Apple Watch Sales Outlook: More than $5 Billion in the US Alone

Many hundreds of thousands of words have been written in the past 24 hours about the Apple Watch — perhaps we should more accurately call it “wrist computer.” Pundits and tech bloggers have assessed its capabilities, features and sales prospects.

On that latter point, multiple surveys continue to show mixed levels of interest in smartwatches among the consumer public.

Those analysts who are bearish on the Apple Watch and smartwatches generally — there were between 720K and 750K Android Wear devices shipped in 2014 — cite the “redundant” nature of having yet another device that duplicates some but not most of the functions of the smartphone but on a smaller screen.

LSA Local Media Tracking Study data from 2014 reflect that just over 3% of respondents have a smartwatch. Roughly 19% of respondents said they don’t have one but are interested. The rest, more than 70%, say they’re not interested for one reason or another (“not interested at all” or “have smartphone and not interested”).

Younger men (18 – 34) living in urban areas showed the highest level of interest (29% in the 18-24 age category). In addition, Hispanics showed greater interest than their non-Hispanic peers in buying a smartwatch.

The 70% “not interested” figure seems daunting for Apple. However many analytics dismissed the iPad as an unnecessary device when it launched. Apple has an almost unique ability to generate consumer interest and make people want devices they don’t actually need.

Let’s extrapolate from the LSA data above and see what some of the numbers might look like in the real world. If 19% of US smartphone owners are interested in buying a smartwatch, that would mean about 35 million people in real terms. If we discount that number according to Apple’s share of the US smartphone market, then it becomes just over 14 million.

If we assume that those 14 million people buy the entry level watch ($349) that would mean $4.8 billion in revenue for Apple in the US alone. Those are large numbers but I suspect the opportunity for Apple is actually greater in terms of penetration and revenue. And it’s certainly larger when we think of the global opportunity.

Android Wear OEMs (Samsung, LG, Motorola) should all be jumping for joy at the launch of the Apple Watch. Its presence in the market will almost certainly boost their sales. They will be seen as affordable alternatives to Apple’s pricey wrist computer.

Beyond watch manufacturers, marketers and publishers are already considering how advertising and marketing will translate on these smaller screens on our wrists. Unlike smartphones nearly 100% of content on smartwatches will be app based. If they exist, ads will reside within publisher apps. However notifications will be another available and important marketing tool.

While video ads (pre-roll) and native ads will undoubtedly make an appearance, marketers may be disappointed to find that smartwatches are not going to be very advertising friendly platforms overall.

They will be brand, retailer and publisher friendly, and through apps offer tools to engage their users; the SPG and Uber demos from the Apple launch event are good examples. However they’re not going to be very good environments for “advertising” overall.

And to the extent they catch on and gain usage, they could fragment the smartphone audience’s attention. That may have a negative impact on mobile “advertising” too. But we’ll have to wait and see how widely adopted they are and how consumer behavior develops.

In the meantime I’m predicting that when Apple makes pre-orders available (April 10) and then reports its initial numbers we’ll see it report “several million” people initially sign up.

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