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Lunchtime Briefing: Apple's Hipster Strategy

Frank Ahrens colleague and security genius Brian Krebs writes about the worm nesting inside some of Apple's new iPods. Also, Yuki Noguchi and Mike Musgrove take a look at Apple's and eBay's earnings that came out yesterday.

As you might imagine, Apple's earnings are strong, thanks to continued strong sales of the company's ubiquitous iPod. But an Apple honcho said yesterday that the company is increasing its historically tiny computer market, at least partially thanks to the new Intel chip that lets users run Mac or Windows operating systems.

The Apple worm is the second ding that the the company -- which I think of as one huge, multi-story sleek white box, like an iPod the size of the building that stores the Space Shuttle -- has taken in the month.

Apple finds itself part of the growing "options backdating" scandal, where execs from several companies have admitted to falsely dating their stock options to ensure the highest possible yield on their sale. An Apple board member resigned over the mess, but an internal investigation cleared Apple founder and svengali Steve Jobs.

Macs are a good example of the disconnect frequently seen between Them and Us, whichever one you happen to be. Apple has some of the best industrial designers in the world; consequently, the company's computers are gorgeous and stuff works when you plug it in.

Yet Apple has not been able to get anywhere near double-digit penetration among computer buyers; analysts show the company with about 5 percent of the market.

Why is this?

I blame part of it on MSM-bashing. The media -- not just tech writers -- LOVE Macs. Which is reason enough for most people to hate them. Okay, okay. That's a little facetious.

The problem has been price and perception. If you can walk into a Wal-Mart and, on a pallet there in the front of the store is a whole Compaq desktop in a box for $418, and it does pretty much everything you want it to do -- e-mail, search the Internet, send pictures of your kids to their grandparents, play music and make "Missing" posters when your dog runs away -- why on earth would you pay Jobs $999 for even a low-end iMac?

I think perception also plays a role, as in, "Macs aren't for us." I think about my hometown of Charleston, W.Va., which, a few years ago, completed a large, impressive new arts center for plays, exhibits and symphony performances. The city built it in a dodgy section of town on purpose, to help revitalize the area and to get regular folks to come. But the result was just the opposite for many people: The new building was extra intimidating and "for rich people, not us."

Apple may not want to change its image and become more of-the-people; it most assuredly would lose the approval of the digital hipsters who affirm the Mac's coolness. Which is why Apple's growth strategy must be in smaller devices, such as the iPod, the iPod that will play movie downloads, and maybe other devices inside Jobs's noggin, such as the long-rumored Apple cell phone.

By Frank Ahrens  |  October 19, 2006; 12:15 PM ET  | Category:  Frank Ahrens , Lunchtime Briefing
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" colleague and security genius Brian Krebs..." You are kidding me, right?!?! I laughed out loud when I read this. Krebs' actual knowledge of IT security is very limited. There is a HUGE difference between a hack and a hacker. I will let you decide which one best describes Krebs.

Posted by: Troy | October 19, 2006 1:21 PM

I would have to agree with Troy. Brian Krebs security genius? Being a reporter on the subject of security does not make you a genius in security. Maybe he has does something in the security field that has not been published??? If so, please share. The Washington post is supposed to be a creditable resource not one full of fluff.

Posted by: Nick | October 19, 2006 2:05 PM

Re: Apple -- Exactly right on all counts. I am a Mac user, but I cringe when I see that dopey ad by Apple running these days, where we have the young dude representing Mac and the tie-wearing, schlumpy guy representing the PC. Apple sees the world as a clash between the hipsters, as you point out, and the idiots. Odd that such a smart company is so elitist about the world. This company will never make any inroads into anything beyond its miniscule market share unless it changes its separatist world view. Which is quite the turn-off among more than a few of its grown-up users.

Posted by: Craig in Loudoun | October 19, 2006 2:12 PM

Isn't this absolutely Mac lovers in a nutshell? They are so desperate to be in the in-crowd, that they practically fellate each other and Apple with empty superlatives. Krebs a genius. Apple products are gorgeous. Best industrial designers in the world.

Even his description of Jobs as svengali, was meant as a high-brow, 'I'm smarter than you' sarcasm of Mac critics.

Apple markets itself as a 'buy me and be cool' company. The premium for this purchased supposed 'coolness' is about $1000 on top of a $400 machine. I have nothing but the deepest contempt and loathing of people who buy things for social status. That is why I'll never own an apple product.

Posted by: morganja | October 19, 2006 2:26 PM

While I personally do not have knowledge of Mr. Krebs's I.Q.--it may be genius level--I was just giving a playful shout-out to my colleague while alerting readers to a story they may want to see.

And I personally am quite a fan of fluff, especially in my pillows and my whipped toppings.

Posted by: Frank Ahrens | October 19, 2006 2:32 PM

Apple serves the user who has a wider range of activites past the basic email, print the MS Word document profile.

