It’s that time of the year…peak Apple Predictions! Consumer Reports didn’t recommend the Macbook for the first time ever. Less iPhone units shipped and revenue shrunk in 2016. The sky is falling! Apple is done!

Or is it? The products, leadership, cash on hand, potential and macro trends make me think the peak of Apple is a ways out (I define “peak Apple” as a peak in market cap).

Leadership

Cook is no Jobs but he’s done a hell of a job. The numbers are impressive. Since Cook took over, revenue is up 99% without sacrificing margins and over $185 billion in cash has been returned to shareholders. With Cook leading the company and Jony leading the products, leadership at Apple continues to be strong.

Peak iPhone?

Apple shipped 211 million iPhones in 2016, a dip from the 231 million iPhones shipped in 2015 but an impressive number. Apple shipped 169 million iPhones in 2014, making it’s jump to 231 million in 2015 a huge 37% increase. 2015’s shipments was helped by the penetration in China and the relatively newness of the larger iPhone screens. Although shipments dipped in 2016 the macro trends are in Apple’s favor.

There are approximately 2.1 billion smartphone users and 7 billion people in the world. The vast majority of people do not own a smartphone. It is estimated that smartphone users will grow to 2.9 billion by 2020. That’s 50% growth in 3 years for the overall market size for Apple to get a piece of.

The majority of new smartphone owners will not be able to afford an iPhone but there is one market where Apple’s chances looks promising – India. iPhone shipments were up 50% in India in 2016 and although the market is accustomed to paying less for a smartphone, as incomes rise so will interest in iPhones.

Unless the buying cycle changes to more than the current 2 year cycle or a competitor starts converting iPhone customers, I expect iPhone growth overtime to continue in line with smartphone user growth (a slower rate than it did in the previous decade).

Current Product Lineup

Apple’s revenue breakdown is 60% iPhone, 10% iPad, 10% Macs, 15% Services and 5% other products (like the Watch). I don’t expect much growth with the iPad but I believe it will be a healthy product line for years to come. The majority of startups use Macbooks and every college kid has one. As the overall PC industry declines Mac sales have stayed resilient. Will Mac sales ever make up the majority of PC shipments? It’s a long way to go, but that’s the bet I’m making.

The Watch and new AirPods are products an anti-peak Apple person can be excited about. At $269 a pop, the Watch isn’t cheap and yet Apple was able to sell $6 billion dollars worth its first year and shipped 25M units in less than two years. Once Watch becomes a standalone device and Apple gets the entry-level price point down to $150, we’ll see a huge boom in sales. For those questioning if Apple still has its je ne sais quoi, the AirPods by all accounts show that Apple can introduce best-in-class products.

Potential New Products

The biggest difference between Apple’s stock price compared to Google’s, Amazon’s or Facebook’s is that little of it is based on potential. Since Apple keeps their product roadmap close to their chest, Wall Street can’t justify lofty valuations based on a product coming any day now.

Apple makes computer widgets. Big computers, handheld computers, wrist-sized computers, etc. Apple designs processors and software. They do this better than any other company in the world and they have over $230 billion dollars in cash. Whether it’s a TV, a Car or a VR device, Apple has the means and know-how to crush any of these markets.

Bottom Line

We’re not at Peak Apple. iPhone shipments in 2017 will grow compared to 2016 due to growth in China and India. iPad and Macbook biz will remain steady. Watch will get cheaper and better. Apple will ship more Watch units for more revenue. Services will continue to grow as they enter the original content game. In the long term, Apple will use their $230 billion dollar war chest for a new product that will grow the business significantly. Tim Cook and Jony Ive will ensure Apple plays the long game and doesn’t optimize for short-term stock growth.

In other words, Apple’s death has been greatly exaggerated.

 

Sharing is caring. As a Product Manager of a collaboration app you must consider friction, security, virality and the overall user experience. I’ve analyzed the top dogs when it comes to collaboration apps these days – Google Drive, Dropbox, Box, Asana and Trello to see how each handles the following workflows.

