a16z Podcast - a16z Podcast: Mobile is Eating the World (and Apple is Gobbling Fastest)

Episode Date: January 30, 2015

Apple absolutely crushed its most recent quarter, and unquestionably owns the high-end of the smartphone market, says a16z’s Benedict Evans. So where does Android fit in the ecosystem going forward? Where is the leverage for Google? Not to mention for Facebook, Amazon, and handset-makers like Samsung? Get used to this market complexion for the foreseeable future, Evans argues, with Apple owning the high-end; forked Android-powered devices flourishing at the low-end; and a battle to sell Google-approved Android gadgets in the middle. Until, of course, everything changes yet again.

Welcome to the A16Z podcast. I am Michael Copeland, and we are here with Benedict Evans to talk about, not surprisingly, mobile. Apple just announced massive record-breaking earnings. What did you pull out of that report, and how does we've discussed new questions in mobile? I want to get to that, but how does this sort of further the evidence that we are entering into a new phase? So what happened? Well, mobile is bigger than PCs. a lot bigger than BCs and Apple has basically sealed the top end of the market so there was a period two and three years ago where we

might have been arguing well is Android going to crush Apple at the high end just as we were arguing you know what's going to happen with messaging and you know what's going to happen with HTML 5 versus apps and all of those questions are kind of done now at least for the next couple of years until everything changes again again

and so Apple sold getting on for 15% of all the phones sold on Earth in the last quarter in the December quarter. That was how many millions? 75 million units. And then Android probably sold the next 50% of all the phones sold on Earth and the remainder is converting very, very past to very, very cheap Android. Right. And so Apple's going to have the top 15%, 10 to 15% of all the mobile phone users on Earth and Android will have most of the rest. But in the USA that translates to Apple having half the users and in Japan more than half the users and in emerging developed markets probably a third but at least half of the value and so you have these two ecosystems where

Apple's got the best the customers who spend most and Android's got some of the customers you spend most and everybody else and those two ecosystems kind of exist in parallel and Apple's kind of got you know I think how it was the right way putting this Apple's kind of got back onto the front foot right and so and I want to ask you about that front foot because so the iPhone 5 wasn't as sort of massive as maybe other people's iPhone 6 and 6 plus has just been tremendous. But does that say something or what does it say not just about Apple and its design and its software, but what does it say more broadly about how the phone is now kind of penetrating

every part of our lives? Well, we're going from a world where there are 350 million PCs on Earth replaced every five years, more or less, to 4 billion phones on Earth replaced every two years. those 4 billion phones are converting very fast to smartphones. And so you have a fundamental change in scale in the computing industry because those phones are all computers. And they're all contain chips that are much, much faster than a Pentium back when Microsoft launched Windows 95. And so that is a dominant computing platform. And Apple kind of has the better part of it. It doesn't have, it has a smaller part, but it has the best part. And the kind of the interesting

dynamic here is that Apple has basically unwound every assertion they've, have made over the last six or seven years as to what they wouldn't do. So they said they wouldn't make a small tablet. They said they wouldn't make a bigger phone. They made a bigger phone three times. They said they wouldn't allow apps if you go back far enough. And so they, you know, it's a sort of various people who have said about Steve Jobs, you know, he could change his mind so fast you'd forgotten what he was saying before. And he would have you absolutely convinced that he'd always been saying that. And you can see Apple continuing that. And, you know, the only two things that they haven't done is they haven't made a cheap phone. That's like not a

cheap phone, but, you know, they haven't made a $300 phone or $400 phone, and they haven't done a stylus. And both of those are kind of interesting questions for the future, because those are sort of the remaining sort of gaps that other people are able to exploit that Apple has so far chosen not to go after. I think the, you know, what has to be kind of slightly careful looking at the surge in growth in this quarter, because part of that is about distribution in China, and part of it is sort of one-off pent-up demand for fablets, particularly in East Asia, but also just generally for kind of larger screen phones. Right.

