Apple’s Diversifying and Maturing User Base

on January 15, 2015

Microsoft’s biggest asset and liability

I’ve long said Microsoft’s enormous and diverse installed base of Windows and Office users is both its biggest asset and its biggest liability. The base commands respect and interest from would-be partners and customers and helps to preserve sales of its software and services. But it also means any time Microsoft wants to make a change to its products, it has to bear in mind the needs of all the many groups and individuals who use it and ensure any new products are not only backwards-compatible but also not too jarring for those who are transitioning from (often significantly) older versions, among other issues. This holds Microsoft back, prevents it from innovating as rapidly as it might, and forces it to maintain a breadth of features and functions often not well-suited to competing in today’s fast changing market.

Apple used to be immune, but is increasingly susceptible

I’ve also contrasted Apple’s position with Microsoft’s: with a much smaller and less diverse user base, Apple has the freedom to innovate without having to please quite so many masters. Its customers have been, for the most part, self-selecting and therefore exhibited a degree of homogeneity Microsoft’s billion plus users have not. Apple has also been able to focus mostly on the consumer market, with education and business markets secondary focus areas, which has also prevented some of the long development cycles often associated with developing software for enterprises.

However, all this is starting to change as Apple has gone from tens of millions of Mac users to hundreds of millions of iPhone customers and to a billion iOS devices sold. Whereas Apple once served a fairly small number of specific niches, it now serves almost every kind of customer imaginable: from the power user to the first time smartphone owner, from the wealthy American to the rising Chinese middle class. It’s also increasingly being adopted in the enterprise market and the IBM deal will only accelerate this trend. To be sure, Apple still isn’t universal in its appeal, especially since its devices tend to be costlier than those from other manufacturers, particularly in markets where phones aren’t heavily subsidized. But Apple’s customer base is becoming ever more diverse over time.

The other thing that’s happening is Apple’s customer base is maturing. I don’t mean it’s getting older (though that is almost certainly the case), but an increasing proportion of its customer base is using its third, fourth or fifth Apple device. These customers are becoming accustomed to a certain way of doing things, becoming “trained” in the Apple way of delivering tightly coupled software and hardware. Their expectations of how Apple will act, therefore, start to harden over time, leading to less flexibility in response to major changes in iOS and OS X.

Far-reaching implications

What are the implications of all this? Well, I think there are several:

  • Apple may start to meet the same sort of resistance to change as Microsoft and other platforms with large and diverse bases, with users responding negatively to major changes, or a lack of backward compatibility. We’ve already seen grumbling in response to the release of Final Cut X, the killing off of Aperture, and the reboot of the iWork suite. Each was a necessary evolution in Apple’s product strategy in the category, but in each case Apple appeared to abandon part of its base in pursuit of new customers or new use cases. This will get harder as the ratio between the existing base and potential new customers continues to change.
  • Apple will start to face a tension between the needs of different segments of its user base. The recent complaints about the quality of Apple’s software reflect this tension. Some users absolutely want iOS and OS X to keep moving forward rapidly and to keep pace with competing platforms, but others would make different tradeoffs, sacrificing speed of change for stability, for example. Interestingly, iOS 8 is seeing the lowest adoption rate of any version of iOS as far as I can tell, and this may in part reflect this bifurcation. Many users would rather see a stable platform than rapid iterations.
  • This, in turn, can start to make it challenging for Apple to roll out new features across its devices, if they’re tied to specific operating system versions. Handoff and Continuity arrived with iOS 8, but didn’t work properly until users were also running Yosemite on their Macs. The irony is Google users complain about not being able to upgrade to the latest version of Android quickly enough, while Apple may increasingly struggle to get some of its users to upgrade even when updates are freely available.

Apple and Google’s shared problem

Interestingly, Ben Bajarin highlighted a similar challenge faced by Google in his piece (for Insiders) on “Facebook vs. Google in 2015” yesterday:

Facebook can be a “one platform to serve all” where I feel Google can not. Google is going to have an extremely difficult time keeping Android interesting to their first billion users AND their second billion users. The primary reason for this is because the next billion Android customers will want and need completely different things than their first billion. A “one size fits all” Android solution is not going to work to satisfy the needs of their most demanding and most profitable customers versus those who are getting online for the first time with their first computer. Completely different set of customers.

I absolutely agree with this assessment and, to be sure, Google faces the challenge I’ve been talking about in an even bigger way given the diversity of its base. However, I think the challenge is in some ways easier for Google to overcome because Android is already very diverse in its applications. Since Google doesn’t have to address every possible market segment itself, but can serve these needs through OEMs, it can (and does) meet a more assorted set of needs, much as Microsoft has always done through its Windows OEMs. Apple’s challenge is it has always met all its customers’ needs itself and yet, it likes to keep its product portfolios very simple and focused. How does Apple continue to meet all its customers’ requirements while preserving this strategy?

How to solve this problem? There’s an app for that

I think the answer partly lies in the richness of the app ecosystem that has grown up around iOS. From the beginning of the App Store in 2008, Apple’s approach was to highlight the ability of apps to extend the utility of the iPhone well beyond the functionality Apple itself provided. In some ways, as time has gone by, the core functions Steve Jobs originally highlighted in introducing the iPhone (iPod, web browser and phone) have become less and less important, while the functionality provided by apps has become all the more important. I think the increasing importance of apps is ongoing and will continue as the user base for the iPhone (and Apple products in general) continues to diversify.

However, I’m not convinced apps are the entire answer here. Apple is going to have to think through the implications of its diversifying and maturing user base and figure out how to avoid being stretched too thin by the need to continue to move its various platforms and products forward and capture new customers without alienating that base.