Workflows

Sharing with Existing Users

• Send Email to existing user 
• If logged in, the user goes directly into the item (document, event, etc)
• If not logged in, prompt the user to log in
• If clicked on the link while logged into a different account, inform the user that account doesn’t have access and allow them to sign in from the account with access

Sharing with Existing Users is for the most part standard among all collaboration apps. One difference in the approaches analyzed is the notion of “Accepting” the invitation. The majority of the collaboration apps automatically give access to the user and the user will see the new item when they log in while others required the user to accept the item before they could access it.

Sharing with Non Users

• Share with an email address that is not associated with this account
  • Prompt the user that this user does not have an account. Warn the user of any security concerns this may arise 
    • Send Email to new user     

• If the user has another account and is signed into that account, you have a couple of options
  1. Allow the user to merge accounts 
  2. Inform the user the account doesn’t have access and allow them to sign in from another account 
  3. Prompt the user to log in to the account it was shared with or accept the item to the account being used. 
• If the user would like to sign up, put them through registration 
  1. Quick Registration (Just email and password, no confirmation or profile gathering) 
  2. Full Registration 
• After Registration there are two main options
  1. Put the user directly into the item
  2. Put the user through a tutorial

Sharing with non-users has more trades offs to consider and therefore more variation among those analyzed.

Trello uses usernames instead of email addresses as their log in. This allows them to associate multiple email addresses to one account which allows them to give the user the option to add an email to an existing account. This approach maintains security and a good user experience.

Accepting the invitation to a different account than was shared was only observed with Dropbox. Dropbox allows you to do this when the item is shared with an email address that doesn’t have an account but forces you to log in to the account it was shared with if the email does have an account. This is an example of balancing security and user experience.

How much friction you put a user through when accessing a shared item is a tough decision with tradeoffs. The user may be in a situation where they need to access the shared item quickly and experiencing friction during sign up may leave a bad taste in their mouth. On the other hand, there are compelling reasons to add some friction to the process. Collecting contact information can allow a sales team to follow up with the new user. Putting the user through a tutorial may allow the user to understand the application better and have an overall better experience. Prompting a user to invite others into the app may allow that user to get more value from the app while also serving as a viral hook.

Conclusion

There are lot of options with sharing and no straightforward formula to figure out what option is best. Is security most important? Is allowing users to quickly access the item more important? Is capturing lead information critical? These are questions you can ask yourself when deciding on your options. As always, tracking your user behavior and A/B testing is your friend. Monitor your users and conduct tests to answer the following questions – Are users bailing during sign up? Are users using the app once to access the item shared but never come back? Is marketing/sales having trouble reaching out to the new user to convert them into a paying customer?

Happy Sharing!

I’ve posted a lot on this blog about Facebook and when it comes to their business, I’m fanboy. Other than Apple, Facebook is the second highest (tied with Google) on my investing rubric.

Investment Rubric

Stock	My Love	Leadership	PE	Cash	Potential	Macro view	Total
FB	8	10	4	8	8	9	31.3
AAPL	10	9	10	10	7	8	36.1
AMZN	7	9	1	3	8	10	26.4
TWTR	7	9	1	5	9	9	27.2
GOOG	8	8	8	8	7	8	31.3
BRK.B	5	10	8	8	5	7	28
CMG	10	8	5	3	7	7	29.2
UA	8	9	4	2	7	7	27
SIRI	7	6	6	2	5	5	22.6
TEAM	8	9	1	8	8	9	28.4

Cash

Facebook has nearly $5 billion in cash along with $21 billion of overall assets, a growing position year over year. Facebook has enough cash in the bank to weather a bad year or two and enough cash, along with an attractive stock to own, to make acquisitions such as Instagram and WhatsApp.

PE

As of this writing, Facebook’s PE is 74.33. I give FB a low score of 4 for this high PE. That being said, considering FB’s growth last year (23% earnings growth, 43% revenue growth) they’re growing into that valuation reasonably quickly (although the price has appreciated nearly a quickly as the growth).

Potential

Facebook’s user base and the information about their users puts it into a fascinatingly strong position. There are many categories Facebook could dominate if they chose to, such as events.