But, you know, it does seem pretty clear now that, you know, the, you know, the Android assault on the middle, the mainstream of the iPhone market just doesn't work, that once you get above a certain price point, Android does not compete well against iPhones. And Apple, so far, has refused to go below a certain price point, so you've got a certain equilibrium in the market. And so there we are kind of for the next year, two years, three years, or something, until stuff comes along that changes everything. Well, what could, and that could be a different OS, it could be what?

Well, I think this is the other thing, that one of the things I keep saying is that, you know, mobile means that we're kind of post-netcape and post-page rank, because we had this model for 20 years of the web browser and a mouse and a keyboard, and that was most people's Internet experience. And you go onto a mobile device, and clearly it's not about a web browser, a mouse, and a keyboard. But it also hasn't settled onto something new. So, you know, right now we have apps, and we have like a 4x3 grid of app icons. And then you have people experimenting with deep linking.

you have Apple experimenting with, you know, local networking, you have the watch, you have, in particularly you have a lot of people looking at messaging as another layer, another development environment with different discovery and sharing methods that sits on top of the existing platforms. But most obviously, we chat and line in East Asia seems quite likely the Facebook is going to try and do that as well. Maybe that Google and Apple try and do that, maybe not. But the point is, you know, we haven't arrived on a new settled model for how all of this stuff works. And that means that, you know, the kind of the current sort of modality for Google is kind of up in the air. It's, you know, how do you find things?

What does it mean to find things? What is it going to mean in five years' time to say, I installed an app on my Android smartphone? Well, what is install going to mean? What is Apple going to mean? What is Android going to mean? Or for that matter what is iOS going to mean? Yeah, exactly.

And so everything is kind of still somewhat in flux. It's kind of, you know, on the one hand, on the one hand, the platform's over an Apple and Google One. The platform was over Apple, Google One. On the other hand, nothing settled at all, and everything can still change. Right. But it's kind of going to change within that framework of, well, people buy high-end phones and they buy mid-range and low-end phones, and Apple's got the high-end phones. And there's not anybody on the horizon that's mounting an credible attack on that.

You know, Samsung tried, ran into a brick wall at a certain level of share, only really succeeded because they were making big phones, big-screen phones, which Apple is now doing, and now Samsung's share has slipped back quite dramatically. There's a bunch of Chinese people who are making very interesting, well-designed phones, but they don't have global distribution. and they don't have the ability to come to market in the US for the next couple of years. And even if they did, again, you ask, well, how well would that do? And, you know, Nokia's disappeared into side of Microsoft where, you know, I mean, this is the other, you know, the way the world has changed.

Apple sold more phones than Nokia. I mean, the Nokia unit that's until Microsoft, because Nokia did, Nokia Microsoft, did 10 million feature phones, 10 million Numeras and 40 million feature phones. Right. Apple did 75 million smartphones. Samsung hasn't told us how many smartphones they sell,

but it's not impossible that Apple sold through more smartphones. than Samsung, which would make Apple the biggest smartphone vendor on Earth and the second biggest handset vendor on Earth, because Samsung sells feature phones too. And you think about that for a minute, Apple is the second biggest, is almost certainly the second biggest handset vendor on Earth in Q4. Now, that will change next quarter because obviously it won't be the launch

quarter anymore, so it will spike down again. But, you know, has that for a change in the kind of dynamic of the market. And so do you think that this snapshot and this market, you know, and this kind of moment, like you said Apple One, well, Apple and Google One. Apple and Google win.

Okay. But this is the way it's going to stay for the foreseeable future until again, like you say, we move on to the next big phase of mobile. I think that's right. And I think you can kind of come at this from two directions. One is, you know, how can I put it? There's a sort of narrative in the tech industry that says, well, you know, these things, you know, the good enough and half the prize thing will always win.

