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The Watches Might Be Smart, But The Sales Not So Much

 4 min read / 

A few years back, The Change Function, a book written by Pip Coburn, which gave a solid framework to evaluate the probability of successful adoption of new technology. It involves asking two simple questions:

  1. Is there a crisis people are looking to solve?
  2. What is the perceived pain of adoption?

This is an attempt to evaluate the smartwatch using the change function, albeit retrospectively.

When it comes to cellphones, the late 90s and the early 2000s bore witness to dwindling sizes. As the mobile phone metamorphosed into the present day smartphones, their functionality increased manifold warranting a larger screen size in the process. All along, people gradually rid themselves of the habit of wearing a watch.

Enter The Wearables

As the then burgeoning smartphone industry later experienced weak growth, the companies started entertaining the idea of creating a new category – that of wearables. The catastrophe of Google Glass notwithstanding, smartwatches seemed like a natural choice.

In that sense, it was from the start a solution looking for a problem thus answering the first part of the change function – there was no crisis, to begin with. The absence of a crisis precludes the necessity to adopt, rendering the second question moot.

In simple words, the smartwatch was never going to emulate its host, the smartphone. This was further evidenced by a 32% 2Q16 drop in worldwide smartwatch shipments, the bulk of which was contributed by a 55% drop in Apple Watch sales – the Apple Watch has a 47% market share.

Common points of contention on smartwatches:

  • Too costly – These devices pack incredibly complex circuitry in a very compact space. For the fab houses to bring down manufacturing costs, they need to produce more. A commensurate demand to justify an increase in production is conspicuously lacking, creating a Catch-22 situation
  • Should be a standalone device – Smartwatches are currently not capable of functioning efficiently in the absence of a paired smartphone. When it comes to functionality, the former is dwarfed by the latter leading to doubts over its efficacy as a standalone device, especially when the smartphones accompany users almost everywhere
  • Fitness device – The only real application that a smartwatch is left with is that of a fitness tracker. Fitness tracking has indeed become a craze lately. However, unless one is a professional athlete, the odds are that one is satisfied with logging the rudimentary events like steps taken, flights climbed, distance walked and so on. A good smartphone is already capable of tracking these and much more. The more advanced metrics that a smartwatch could potentially measure would only make it a glorified fitness tracker with a very little mass market appeal.

Since the advent of the smartphone, a larger screen size has been the name of the game. Given how much heat Apple took for the small 3.5-inch screen size up until the iPhone 4S, it is highly unlikely the 1.5-inch real estate of a smartwatch screen is going to sate customers. The watch industry as a whole has been in steady decline, and the current lineup of smartwatches does not bring with it, the allure to reverse this trend.

The Others

The Apple Watch is classified under “other products” in the company’s 10-K. For it to command its line item, the sales must be comparable to that of the iPhone, iPad and Mac, which looks light years away at the moment. In 2015, other products (including the Apple TV, the Apple Watch, Beats products, the iPod and accessories) were just 4.27% of the total sales.

On a lighter note: the sixth generation iPod Nano, released in 2010, could play music, store photos, had an inbuilt pedometer and came with a watch face. It cost less than $175 including the strap which is still less than half of what an Apple Watch costs.

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Companies

Whatsapp Launches New Venture Aimed at Businesses

 1 min read / 

whatsapp business

Whatsapp has launched a new app targeted at businesses, called the Whatsapp Business App, which they claim will enable companies to “communicate more efficiently” with present and potential customers.

This forms part of Whatsapp’s wider strategy to branch out into the corporate world. It plans to use the app to generate new revenue by charging businesses for using the extra communication tools that will enable them to better connect with their customers.

Although the app is set for worldwide release, at present it will only be available in Indonesia, Italy, Mexico, the UK and US. It includes a feature which indicates a business is authentic with a green tick badge next to their name.

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Companies

Amex: Troubled Credit Card Company Reports $1.2bn Net Loss

 2 min read / 

Amex annual report

On Thursday, American Express, or Amex, reported a net loss of $1,197m in the fourth quarter, the first net loss the company has experienced for 26 years.

Although the company stated that revenue from interest expenses was up 10% to $8.8bn, Amex said recent reforms to the US tax code meant the company incurred extra costs, including a repatriation cost on its foreign assets as well as a devaluation of its deferred tax assets. It estimates total costs amounted to $2.6m.

For the full year, net income was $2.7bn compared with $5.4bn the company earned in 2017. However, even with the estimated $2.6m the company claims it incurred from the recent tax charge, net earnings were still $5.3bn, $100m lower compared to last year.

In New York, American Express shares (AXP) took a near 1% tumble at the beginning of trade with shares finishing the day on $99.90.  JPMorgan Chase and Goldman Sachs anticipate greater earnings for 2018.

“Overall, we believe the Tax Act will be a positive development for both the U.S. economy and American Express” said CEO and chairman Kenneth Chenault. Chenault also said he will be leaving Amex in “very strong hands” when his successor, Steve Squeri takes over next month.

American Express has suffered from an ever-reducing share in the credit card market and ended its 14-year relationship with American warehouse chain Costco who in 2016 made an agreement with the market leader, Visa.

Keep reading |  2 min read

Companies

Tencent Extends Facebook Lead

Tencent Facebook

Tencent has shot past Facebook to become the world’s most valuable social network.

Editor’s Remarks: Although Tencent briefly overtook Facebook in terms of market cap in November, the recent selloff of Facebook shares prompted the Chinese tech titan to regain the lead. Facebook investors responded negatively to news that Mark Zuckerberg’s plans to highlight family and friend-based content on the newsfeed would reduce the amount of time people spent on the site. Shares in Facebook have fallen 5% since that announcement, enabling Tencent to gain a $19bn lead over the US company. Tencent’s growth has been spurred on by its diversification away from its flagship messaging app, WeChat, and into video games.

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