The upside within the Big Blue App is enormous but the potential with their other products is an attractive icing to the cake. Instagram, WhatsApp and Oculus are growing and still a ways away from achieving their true potential. We may think of Facebook not as a Social Network, but as a Virtual Reality company someday.

Macro View

More internet users are coming on board every day. 46% of the current population is on the internet, plenty of room to grow. Internet users grow 7.5% yearly.

Online advertising, where Facebook makes its money, continues to grow as well. Online advertising accounted for 28% of all advertising and is growing 13% per year.

Leadership

Mark Zuckerberg has the ability to see a clear vision of the future and execute to get there. It appears Mark still owns voting control. Mark has shown the ability over and over again to delay gratification and think in the long term. As a buy and hold investor, this gives me great confidence that our interests are aligned.

My Love

I use Facebook every day. It’s typically the first app I open when I wake up in the morning. I use WhatsApp to communicate with my cousins around the world and I use Instagram nearly daily. I’m a fan of their products.

My Concerns

Time spent on Facebook per day (~40 minutes / day) is high. Will people fatigue? Will Snapchat, Twitter and yet-to-be-named startups chip away at this time spent? Will another Social Network overtake Facebook someday?

They’re betting a lot of money on messaging – Messenger and WhatsApp. Can they win this war? Can they monetize communication like AT&T and others have in the past?

When I’ll Sell

I’d sell if Zuckerberg left but I thought I’d sell Apple when Steve Jobs died but I haven’t. Zuckerberg leaving would make me think long and hard about their prospects.

I’d sell if they started to stretch themselves too thin. Although I invest in companies who do a lot (Google, Apple, Amazon) I love Facebook’s relatively focused product line.

WARNING – Shitty investment advice ahead. Proceed at your own risk!

It’s 2016 and all of the practical advice on investing is to sit back and invest in index funds, ETFs like $SPY. Maybe you’re even more savvy/lazy and use a service like Betterment. Yet here I am, still unable to resist the allure of picking a stock.

Maybe it’s the ego, maybe it’s the rush you get when a stock you pick doubles, maybe it’s more extrinsic — the exercise of evaluating these companies will (hopefully) make me a better Product Manager and a better entrepreneur someday. Either way, it’s a hobby of mine and it’s something I enjoy whether I make money or not (but def trying to make that $$$$). Don’t do what I do, stick to the ETFs. But…here is how I go about evaluating a stock.

As Product Managers tend to do I’ve developed a rubric. The criteria of the rubric are heavily influenced by the greats – Warren Buffett, Charlie Munger, Ben Graham and Peter Lynch.

Criteria

I invest on 10 year time frames. I’m not concerned about how well the stock will do tomorrow, or next year, but where will it be 10 years from now. Keeping that in mind, I break down each stock from six different perspectives.

How much Cash does the company have in the bank? If they hit a rough patch do they have the cash to get through it? Do they have cash for R&D, for acquisitions?

What’s the Macro View of the company? What trends in the world will affect this company both positively and negatively?

What’s the company’s Potential? They’re making money doing X but what other opportunities do they have to make money in other ways?

What’s the current Price/Earnings ratio? Is the stock, based on its price, already expected to grow like a weed? Is the price cheap compared to earnings and therefore the growth expectations modest?

How’s Leadership? Particularly the CEO. Have they shown the ability to delay gratification? Are they committed to building a long lasting company? Visionary?

My Love. The most important criteria of them all with my investing. How much do I love the product? And not just any product by the company, but the product that is making the lion share of their revenue and profit. This is where I hope to leverage any information asymmetry I may have. Picking individual stocks that will beat the S&P 500 is tough and a big reason for that is because Wall Street is very good at understanding many of the other criteria I listed above. My taste has to be the differentiator.

The Equation

My Love + (Leadership * .8) +( PE * .7) + (Cash * .3) + (Potential *.7) + (Macro View * .5)

My love for the product is the most important to me and therefore I give it the most weight within the rubric.