It's very notable that in China, Apple's had Apple sales more or less doubled in precisely the period that you have half a dozen Chinese manufacturers coming in to market with really good design and strong brand, which show me is only the most obvious. And what's happening is those guys are killing Samsung. They're not touching Apple at all. And so, you know, it's a very overused metaphor. But, you know, when I hear people saying, you know, high end does not last, it gets killed by cheaper product, I think, you know, yes, what car do you drive?

Right. Because, you know, you can go and buy a VW jetter, and that will be just fine. So why would anybody at all buy a BMW or an Audi or a Lexus or Tesla? Surely those companies should have died 30 years ago. well actually no you know technology has kind of been the only product you know how can I put it PCs were a commodity and there was this tiny little bit of market at the top where you could sell high-end PCs where Apple just managed to week out of survival but everything else was a commodity there's a whole bunch of industries that are not commodity in that sense there is a commodity part

and there is a premium mid-range part and there's a high-end part and you know something that's as personal and that you carry around with you all the time as a phone I don't believe fundamentally that there's not going to be a market for a high-end product over time and you know right now Apple is the only company that's positioned to sell that. I wish there were others. You know, Nokia, for a brief period, was doing that. If you look at the Illumia devices, if those Lumia devices have been running a different platform, you know, the hardware was lovely, and some of the HTC hardware was lovely, but for a whole bunch of reasons that didn't work. And right now Apple's kind of the only company in that space. And when you look at things like Touch ID,

when you look at Apple Pay, when you look at the things that they do with that integration, you know, it's very hard for commodity OEM using somebody else's operating system and somebody else's components to compete with that proposition. Now, the interesting question on the side of this is, well, to what extent does that actually matter to Google? Because Google isn't in the handset business. Right, but they are in the payments business. They are in the apps business. They are in the, you know, well, exactly. So then you ask the question, well, okay, which bit of Google? Because clearly the guys who run Android would like there to be more Android sales. Do the AdSense team care? They make more money from iOS devices. So then, you know, what happens when the AdSense guy and the Android guy

sit in a room with the Maps guy and say, and the Antsense guy says, we'd like maps on iOS first, please. And the Android guy says, are you out of your mind? Hang on. Right. It's a bit like, you know, the dilemma Microsoft had putting Office onto Mac, except much more. I mean, that's a bad example because Mac was so tiny.

But, you know, Google is making more money on iOS and Android right now. Right. Facebook is for that matter, too. Oh, yeah. So then the question is, well, okay, which parts of Google feel what about what's going on here? You know, why does it matter? How much does it matter? to whom, how strong Android is, and then, you know, coming back to the Chinese guys,

as they start going to go outside of China, some of them are quite interested in taking control of Android for their own purposes. And so then you say, okay, I mean, so this is kind of this interesting question for Google about the decline of Samsung, because, you know, on the one hand, it was worrying because Samsung had half of the Android market by volume, more or less, and so that was kind of concerning for Google that you had this big, powerful partner. But as Samsung starts to shrink and these other guys come up, it's actually harder for Google to stop those guys doing things. because one of them could just say, you know what,

we're only going to sell devices with our own platform, and maybe we'll sell quite a lot of them, and if Google says we can't also sell something running Google Play, maybe that's okay, whereas Samsung was not in a position to do that. So it's like, is this, is the, if presuming the trend continues, if the decline of Samsung happens, is that good or bad for Google? It's like, kind of interesting, and for which part of Google? It's like, again, you know, it's bad for the guy in Google,

whose job it is to make sure that Android isn't fragmented. Is it bad for Sundar? Is it bad for Low Page? Well, kind of maybe. Right. I want to ask you, we've talked about this a little bit before, but so for companies like Facebook and Amazon

who are not just sticking their toes in, but their entire legs into the mobile side of things, what does this turn up the heat on them to really get moving faster and really come up with a platform and a plan? I think Facebook and Amazon have a lot of the same issues that Google has, and a lot of the same issues that prompted Google

