Loup Ventures: Apple could sell 31 million AirTags by New Years Day

“When product-market fit happens, growth can be explosive.” — Gene Munster

From “Apple’s Path to a Sleeper Hot,” mailed Monday to Loup Venture subscribers:

We believe AirTags have the potential to be a sleeper hit with consumers and surprise investors over the long run by adding 1% plus to Apple’s overall revenue. While it sounds like a small number, 1% would equate to $3.3B on Apple’s expected 2021 revenue of $333B. As a point of perspective, Sonos, the audio company, does about $1.5B in annual revenue today.

Apart from the adoption lesson, there’s also a financial lesson from AirPods. That is, when product-market fit happens, growth can be explosive. We estimate that Apple sold about 80m AirPod units in CY20, the fourth full year of AirPod availability. At an ASP of around $170, this equates to $14B in revenue. We estimate the company will sell about 95m units in CY21.

Using AirPods as a reference point, we can get a sense of how many AirTags could be sold over the next five years. AirTags star at $29 per tracker and $25 if purchased in a pack of four. At 1/6 the price of AirPods, it’s reasonable to anticipate Apple will sell more AirTags than AirPods. Applying a 4x factor yields 380m AirTag units in year five (2025). While 380m units feels aggressive, we believe 120m units in 2025 is reasonable based on a 40% compound growth rate.

Another test of our assumptions is comparing the percentage of iOS users that have adopted AirTag, AirPods, and Watch. The table below outlines this exercise. We’re modeling for each user to have two AirTags on average, with a replacement cycle of roughly four years. Putting it together, this would imply 155m AirTag users in 2025 and 14% iOS penetration, assuming the active iOS user base grows 3% per year from around 1B today to 1.1B in 2025. As a point of reference, this 14% iOS penetration would be similar to the attach rate to date for AirPods at around 15% and Watch at just under 10%.

apple airtags 31 million

My take: What sleeper? AirTags are a hit, wide awake and in plain sight.

26 Comments

  1. Hap Allen said:
    Indeed…

    “Does anyone know where Gramps is?”

    10
    April 26, 2021
  2. Gregg Thurman said:
    While I appreciate Gene’s effort I think his estimate low by at least half. His ratio of buying single units to 4 packs is way low. I believe that a great many (at least half) of those that buy a singleton will be back to buy the 4 pack.

    11
    April 26, 2021
  3. John Kirk said:
    I think Apple has done an excellent job in implementing the Airtags.

    But I must admit that I’m a bit confused. Exactly how many people are going to need these things and what will they be using them for?

    I have a strong suspicion that I’m out of touch on this one. Everybody seems to think this will be big. Enlighten this poor fool. What’s the big deal?

    7
    April 26, 2021
    • Kemble Widmer said:
      I’ll be putting them in my luggage, high $$ camera bag, high end snowmobile, and high end bike.
      If I had dogs or children, they would be on collars and sewn in jackets (for personal safety and jacket recovery, I lost hundreds of dollars in coats as a child).
      Safety and security are about risk reduction. Nothing is fail safe, but at $25 per use case a no brainer in my opinion…….

      11
      April 26, 2021
  4. Bob Goldstein said:
    I went to the Apple website to get info on the AirTags but they did not explain how to use. Where I live, criminals are hijacking expensive bikes from riders. It happens a lot where my son rides. I told him about AirTags but I could not explain how or where to mount them on a bike. I told my daughter about using AirTags for her keys and I still have no idea how. On the website it shows a key ring for another $29 but I would not want to be forced to buy that for her keys. I think they are a good idea with luggage and it’s simple to just throw it in the suitcase. I have had luggage lost at the airport

    6
    April 26, 2021
    • David Emery said:
      Double-sided tape to mount the AirTag underneath the seat. Otherwise the crook will see and toss the tag.

      8
      April 26, 2021
      • David Drinkwater said:
        Depending on the bike design, you might be better off putting it on the base of the “U” in the fork (at least for a mountain bike). Seats are way too removable. You do need to be able to access the tag every so often to change the battery.

        11
        April 26, 2021
        • Bob Goldstein said:
          The solutions do not seem very elegant. The thieves will soon learn to look for them. I would not pay an Extra $29 so I can attach to my keys. Keeping track of luggage seems like a no brainer but I can’t see the numbers being tossed around for luggage

          0
          April 26, 2021
          • Bart Yee said:
            I would place the AirTag in a back/bottom zippered luggage pocket if possible, not loose within the contents. Bags are opened by airline / airport personnel if lost or without flight tags or ID so an AirTag can go missing (although trackable) unscrupulously. Some bags even have zippered liners where an AirTag could be placed between the lining and outer shell or material. I’d think adhesive velcro, one side to the luggage, the other to the AirTag would be a decent solution instead of letting it bang around loose.

