Linked by Eugenia Loli on Wed 7th Apr 2004 05:50 UTC
Apple By most counts, they're a hit. But they were intended to woo new users to the fold, yet Mac market share has only budged -- lower, says BusinessWeek.
Permalink for comment
To read all comments associated with this story, please click here.
The New FUD: Apple Market Share
by Anonymous on Wed 7th Apr 2004 15:51 UTC

Those of us that followed Apple in the mid-90s are all too familiar with the onslaught of negative publicity that the company received that ultimately predicted the company's imminent death. Of course, the claims were grossly over stated. Apple was a very healthy company at the time as it is now. Unfortunately, the publicity had such a negative affect, that these predictions almost resulted in a self fulfilled prophecy.

At the time, Apple was still a relatively new player in most people's minds. The fact that many computer companies were in fact dying didn't help the stigma Apple received. When one misleading report was coupled with misconceptions about Apple and the marketplace, more reporters inevitably latched onto it and turned the situation into something far bigger than what it actually was.

While I wouldn't classify most of that negative publicity a mass instance of "FUD" (fear uncertainty and doubt), as most instances of FUD are uniquely intentional. These were a combination of some fear uncertainty and doubt mixed with mass-confusion. Thankfully, after a lot of education, such proclamations of death are not taken seriously, no matter what the author's intent.

However, there is a new round of Apple FUD that is not unlike the first and has been propagating throughout the same news scene as before. The new FUD is just as disturbing and equally pervasive as its predecessor but relatively undetected thus far. The new FUD plays on the public's misunderstanding about "market share" and "install base." Most individuals mistakenly use these terms interchangeably without fully understanding their meaning.

Market share is a term that describes the gross number of product sold in a given time period.

Install base is a term used to describe the gross number of products sold that are in use at any given time.

The problem with using these terms interchangeably, -- at least when it comes to computers and computing platforms -- amounts to the same problem that occurred during the 90's era news reports. People are far less inclined to consider an alternative platform if there is concern that it may not be around in the future. In the case of Apple however, these claims are totally unfounded.

Here's an example to put things into perspective: Lets say two people comprise 100% of all computer users on the planet. Each of these individuals bought a new computer for themselves at the same time; one a Macintosh and the other a Windows PC. Market share and installed base dynamics would indicate 50/50 percentages.

But if after two years time, the Windows user decides to replace his computer, "market share" dynamics will show that Windows occupies 50% more of the market than that of Macintosh users... even though there are still only two individuals using a computer.

Because "market share" only gauges sales of a platform as opposed to the total number of products in use, the results are skewed -- assuming we are solely trying to determine the total number of people using that particular product and not gauging sales. Of course, if we utilize the "Install base" dynamic, the ratio of computer users in our example is still 50/50.

When a research company reports that Apple's market share has declined and is at 2%, they may very well be correct, but this is not an indicator that Mac users are defecting to Windows, nor does it in any way suggest that the total number of Mac users is at that number. Instead, it indicates that the number of Macs sold during that time period didn't grow as fast as Windows did. The market share statistic doesn't indicate the fact that the vast majority of Windows users are simply replacing their old systems or that Mac users don't typically upgrade their computers as often.

Mac users tend to get more life out of their machine than their Windows-using counterparts. Because Mac users don't replace their computers as frequently, that translates to decreased "market share" even though install base grew... though not as fast as Windows.

I've concluded that any proclamations about "market share must be taken with a grain of salt. Until a reputable research company can provide figures that measure the computer industry with install base dynamics, everything else is meaningless. I would go so far as to actually question the intentions of any reporter that holds up the market share statistic as a barometer that gauges the ratio of various operating system users. Any reporter worth his salt knows better than that.