to want to do Android. in the first place. That is to say the web browser was basically a neutral platform for a website, and it didn't really matter what website, web browser people were using. I mean, there was a period in the late 90s when Microsoft hoped that it would matter, but it doesn't really matter. And so, you know, Facebook and Amazon never

really thought that they had to make their own web browser. Whereas you go to mobile, and suddenly you've got, the operating system is not this neutral, transparent layer. It's got all this stuff happening that determines how you share things and how you talk to your friends and how you engage with people. And particularly for Facebook, the smartphone itself is a social platform, which is why,

you have dozens and dozens of apps bubbling up. You know, it's why Snapchat can just appear out of nowhere and grow to be this big business, or Yick, Yak, or Secret, or Line, or all these other things can just kind of come out of nowhere, which would have been impossible on the desktop. No one would have used 10 different social networks on their web browser. On mobile, it's really easy.

And Amazon has kind of, you know, similar but, you know, related issues. And so they kind of look at the home screen and think, how can we move down the stack from being just Yon icon on the home screen to having a greater involvement with how you use your device? And so that was why Facebook came along. It's why the Kindle Fire phone exists. And neither of those were the right approach. In a funny sort of sense, it's like you can be too far up the stack to do this,

just as you can be too far down the stack to do this. So just as it doesn't really make sense for a mobile operator or a handset maker to try and build a social network, it doesn't necessarily make sense for a social network to try and build a phone. Because that's not really where the network effects sit, and they don't really have the right kind of position in the value chain to do that. But that doesn't mean that Facebook and Amazon are going to give up because, you know, there is this sort of fundamental existential question.

Well, how do you find stuff? And how do you give Shastjaf your friends? And where does that happen within the operating system? And how does that affect a social network or any commerce business? And so they've got to have their fingers there, even if they don't quite know what they're going to do. And if that platform isn't theirs to control in the way that they would like to, you need to exert control. Well, you need to have engineers.

and you need to be poking around trying to think of something interesting to do quite what is rather more difficult. I mean, obviously, you know, Amazon has this issue, so Google has this issue on iOS because, you know, there's 750, maybe just 800 million active iOS devices out there, and there's only 100 million, we know now, or was leaked recently, there's only 100 million active users of Google Maps on iOS. So it's maybe four, that's kind of the wrong number, there's probably 400 million iPhones in use, a bit over 400 million iPhones on use. Only a quarter of those. have installed Google Maps. And that is the thing

that if you ask anyone in the Valley, they would say absolutely essential, no way everybody will have Google Maps. No, no, no, no, no. Three quarters of people can't be bothered. So they either don't use maps, and I actually suspect quite a lot of people actually don't use maps at all at all,

or use them very rarely. I find that shocking. There's people who tie knots and people who don't. Yeah, there's people who live in one place and work in another place and know where the store is. And they don't go to a new bar over the weekend. There's people who don't really use maps very often.

But this is kind of the point, that Google's got search on all these devices, but it doesn't necessarily have anything else on those devices and so they've got a kind of a similar problem to Facebook and Amazon which is yes we've got our one icon on the home screen in Google's case that one icon might actually just be Safari right we've got our one icon on the home screen but then there's all these other ways that people could find stuff

that used to be our business and so how do we kind of expand and understand more and capture more of that let's shift gears a little bit and talk about tablets that was one area where Apple did not show message yeah it's kind of a mirror image so for the iPhone the numbers record unit sales also record high ASP which is of course because people are buying iPhones with more memory because Apple change the configuration and also of course because they're buying the iPhone 6 plus

which is more expensive for the iPad numbers and sales it's not a record low but sales have been trending flat down for the last 18 months to two years and it's a record low ASP record low average selling price and it's interesting there's a bunch of stuff going on here one thing it isn't is competition from equivalent Android tablets because they aren't selling well yeah well yeah own and there's no with ours but it's more to the point that they're not selling those aren't selling worth a damn either right what are selling are 7500 10025 dollar generic black plastic tablets those really aren't the same thing they're TVs or their games devices

