Market Share vs Total Units Sold

Here’s an important point – sometimes market share isn’t all that important.

At this point you probably think I’m crazy. Let me explain. The numbers are made up, because I don’t have the actual figures on hand, but they’ll give you a basic idea of why Market Share doesn’t always matter.

Let’s say Fruit Computer company, sold 500,000 computers one year, and SoftMicro sold 4,500,000 copies of it’s operating system to several computer manufacturers, who packaged and sold computers to business and the public.

Fruit Computer Company has 10% of the market. That’s bad, right? Wrong. Fruit Computer Company has a higher Manufacturer Suggested Retail Price, and is controlling costs, so they are making money.

But with only 10% market share, they can’t find anyone to make software for them, right?

Wrong. Fruit Computer Company builds machines specialized for certain markets, and owns those markets. Any software for those markets has to be designed for their computers. Also a lot of small companies produce software for their computers, because the users needed something, wrote it for themselves, and realized they could make money on the side selling software as well.

Of course SoftMicro is doing fairly well. While they don’t have as high a Manufacturers Suggested Retail Price, they are moving a lot of kit.

Of course you recognize who I’m talking about. The above scenario is from the 1980s, but the market is very much the same today, with some exceptions:

  1. Microsoft has introduced competing software for some applications (web browser, etc.) which has annoyed the developer community.
  2. Apple has introduced the Mac App store, making it easier for the smaller developers to get the product in front of buyers.

You also have to take into account the way Apple has been slowly lowering it’s effective price (inflation adjusted). This means Apple has been slowly but steadily gaining users, making the Mac a more important market for software.

Worldwide Apple’s market share is 7.1% according to Wikipedia. Steve Jobs said that Apple had 20% of the U.S. market, but the U.S.A. is a small market, compared to China or India. Most Chinese and Indian consumers can’t afford to spend $79.99 for Aperture. Nor can they afford to buy Macs. A lot of them use smartphones as computers, because that’s what they can afford.

So while Apple market share isn’t that great, it is concentrated in the countries that have the most disposable income, and are most likely to buy software from the Mac App Store. Market share doesn’t matter.

What does matter is Apple increasing the total number of machines in use, and this Apple is doing, having set sales records virtually every year since the return of Steve Jobs. By doing this, Apple is providing developers with an ever growing number of users to sell to. Developers like this. They like it a lot.

It also leads to new developers, from the Windows side of the fence, testing the Mac waters. Like game developers. Games don’t sell well outside of the First World, and the First World is where the majority of Macs are located.

So yes, Market Share does matter, but so does Total Number of Units sold.

One last thing. Macs tend to last longer. That means that while Apple may have sold 20% of the computers delivered in the U.S.A. one year, that they actual number of Macs in use is higher. How much higher we don’t know.

But I still have my 1999 iMac G3 here, and it runs like a charm.

Regards

Wayne Borean

Tuesday February 3, 2015

 

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