            As for the bicycle, that’s harder since it is easy for some to inspect the bike and look for potential tracking devices. I agree a similar velcro attachment to the underside of the saddle, possibly taped into the handlebars under the bar tape with some padding around it to hide it, hidden inside the gum rubber covers of the brake/shift levers as its thin, or placed inside an under seat/frame travel pouch with other spares like tubes, tools, patches, etc. – although that can be easily removed. An AirTag could be disguised with a round reflector and mounted as if just a light reflector, might escape detection until it beeps? Not sure signals could be detected if inside the carbon fiber tubing of modern bikes.

            4
            April 27, 2021
            • David Emery said:
              Hiding tags from a thief is the typical ‘cat and mouse’ game. But if you presume that lost luggage is not theft, then there’s no real reason to hide them in luggage. That’s the one use case for tags that I’m very interested in. (Despite having many senior moments, losing stuff isn’t a major problem for me (yet…) . )

              IF Apple makes the tracking technology available, it’s interesting to think about various kinds of specialized trackers.

              2
              April 27, 2021
  5. David Drinkwater said:
    With all due respect for Gene Munster, I think 30 million is only achievable if Apple can’t *deliver* more than 30 million. If Apple can deliver 100 million, Apple will sell 100 million, but secrecy being what it is, we will never know.

    8
    April 26, 2021
  6. David Drinkwater said:
    BTW, I received three Spigen key rings today. I only have to wait until an estimated June 10 to receive the AirTags to fill them with.

    8
    April 26, 2021
    • Roger Schutte said:
      David, fyi…I can order on Apple.com for curbside pickup at my local Apple store and online orders at BestBuy.com are showing as available with delivery this Friday. That’s if you don’t want them engraved.

      8
      April 26, 2021
  7. Fred Stein said:
    All good comments.

    Agree w/ Gregg – the 2 tag estimate is low. Many will buy the 4 pack increasing revenue. Plus the add-on key rings, etc. will up the revenue by at least 25% more

    9
    April 26, 2021
  8. Fred Stein said:
    This AirTag 1.0.

    Apple will grow this business in ways we can only imagine.

    9
    April 26, 2021
    • John Kirk said:
      Yes, I have a feeling that this technology will enable uses that I can’t currently foresee. (Of course, I’ll deny ever having said this and will proudly claim that I knew that super popular and ubiquitous “X product” was coming all along!)

      5
      April 27, 2021
  9. Mordechai Beizer said:
    I bought 5 tags and 2 key rings today so add that into the sales projections. On a serious note, $65 for a key ring and a tag seems worth it given how expensive a replacement car key is nowadays. I could easily see buying some more if this turns out to “just work”.

    10
    April 26, 2021
  10. bas flik said:
    airtag will change way of life like smartphone did. everybody will be tagged. your wife will buy many and hide them in all your stuff. in the end insure companies (apple owned) will not provide insurance unless your stuff is tagged. billions will be sold. android will have problems retaining customers. massive switching out of android into the Apple black hole. M1 will destroy windows and simple airtags will destroy Android.
    Sooner or later everybody will be sucked in. The magical ring from cupertino looks to temptive to resist.

    6
    April 27, 2021
  11. Peter Kropf said:
    For Airtags on high end items.

    I’d use two for each. One would be public and have my cell num and ‘reward for return’ engraved on it.

    The other would be cleverly hidden. The best of us, would see my cell and return the item for the reward. The worst of us might see the public tag and destroy it in the hopes of stealing my item. Hopefully, they never discover the private tag leading to arrest and a date in court.

    5
    April 27, 2021
  12. David Emery said:
    A friend had her (Android) phone snatched a couple years ago in Lisbon. They went to the police, used the Android ‘track my phone’ function, and rode with the cops until they got to a large apartment block. At that point, the cops said, “We can’t search the entire building.”

    But I suspect the AirTags tracking would be sufficiently accurate in -3 dimensions- to make it a lot more feasible for the cops to find the apartment where the item was located.

    (Be careful if you go to Lisbon. I got pick-pocketed there a couple years ago, first time in many years of international travel.)

    3
    April 27, 2021

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