their screens or their screens they're not really post-PC computing devices of a kind that anyone at google or apple would kind of think about they'd like the tablet to be and they are notionally they run android yes but you know half of them never go online they just watch videos that are plugged in via SD cards or something so that's like that's just like an interesting thing but it's not the same thing I think the several issues with generically with the tablet as a post-PC device. I think one of them is the input methods. I think one of them is that most people who use a computer all the time still use a keyboard and mouse a lot and still have apps that need a keyboard and a mouse. And

we've discussed various times. Over time, that will probably change. There's an awful lot of people who make a PowerPoint every fortnight and need a mouse and a keyboard, but their job doesn't actually revolve around PowerPoint and they should be using a SaaS dashboard. or something. And so there's kind of a time and an app issue. I think to me the more interesting point is that we tend to think about tablets and smartphones as a category, our meta category, and then PCs, laptops and desktops as another category. But if you come at it from a kind of consumer point of view, you've got a screen that you take with you everywhere, that's your phone that goes in your pocket. And that might be a fablet, of course, which is another issue. And then you may or may

not also have a big screen. You may not. You know, when the iPad came out, it was a bunch of of people said, well, you're always going to need a bigger screen. Actually, that was so completely wrong, because not only people are always going to need a bigger screen, they don't need a big screen at all. A lot of people just have a smartphone. But if you do have a bigger screen, the odds are you probably already got a PC. And so then the question is, well, do I need to replace it? And if you're going to replace it, then yes, it's, do I need a desktop or laptop or laptop or a tablet? And the answer may well be, well, actually a tablet is pretty good for what I want to do. But first, you've got to think, well, I bought a PC four years ago. I

turn it on every fortnight because I'm using my smartphone all the time. Do I actually need this, well, do I need to buy a new one? Well, maybe. And then when you look at actual sales of iPads, what's very clear is that there's a very low replacement cycle. And so, on the one hand, you know, the number of people who want one

is kind of constrained by the fact that you've got to be replacing your, you may well just be, are you replacing your PC question, which you're kind of hypothesized. The other issue, I think, is that when you've got it, you don't need a new one. And this is quite different from smartphones. I mean, there's

kind of an S curve here. Well, no, but explain to me how that is different because we don't need to replace our smartphones every two years or every year, whatever it is, but like... So it is different. So I think, so there's a couple of things going on here. One of them is that a lot of high-end smartphones, which, that is to say, iPhones are on a contract, and the contract tends to be a two-year contract, so you get given a big subsidy to buy a new one or big, whatever you want to call it. Right. You have a big incentive to buy any one every two years. Second, smartphones get taken out of the house. They get dropped. They get scuffed, they get bashed around, they get scratched.

The third thing is, I think there is kind of a curve on improvement of product, any technology product. And, you know, the difference between a new car and a 10-year-old, a car that you might have bought 10 years ago is almost imperceptible today. Except they might have a screen now and it wouldn't have had a screen 10 years ago. But otherwise, you really wouldn't be able to tell the difference. The difference between a new PC and now and a PC that you bought two years ago, again, you are not going to be able to tell any different stall. five years maybe and so the PC replacement cycle is now five years if you go back 20 years ago

the difference between a new PC and one you bought two years ago was enormous and so you had much more of an incentive to upgrade today there's not that much incentive to upgrade your PC because you can't really tell then if you I mean there's a few like what step things like retina display or SSD or something but basically you can't tell

and then you have a smartphone and again the difference between not iPhone and iPhone was huge different between iPhone and iPhone 3G was pretty big The difference between iPhone 5 and a 5S is quite a lot smaller, except that you've got the fingerprint scanner. Apple obviously does this bi-annual cycle, so you've got every two years is a big step.

