Under the tree: iPads, more iPads and iPhone XRs

A study of new activations suggests that the iPhone XR, despite rumors, had a great Christmas. But not as great as the iPad.

From the Localytics blog:

In 2016 we found that iPads dominated the leaderboards for new device activations over the Christmas holiday, while in 2017 the Google Pixel 2, Pixel 2 XL, and the iPhone 8, 8 Plus, and X took the top five. In 2018, iPads returned to the top of the list as they nearly swept the top five, proving that their stellar performance years ago was not just a flash in the pan.

Click to enlarge.

Despite slight market share misgivings, the iPhone XR managed to have great adoption this Christmas, witnessing the greatest lift in activations of any new Apple device in the past three years. The number of new XRs activated by consumers grew by 88% over Christmas, while XS activations grew by 49% and XS Max activations by 36%. It’s also important to remember that the XS and XS Max have been in the market since September, while the XR came out in late October.

localytics iphone xr

Click to enlarge.

Methodology:

Localytics processes 3 billion data points daily. For this analysis, Localytics examined the percentage increase in the quantity of new devices from December 24th to Dec 26th to a baseline number of new devices over the same days in the prior 3 weeks (Dec. 3rd – Dec. 5th, Dec. 10th – Dec. 12th, Dec 17th – Dec 19th). A new device is defined as a device that is seen by Localytics for the first time by downloading one of the apps incorporating our SDK. For market share data, we examined the relative percentage of each model as of Dec 27th 2018. All data in this study is based on international device usage.

My take: Compared with CIRP’s survey of 165 Apple customers, this is big data. Both studies pose a challenge for the iPhone-XR-disappointment meme. (See, for example here, here and here.)

22 Comments

  1. Dan Scropos said:
    It would be Uber-Cool is someone far smarter than me could decipher these statistics, if that’s even possible, and try to model them into December revenue.

    1
    January 1, 2019
  2. Ralph McDarmont said:
    Activations and revenue are two different worlds, but they trend in tandem. Like many I anticipate blowout revenue from the Christmas Qtr. as always but maybe even better this time. AirPod and Watch sales were spectacular. With many consumers holding Christmas gift money in hand, count on a lot of post-holiday sales too.

    3
    January 1, 2019
  3. Fred Stein said:
    Buried in the detail: The lower priced products did very well, taking about 1/2 the iPhone units. The iPad 6th generation led the iPad category, priced at $329 from Apple and lower from other retailers.

    My guess / hope is that Apple’s will have higher unit sales at lower ASPs. We’ll never know for sure. As Ralph, above points out, AirPods and Watches fall into that same bucket, devices. ALL GOOD. Happy New Year.

    0
    January 1, 2019
    • Robert Paul Leitao said:
      Fred:

      Why are you hoping for higher unit sales at lower ASPs? I’d like to understand your thinking. While all sales are good, Apple’s ability to drive adoption of the most innovative products the company makes is paramount. Innovation is expensive and Apple’s higher-priced products are apt to have an extended useful and are more likely to remain in service beyond the original owner. Adoption of Apple products that offer the latest innovations and advanced functionality may deliver higher rates of Services attachment. Sales of the most innovative devices are also likely to deliver higher gross margin than the company’s lower-priced products.

      I can see a real benefit if adoption of the 6th generation iPad is occurring among students and first-time iPad owners. In my view, the iPhone Xr is designed to attract consumers acquiring their first iPhone or consumers choosing to return to the platform after a foray into the other major platform and finding it inadequate and far less satisfying of an experience.

      Sales of the Apple Watch and AirPods are a bit different. They are constituent devices which evidence an increase in average revenue per user (ARPU). Rising ARPU is indicative of greater consumer engagement with the platform and thus higher levels of customer satisfaction.

      I do think all sales are good. But sales of devices that increase Services attachment along with sales of constituent products are even better.

      3
      January 1, 2019
      • Fred Stein said:
        I think you answered the question for me. Thanks. Especially w.r.t. Gen 6 iPad, in .EDU.

        But there are other points:

        One of the classic challenges outlined in innovator’s Dilemma is the tendency to satisfy the needs of your best customers. The economics are compelling, almost addictive. Reaching out, for example with lower prices, to new customers grows the base. Some who are on tight budgets today will have more disposable income in the future.

        Another advantage is that lower priced iPhones take the oxygen (ROI) from competitors. Lower priced iPhones including used iPhones, put price pressure on Android clones at the mid-tier. At the high-end, Apple’s dominance is big. Apple on TSMC lead the world in smartphone chips. Right now, only Huawei comes close. For the rest, Apple may have killed the ROI needed to compete. Apple is building an iOS/A-series chip castle complete with moat, cannons, etc.

