Apple Watch's halo effect may be impossible to resist
Back when the iPod was still Apple's main squeeze, it was said that its influence was so strong it created a halo effect that boosted sales of Apple's other higher-priced products (namely Macs). Over the five years following the iPod's release, Mac sales practically doubled, no small feat considering the declining trend in the industry. And they've been strong ever since, even though the iPod's halo effect has long worn off.
But while it might be little more than a footnote in Apple's earnings reports, the spirit of the iPod is still very much alive. These days, the iPhone has assumed the mantle as the angelic successor to the iPod, dutifully peddling MacBooks and iPads to satisfied customers, but the halo effect is about to return to its roots, thanks to a little help from the newest member of Apple's family.
Halo there
Much like Apple Watch, when the iPod was originally released, it relied on another Apple product to properly function. But there was a small problem: Apple wasn't quite as successful as it is today. It had a built-in loyal following of fans who plunked down $399 to buy one, but for the most part, Apple struggled to convince non-diehards to buy a Mac so they could buy an iPod.
It wasn't until Apple opened up the iPod to Windows users---first with Musicmatch Jukebox and later with iTunes---when iPod sales truly took off. The iPod may have been the best MP3 player on the market, but Apple needed to embrace its biggest competitor before the halo effect could take effect. Apple knew the Windows experience paled in comparison to the Mac's, and once people fell in love with their iPod they would inevitably check out the Mac. The worse the Windows experience, the better it was for Apple's strategy--the halo effect worked best on customers who had bought an iPod to use with their aging PC. It wasn't even the iPod itself that spurred Mac sales, it was the iPod-Mac experience.
Once Apple Watch makes its debut on April 24, it will be playing a similar game. While its mission isn't nearly as monumental as the iPod's was--what with a built-in community of hundreds of millions of iPhone users--Apple will be using it much in the same way it used the iPod.
Reach ability
In many ways, Apple Watch is the ultimate halo device. Apple's new wearable is even more dependent on another device than the iPod was, and this time around I'm pretty sure Apple isn't going to open it up. It doesn't merely want to get Apple Watches on people's wrists, it wants to deliver the perfect experience.
That means not only selling it to existing iPhone users, but getting interested buyers to upgrade and/or switch. The allure of the Apple Watch isn't all that different than the iPod--namely portability, good looks and convenience--but Apple is going to attract a good deal of customers who aren't interested in how many gigabytes and pixels it has. That halo effect will open up the iPhone (and possibly even the new MacBook) to an audience it might not presently be able to reach.
Of course, Android users will be touched by the halo effect too. Many of the major players already offer smartwatches of their own, and if Apple Watch offers as superior an experience as it seems, it might compel some of them to saunter over to an Apple Store to trade in their old Android phone.
And unlike the iPod, where nearly all of the would-be switchers were naturally drawn to the iPod first, this time the halo effect works both ways. Apple Watch will surely attract its share of Android users to the iPhone, but at the same time, Apple already sells tens of million of iPhones each month. And some of them will surely walk out of the Apple Store with a new watch in hand--especially iPhone 6 Plus buyers concerned about keeping a 5.5-inch handset on their person all day.
Tied and true
The iPod's halo effect was never about building an ecosystem; rather, it was the iTunes Music Store and its FairPlay DRM that created the lock-in. The iPod's job was simply to introduce the Mac to the millions of people who had never used one.
Apple Watch, on the other hand, is all about the ecosystem. It may as well come attached to a two-year contract; by being dependent on the iPhone, the Apple Watch halo effect has the potential to cast a brighter and wider glow than the iPod ever did. Apple sells more iPhones in a quarter than a year's worth of iPods, but in order to keep the momentum, Apple is using its new smartwatch to appeal to iPhone and Android users alike.
It's about upgraders as much as switchers. With the iPod, Apple only converted a small percentage of users to the Mac; in the first quarter of 2008, for example, 22 million iPods translated into less than 2.5 million Macs. But Apple Watch is a 1:1 correlation, and every sale is an opportunity for lock-in, whether it's an iPhone 4 user upgrading to an iPhone 6 or a Samsung Galaxy user switching teams. And if Apple Watch is as desireable as the iPod, it could lead to tens of millions of more iPhone sales each quarter.
And this is just the beginning. The iPod simply played music, but Apple Watch is at once a fashionable piece of jewelry and a gadget that does everything the iPod did and a whole lot more. The original iPod may have started at $399, but within 18 months it had expanded into a line of devices with a range of prices. Apple could do something similar with Apple Watch, both to bring down the price of the low-end and to appeal to as many styles as possible. Apple Watch could end up bringing Apple to heights its music player could never reach, with a halo effect that makes the iPod's seem small by comparison.
But then again, Apple never sold a $17,000 iPod.