ipod search results
It seems like that’s the only topic on the minds of Apple investors these days. In fact, it’s nothing new. Since the launch of the iPod twenty years ago, navigating the theme of product availability has been an essential part of investing in Apple. It’s a well-traveled road: Apple releases a new product and it takes 2-4 months for supply to catch up with demand. We’ve all learned to extrapolate underlying demand from the reported numbers. Then, the supply chain tightened not only for newly announced Apple products but for others as well.
It started last April
On April 29th, 2021, Luca Maestri warned that broader supply challenges would have a negative impact on the forthcoming June quarter by $3-4B. That headwind was expected to dampen sales by 4%. It was the only mention of supply constraints in Apple’s prepared remarks for that quarter. In hindsight, it highlighted a theme that has dominated the Apple conversation for the past year.
The global supply chain will likely change rapidly over the next decade, shifting away from China. Apple saw it coming in 2018 and will be aggressively investing a projected $430B in US tech infrastructure over the next five years, along with investing to a lesser extent in Malaysia, Thailand and Vietnam. While Apple is in a favorable position to navigate the shift long-term, I expect investor anxiety around the topic to ebb and flow in the years to come. In the end, I believe Apple will remain on top given the company is in a unique position with its financial resources and expertise to diversify.
What keeps Cook up at night?
When I meet with management teams, I often ask a softball question. What keeps you up at night? Even though it’s anticipated, I still ask because it can reveal one or two pressure points on any business. These pressure points are the key factors that will have an outsized impact on the business over the next 2-5 years.
Over the years in knowing Apple, I’ve witnessed the company navigate a spectrum of pressure points. Would the iPod trigger growth in Mac sales? Will consumers pay up for an expensive phone? Can production scale while maintaining profitability? Will US tariffs on China prevent the import of Apple products? Will the App Store take rate be impacted by regulation?
Over the past three years, the latest pressure point has emerged… How to navigate China? I believe this is one that keeps Tim Cook up at night.
Where do I start? An easy place is that I was wrong.
I believed that, long term, Zillow’s outsized brand in the US residential real estate market would be a competitive advantage in winning iBuying customers. My thinking continued that while the Zestimate had its flaws, it would get better over time and allow for more accurate bidding, thereby reducing the capital risk of buying and selling homes. We’ll never know how this would have played out because Zillow abruptly exited the iBuying business.
CEO Rich Barton said that Zillow takes big swings and is willing to fail fast; for me, this takes failing fast to a new level. I believe that Zillow exited iBuying because they didn’t want to kill the golden goose.
A win for real estate agents
Zillow’s recent move is a win for real estate agents. I’ve heard from agents over the past year voicing concerns that the Zesitmate is not industrial strength and that the nuances of real estate require a human to price properly. Barton agreed with this assessment, saying the company had been “unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in.” A reality check for the accuracy of the Zestimate.
The debate about the future of iBuying is still on the table because Opendoor remains in the market. They’ll transact more than 20k homes this quarter, over 50% of the overall iBuying market (purchases and sales). Of course, as Zillow winds down their iBuying activity through early 2022, Opendoor’s share will increase sharply.
I believe home sellers want ease, speed, and visibility. iBuying remains a compelling product to meet those unmet needs. My long-term view stands beside the fact that iBuying took a step back with Zillow’s exit. Zillow’s exit is testimony that pricing homes is harder than it looks, which is a win for agents, arming them with a powerful message to their potential customers: don’t go the iBuying route, Zillow tried and failed.
The term podcasting, a combination of the word ‘iPod’ and ‘broadcasting’, is generally attributed to Ben Hammersley in an article written for the Guardian in 2004. Fun fact: in 2005, the New Oxford American Dictionary chose “Podcast” as the word of the year. Podcasting was born from a combination of the internet, free audio production and distribution software, along with portable music devices. Distribution platforms such as iTunes, which added podcasts in 2005, elevated podcasts to a wider audience.
Today podcasts have become an alternative to online print as well as books for learning, and video and radio for entertainment, allowing people to consume content in condensed formats. Audio’s distinct advantage over written word and video is that it can be enjoyed while doing other activities, such as walking, working out, cleaning, or on a commute. In this way, audio serves as an augmented reality layer in ways other media formats cannot.
While Google search trends do not tell us usage metrics, they do show that search interest in “podcasts” is inversely correlated with interest in “newspapers” and “radio” over the past 16 years: