Apple company makes lot of money How?
There's no question that apple makes an unbelievable amount of money in fact last quarter they exceeded 100 billion dollars in revenue for the first time
But what's even more impressive is their huge mountain of cash almost 200 billion more than any other company in the world
This is a complete 180 from where they were two decades ago when apple had just escaped bankruptcy, So how were they able to make so much money, So quickly to become the most valuable company in the world
Well that's exactly what i'm going to explain
Alright now one of the biggest reasons apple's doing so well today is because of their business strategy which was way ahead of its time back in the 80s computer companies like microsoft made money licensing their operating system
But jobs refused instead hedging his bets on hardware sales believing that you can only create a great product if you retain control over the hardware and software and you can only charge a premium for hardware if it's objectively better than the competition
The problem with this strategy in the 80s and 90s was that most customers didn't see the difference between macs and pcs at least not enough to justify the max higher price this resulted in apple controlling only a small share of the computer market
But their focus on hardware and software integration and optimization would become much more viable to customers as the industry shifted toward mobile devices
Apple first caught a glimpse of this with mp3 players there were many cheap models on the market but their ipod became a runaway success eventually capturing almost 80 percent of the music player market and that's because optimization is crucial
When it comes to battery life portability and ease of use something apple already had experience with but other companies like sony and microsoft didn't the ipod's click wheel navigation made browsing music effortless
Its software interface was intuitive and easy to understand and adding music was simple since almost everyone was familiar with itunes not to mention the itunes music store which works seamlessly with the ipod
Apple designed their hardware to operate flawlessly with their software which operated flawlessly with their services and users began to notice the tangible benefits of that seamless integration with the ipod which is why they didn't mind paying a premium for the device even though there were alternatives for half the price
The ipod's high profit margin and high sales volume contributed to apple's monumental growth rate from 2001 to 2007 where the company grew 25 to 100 nearly
Every year this was the beginning of apple's most profitable era and they were in the unique position to do something
No other tech company could that is creating an ecosystem where every product becomes a wild success this was crucial to apple's explosive growth they couldn't simply release new products that sold sort of well like the macintosh in its early days
They needed each device to perform like the ipod dominating their respective markets with high profit margins to deliver record breaking revenue and that's exactly what happened
Apple moved quickly releasing the iphone in 2007 their most profitable product ever it was a hit right away and immediately spiked apple's annual revenue
But the ipad released just three years later took things to a whole new level everyone expected apple's tablet to cost at least one thousand dollars so when steve jobs denounced its starting price of 500
The hype surrounding the product grew even more than with the iphone once it went on sale the ipad became the fastest selling consumer electronic device in history by 2011
Apple's annual revenue had grown to over 100 billion dollars making them the most valuable company in the world this came just two weeks before jobs would retire as ceo from apple
Now if you're wondering what a day in the life of steve jobs was really like, But one downside of creating products that sell so well is that achieving market saturation becomes inevitable
Which means it's pretty much impossible to find new customers and you can only make money from existing customers upgrading the devices they already own apple tried remedying this by focusing on emerging markets like china and india where their products weren't as popular
But because of the price sensitivity of those countries sales of apple products didn't increase the way they'd hoped and a new strategy was needed to boost revenue
So apple took two approaches first was the decision to increase prices of almost every product in their lineup this for the most part took place in 2018 when the iphone and ipad's base price increased by fifty dollars
The apple watch by seventy dollars the mac mini by 300 and the macbook air by 200. these price bumps were pure profit for apple since the manufacturing cost of these products largely remained the same second was to focus on growing their services business which allowed apple to capitalize on their existing user base with recurring monthly payments
That's what led to the creation of apple tv plus apple arcade apple news plus and apple fitness plus these services were also very profitable since their costs were fixed
No matter how many people signed up so how effective were these strategies in generating revenue for apple well after all the price increases of 2018 apple had their most successful year since 2015 totaling 265 billion in revenue
But what happened next was even more impressive through the next two years apple began rolling out various subscription services to their existing users
Apple news plus launched in march 2019 the apple card in august 2019 apple arcade in september 2019 and apple fitness plus in december 2020
This flurry of new services fueled even more revenue growth for the company setting a new annual record in 2020 at over 274 billion dollars but perhaps the most notable thing about how apple makes so much money is that virtually none of it is from selling user data to advertisers
Although they do employ some targeted ads on their news app and app store it's on an extremely small scale and collects much less data than companies like facebook or google
And i think apple deserves some credit for this user data has become more valuable than oil and apple could begin fracking their user base at any time to generate tens of billions in extra revenue but since the beginning they've refused to do this
Acknowledging that they're in the unique position to charge more for their products by providing a superior experience and treating their users with dignity by handling their private data responsibly and so far that approach has proven to be the most profitable since apple remains
The most valuable tech company in the world with the ability to sell a high volume of high margin products, Alright so that is how apple makes so much money
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