The Individual Stocks I Own and Their Rubric Score

Stock	My Love	Leadership	PE	Cash	Potential	Macro view	Total
FB	8	10	4	8	8	9	31.3
AAPL	10	9	10	10	7	8	36.1
AMZN	7	9	1	3	8	10	26.4
TWTR	7	9	1	5	9	9	27.2
GOOG	8	8	8	8	7	8	31.3
BRK.B	5	10	8	8	5	7	28
CMG	10	8	5	3	7	7	29.2
UA	8	9	4	2	7	7	27
SIRI	7	6	6	2	5	5	22.6
TEAM	8	9	1	8	8	9	28.4

Each criteria is on a 1-10 scale. A perfect score, after the weights, would be a 40. A score of 25 and above is what I consider to invest in.

With $SIRI, the outlier, I only invested $500 and I did it because it was unbelievably cheap at the time and I’m a big Howard Stern fan. It’s my biggest percentage gain investment to date but I consider it to be a lucky investment.

In the next couple of weeks I’m going write a breakdown of how I came to the numbers in the rubric for $FB, $AAPL, $TWTR and $TEAM.

Despite predictions that we’ve hit the peak of Facebook’s Social Network it has continued to defy critics and grow in every objective measure you could think of.

To determine the health of the Social Network itself I keep an eye on Daily Users and time spent on the site. In terms of the business, Revenue Per User is another metric to keep an eye on. Facebook’s Q3 showed growth in all three.

 

 

Compared to a year ago, Daily Average Users has grown a total of 4%. 5.2% in the Asia-Pacific, 2.2% in Europe, 1.8% in US and Canada and 5.5% in the rest of the world. I’m most impressed by the smallest number, 1.8% in the US and Canada. If users were feeling Facebook Fatigue in large numbers the saturated market of US and Canada would start trending down, we’re not seeing that (yet).

The 5.5% growth in the rest of the world, although the largest, is the least impressive. Internet usage is growing around 7% this year with the expected growth much larger in the “rest of the world” as defined by Facebook. Facebook’s strategy, including Internet.org is solid and Facebook is most likely capturing a large chunk of new Internet entrants but have some room to improve.

Facebook continues to increase Average Revenue Per User worldwide and in every region.

Ad revenue in the US & Canada grew 41% from a year ago. Facebook is moving in the right direction and there is still tremendous upside here. It’d be interesting to compare ad revenue per minute spent watching TV versus the ad revenue per minute spent on Facebook. It’s a bit of an apples to oranges comparison — TV advertisements consist primarily of long, informative, high-quality commercials whereas Facebook ads come in a variety of types including photos, videos, and links. While TV ads are often richer and more informative, Facebook ads allow for precise audience targeting and provide useful engagement metrics to advertisers.

My hunch is that the broader market’s ad spend is not being allocated effectively and many advertisers are clinging to older, less measurable, less effective ways of advertising (newspapers, magazines, billboards, TV). Slowly but surely these ad dollars are moving to Facebook and expect the ARPU number to double in the next 2-3 years.

Some believe the Law of Large Numbers will soon be Facebook’s biggest problem but Facebook has plenty of potential users to gobble up —  over a billion people that have internet access already and more than 4 billion people who are not on the internet yet. Expect user growth and revenue growth per user to continue for over a decade.

We’re not at peak Facebook. The Sky is the Limit

Disclaimer – I own $FB

 

As a child, like clockwork, every birthday my grandfather would give me a Savings Bond along with whatever toy or video game was popular at the time. Those Savings Bonds came in handy when paying down college debt. Owning them and using them was all I needed to become hooked on investing and the power of compound interest.

The days of buying a Savings Bond or a Stock Certificate at a bank and signing it over to your grandchildren are long gone. These financial instruments have become electronic and the friction of gifting them has ironically increased since being modernized.

Stockpile is the first promising attempt at cutting down on the friction of gifting financial instruments.

Stockpile takes a clever and familiar gift card approach to stock gifting. They allow a user to use a credit card to purchase any amount of shares in stock, including partial shares, in gift card form for a gifting fee of $2.99 + 3%.

While using Stockpile I was pleasantly surprised how they handled gift card redemption.Unlike other gift cards that lock you down to narrow uses and attempt to charge fees, Stockpile provides many different options during redemption. You may redeem the gift card for the stock the gifter choose, regift the gift card, redeem for a stock of the redeemer’s choosing or you may purchase another gift card, such as a gift card to use at Macy’s.