        Finally, and pure speculation on my part: Apple appears to be more active in offering rebates for upgrades while selling refurbished iPhones with warranty. This creates new relationships, not just sales and enhances the “Apple experience”.

        None of the above can be measured. Analysts won’t ‘get it’. Case in point: At the end of last earnings call, Tim Cook noted that Apple’s installed base grew by 20%, an amazing feat for a company approaching 40. I recall only a few analysts mention this.

        0
        January 1, 2019
        • Robert Paul Leitao said:
          Fred:

          Thank you for the response. I’m not sure it’s efficacious for Apple to compete with the pre-owned iPhone market by providing lower-cost handsets. The percentage of revenue flowing to the gross margin line has been on a gradual and steady decline since FY2015. This is despite the big jump in the iPhone’s ASP last fiscal year. Innovation is expensive and the costs of innovation must be recouped to fund future innovation. I very much like the A11 and A12 series SOCs and I expect to see nothing older than those chips in the iPhones Apple ships later this year.

          The iPad is sold in much lower quantities than the iPhone and there’s an advantage in the highly competitive education for a lower cost product. While there’s a market for pre-owned iPads, it’s not on the same scale as the market for pre-owned iPhones. I believe the iPad Pro line is priced appropriately for the advances packed into the line’s flagship devices.

          0
          January 2, 2019
  4. Gregg Thurman said:
    Is it me, or are all the naysayers on extended holiday?

    0
    January 1, 2019
  5. Jonathan Mackenzie said:
    While it sounds like good news, if I understand what they’re measuring, it doesn’t have to be. If Apple averaged 3 iPad activations in the baseline and on Christmas they had 6, this would be described as 100% “lift” in activations. So on a YoY basis, the “lift” may be compared, but it is compared to another (unrevealed) baseline. If Apple averaged 5 iPad activations last year in the baseline and had the same 6 on Christmas that it had this year, that would be 20% lift in activations.

    It’s very likely that the activation boost says something about how popular the iPad was as a Christmas gift, but we’d need to assume that average daily activations in this December more or less matched last December in order to say anything about how this represents an improvement in sales. Maybe that’s true. Maybe it’s half, or double. Who knows?

    And of course the same applies to the XR. It is at least possible that daily activations of this iPhone were so low that when a modest number of folks got them as Christmas presents, the activation number spiked.

    If I have this wrong and there is any way to compare YoY baselines, someone please enlighten me. This news sounds really good. It probably is really good. But mathematically I don’t think it has to be.

    0
    January 1, 2019
  6. Robert Paul Leitao said:
    In my view, the iPhone Xr is an intriguing and deceptive product. It’s powered by the A12 Bionic SOC and updated Neural Engine. The reason I consider it deceptive is because it packs a lot of power and functionality into a lower-cost iPhone.

    The reason why I think it’s intriguing is in a maturing market one primary avenue for growth is winning adherents from the other major platform. In my view, the success of the iPhone Xr will be determined less by the number of units sold and more by how many new customers it brings to the platform. The model is a nice combination of price and power and this may deliver an intriguing value proposition for new platform participants.

    With a rapidly growing global market for pre-owned iPhones, new iPhone unit sales is a less important metric than continued growth in the installed base of device owners. Apple’s success can not be accurately measured by the number of new iPhones sold in a particular quarter or fiscal year but by the continued growth in the global installed base of active device owners.

    2
    January 1, 2019
  7. Robert Paul Leitao said:
    What if Apple delivers revenue results for the December quarter at least midway in the guidance range, announces the iPhone Xr is a magnet for customers previously engaged in the other major mobile platform and sales of constituent products such as the Apple Watch and AirPods more than met expectations?

    It would suggest the company’s growth story remains intact and this will be evidenced by the continuing growth in Services revenue in the 20% per annum range. Such a scenario might convince investors to tune out the talking heads and media pundits and tune in to what management is saying about the company’s prospects for growth. My suggestion would be to fasten your seatbelts and hold on to your shares.

    3
    January 1, 2019
    • Gregg Thurman said:
      Yea!!!

      I’m nominating this for post of 2019. Thank you Robert.

      0
      January 1, 2019
    • Mark Visnic said:
      To clarify Robert, are you now forecasting Q1 revs at guidance midpoint? And, if so, is that why you are implying a bumpy share price post earnings report?

      0
      January 1, 2019

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