesn’t mean Apple lost money, but it does mean the company saw its share of the market fall while competitor sales increased ever-so-slightly. Nor does it mean that Apple’s watchOS and the Apple Watch aren’t a smashing success because the company surely made more pure profit for each watch sold than any other company could dream of doing.
Again, this is exactly what happened with the smartphone. Very few people bought the first Android phones. Then Motorola and HTC made some headway (with the help of U.S. carriers), and the gap narrowed until places were switched. Somehow, Apple still makes more money, even today, thanks to a supernatural manipulation of the supply chain and the idea that Android phones are for “poor” people in North America.
This is how wearables are going to play out, too. The Apple Watch is yet another product Apple makes obscene amounts of profit per unit because it’s good at business, and people in the U.S., Canada, and a few enclaves around the world will rush out to buy another one the minute it’s available. Basic math tells you selling 100 things and making $10 for every one of them is more than selling 200 things and only making $2 from each.
None of that matters to me, and none of it should matter to you. I want to love a wearable but have a hard time doing it, and when I do wear one, it runs Garmin’s goofy proprietary software, not Wear OS or watchOS. It’s the one I like more than the others, and what you like is never going to matter to me. You need to do the very same thing and use whatever you like without caring what I think or which company makes more money.
It’s also just the way both Apple and Google like it. One company wants numbers sold while the other wants profits per. Of course, Apple loved selling more watches than Samsung, but it loves the bottom line just as much.
This all weirdly makes sense. If you have 30 companies each selling a good product that people want, collectively, they will sell more than a single company that sells a similar, yet different, product. Wear OS, like Android, is a commodity like corn or crude oil that other companies use to create their own product. WatchOS is not and only available for the Apple Watch. A company trying to do it alone will never be the market leader when it comes to sales.
As long as Apple can capture customers in its reality distortion field and keep them buying expensive products and accessories to use with them, it will do just fine. Marketing is an incredible tool and Apple is the master at wielding it.
Enjoy your smartwatch, no matter who makes it.