Stockpile’s options of investments are impressive — hundreds of companies along with many ETF options. The website and iOS app are carefully designed with a modern look and seamless user experience.

OneShare.com, GiveAShare.com and FrameAStock.com provide a similar but limited stock gifting product. These products allow users to purchase one share (and only one share) at a time for a much higher fee than Stockpile (a share of SIRI trades for $4 and cost $44.00 on GiveAShare). These websites are in much need of a facelift and all three lack a mobile strategy.

Companies like GiveAShare focus on Adults who want to teach investing basics to children. They focus on getting young investors excited about investing by giving users a physical certificate (many times unofficial) and providing add-ons such as child investment books. Stockpile is not pursuing this educational or novelty route and do not provide physical certificates, Stockpile is more focused on providing a practical way of gifting a stock.

Stockpile is a well-designed, easy-to-use, innovative product that has made gifting stock more than a novelty. Stockpile has successfully removed the friction of gifting stock at a reasonable price. Through Stockpile, people can give the gift of wealth beyond the impersonal wad of cash. Proud grandparents, aunts and uncles can buy stocks that will teach the value of investing and set their loved ones up for the future. I like the fact that a small gift I give today could potentially grow much larger and make someone happier now and when they cash it in someday many years from now.

With the upcoming 6/30 launch of Apple Music and Howard Stern’s contract with SiriusXM coming to an end, the stars are aligning. Howard Stern and Apple may seem like an unlikely pairing but they would be a powerful couple.

As iTunes music sales continue to lose business to the rise of streaming music and the subscription model, Apple is mixing it up. Apple is entering the streaming music space and needed a way to differentiate themselves from the established players like Pandora and Spotify. Apple Music’s differentiator is a blast from the past – human-driven radio stations (as opposed to playlists or algorithms). At launch, they’ll have one station, Beats 1, which will support 3 different DJs around the world.

For Apple to be successful in the Internet Radio space they should take a peek at SiriusXM. Unlike Spotify and Pandora, which has concentrated on content delivery, SiriusXM has concentrated on having the best audio content in town. SiriusXM has struck deals with the majors sports (NFL, MLB, NBA, etc) and many personalities, the most important being Howard Stern.

SiriusXM had merely 600,000 subscribers prior to Howard joining the company in January 2006. They now have over 28 million subscribers. Howard’s fans are loyal, will follow him and pay to listen to him. Howard joining Apple Music would provide an immediate boost in Apple Music subscribers.

SiriusXM has done a great job of curating content but the user experience of their web and mobile app is lacking. The iOS mobile app doesn’t allow podcast-esque subscribing. If you are listening on the web there is no handoff to mobile, the iOS app does not know where you left off. Even simple tasks such as fast forwarding and rewinding are clumsy and unreliable.

Howard can bring Apple Music paying customers and Apple can give Howard’s fans a much improved user experience – a win-win situation. As a fan of both Apple and Howard, I’m keeping my fingers crossed. I’m hoping Apple isn’t too prude to team up with Howard.

Bababooey to you all!

 

 

“Steve cared,” Cook continues. “He cared deeply about things. Yes, he was very passionate about things, and he wanted things to be perfect. And that was what was great about him. A lot of people mistook that passion for arrogance. He wasn’t a saint. I’m not saying that. None of us are. But it’s emphatically untrue that he wasn’t a great human being, and that is totally not understood.

It ain’t easy distinguishing a passionate person from an asshole. I’d rather work with a passionate person who is rough at times than someone who doesn’t care.

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I agree with Gruber that the Watch will most likely not have the every-two-year buying cycle that Apple sees with the iPhone. I think the buying cycle will be between the iPhone and the iPad. I still have my iPad 2 and since it generally stays in my apartment, it’s rather unscathed and can do what I use it for easily. A Watch on the other hand will take a daily abuse, perhaps even more since it’s not in someones pocket.

I predict Apply Watch buyers will buy new every 3ish years. iPhone will remain every 2, laptops and iPads will be every 5ish years.