Once you are up to semi-geek level, then things even out (and I believe that Mac OSX becomes even more appealing).

The reason the Mac ads sell 'cool' is that it is impossible to sell a better user experience in a commercial.

The iPod has helped quite a bit, because now Apple can say, "See how smooth and how much fun it is? We can do the same for your next computer"

Using a Mac is a better experience (I use both), but you have to own one to really get the message.

Plus, the virus, trojan and worm assaults on Windows are a major, Major incovenience.

With a Mac, they simply don't exist. Living without the fear and just a minor bit of caution is all that's necessary.

Wanna see my movie?

Posted by: Steve G | October 19, 2006 2:32 PM

Morganja, have you ever bought a computer in your life?

I have a hard time understanding how anyone can look at a $400 product and a $1,400 product and think "they must be the same."

$400 Dells are low-end, cheap sytems. $1,400 Dells are high-powered, fast, and modern system. Do you think both of those products are the same? Of course not. Buying a better computer costs more, even from within the same company, such as Dell.

Apple just doesn't sell low-end cheap systems. That's their choice, but it doesn't mean their computers cost more. It just means they ONLY sell the high-end, not the low-end.

If you don't believe me, look at what $1,100 can buy you from Apple or Dell:

Answer: Pretty much the SAME sytem, spec-wise. There are minor differences, but not enough to make a big difference.

Posted by: Jeff | October 19, 2006 2:51 PM

Macs look better and work better and now they cost the same or less for similar configurations. Unless the definition of "hipster" has become "smart," I don't see what hipness has to do with it.

Media folk like Mr. Ahrens really should point out the "apples to apples" reality when talking about those $400 Walmart pc's. It's like comparing a low end Ford to a BMW. If you want to make a valid comparison, think Lincoln. And maybe it's different where you come from, but I don't know any poor folk who wouldn't rather drive a BMW or a Lincoln than the cheapest car they can possibly buy. Same thing with computers. Unfortunately, it's Apple's marketing that sucks, not their products.

Posted by: mweb | October 19, 2006 3:22 PM

I read your article and was especially interested in the Apple cell phone, so much so, that I went out and tried to find other mention of it. Oh well, if Apple ever makes one, count me as a first in line buyer. I bought a MacBook PRO back in January and words completely fail to express my delight. My household has long wished for a wireless network, connect two different color printers (an HP nd an Epson) and a laser printer (HP) with everyones computers. We spent an estimated $800 of variou hardware for our PC's and never did get it to work. With my PRO, I bought Apple's AirPort Express. Our entire home is one big wireless network. Everything works and it took under an hour to get it working. I liked it so much, I bought my wife an Apple and our friends are buying them, too, including some missionaries staying with us from S.E. Asia. 5% of the market, you say? I might just be buying some Apple stock. After previewing Vista, I expect Apple to own 50% or more of the PC market within 5 years.

Posted by: MikeB | October 19, 2006 4:32 PM

I just read today that Apple is just about to overtake Gateway Computer in PC sales. This just a few months after they announced that they were going to an Intel chip set. I think Dell should be very afraid, very afraid indeed.

Posted by: MikeH | October 19, 2006 5:04 PM

Apple is a smug, obnoxious, elitist, company that markets pseudocool. They just make me cringe.

In addition, they apparently think that the way to get Windows users to switch, is to tell Windows users that they are stupid and uncool. This "attack the prospective customer" philosophy is counterproductive.

This Christmas, it's a Microsoft Zune or a Sansa-Rhapsody for me. Not an iPod.

Posted by: JohnJ | October 19, 2006 5:06 PM

>I think Dell should be very afraid, very afraid indeed.<

Worldwide, Apple's Q3-2006 market share is in the Others category, below HP, Dell, Lenovo, Acer and Toshiba.

In the US market, Apple's Q3-2006 market share is 5.8%, compared to Dell's 31.0%.

(Numbers from IDC. I have an HP computer.)

Posted by: JohnJ | October 19, 2006 5:25 PM

If Apple's Mac OSX is so great, why is Apple getting a Windows Virus on their video iPods? Doesn't OSX have the capabilities necessary for their own hardware?

Posted by: Riddle me This | October 20, 2006 11:58 AM

Riddle me This, The iPod and iTunes work with both Mac and PC computers. The cause of the worm infected iPods was traced to a Windows PC in one factory used for QA purposes. If you have a Mac, you were in no danger of bing infected since the worm is built to exploit Windows, not OS X.

Posted by: Troy | October 20, 2006 1:42 PM

The success of Apple Computer is based on superior business managemment perennially responsive to a demanding user base.

The success of Microsoft is based on a market monopoly and gross exploitation of the resulting customer base.

Total cost of computer ownership, when you include training and technical support, vastly swings in favor of Apple Computers.

I have bought, installed, and serviced enough business IT equipment and train 1000's of users to know at least this much.

Posted by: thw2001 | October 22, 2006 10:20 PM

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