Right. And, of course, if you bought the iPhone 4S, then the 5S, it looks like a big upgrade to you. If you have a 5, then it doesn't look like a big upgrade. So you've got to kind of think about that because everyone's on two-year cycles, and Apple's on a 1-year cycle. But anyway, my point is, the curve is slowly flattening out for smartphones.

And it's not just, you know, the difference between the Samsung Galaxy S-5, and the Samsung Galaxy S4 is not as big as the difference between the one and the two. And so you do start to have that effect, but then you still have the durability and the dropping and the scuffing of the contract. So you still tend to upgrade these things, whether it's every one year or every two years, every three years. The average seems to be about two years in the handsome business.

And tablets, just to kind of to finish the point, you know, there's an awful lot of people who look at an iPad Air 2 and an iPad 2 and go, there's not that much difference. Well, am I going to spend another 500 bucks? The S-1 is perfectly good. Even though they're on a similar sort of upgrade cycle. Well, they are, but I think the perceived improvement is smaller. You know, the weight mattered.

If you're leaving it at home and using it to watch TV in bed, the weight doesn't really make any difference. If you're over a certain age, the retina panel doesn't make much difference. If you're just watching, you know, if you're doing high-end games and doing all the cool post-PC apps, then the faster processor matters. But if you're not, then it doesn't. and bear in mind a lot of these things got bought by

older people who wanted to have it because it was easier than a computer so they're not necessarily using all those really sophisticated apps that really stretch your processor so I think there's a bunch of people who are holding onto a three-year-old iPad or a two-year-old iPad or a four-year-old iPad and going well yeah I mean if I drop it then I'll buy a new one but it seems to be just fine

Is that also a perceived utility or a perceived pleasure problem I mean that it's not doing a tablet's not doing everything that I had hoped and like changing my life in the weather. Well, I don't think, well, you know, how do you quantify that? The user satisfaction numbers for iPad is off the scale. Right. The iPad's share of tablet use is 80 to 90% on any kind of, or to the extent that anybody who has metrics for iPad use, that is to say, e-commerce sites or websites or, you know, anybody who's doing video or anyone who's actually selling anything, sees the iPad as 80 or 90% of their, or 70, 90% of their tablet

use. Yeah. So, as I said earlier, it's not that everyone is using Android tablets instead. And you do see our tablets taking quite a large share of usage, in fact, you know, 10, 20, 30% for some people. But it's more, I think, well, I've got one. I don't need to buy another one. I'm not getting a subsidy. I'm not, the operator isn't giving me money to get a new one. And, you know, when all sudden, you know, the weight doesn't matter, the screen size, you know, the improvements are harder to perceive if you're not kind of, you know, or kind of an early adopter.

And so hence, you know, Tim Cook said, you know, 50 to 70% of iPad buyers today are still people who didn't own one before because the people who've got them don't buy any ones. Historic footnote, the iPod. Oh, yes. What did we learn about that? Well, Apple stopped reporting it,

which they said they were going to do last year, last quarter. So they've changed the reporting basis. So they're no longer breaking out unique sales of iPods or revenue from iPods. I feel a bit sad about that. It was so exciting when the iPod came out. Well, every time I post a chart,

people tell me it's a Stegosaurus chart because basically it's this curve with a spike every Christmas. They sold, what was it, 400 million of them And they did something like $65 billion of revenue It's not quite clear because you have to think about They included iTunes revenue in there for some period of time So you kind of have to work that out

But it's, you know, they sold an awful lot of these things Apparently the unit, someone said to me lifetime sales So the Seni Wartman were about 250 million units So they sold, you know, almost double the Sani Wartman But clearly it got killed by the smartphone Yeah, well at least they killed themselves I suppose Well, exactly, yeah, they did it themselves before anybody else came along. So what now do we look at on the horizon?

What signals are you going to be paying close attention to moving forward in the next six months or so? The big things that are going to happen, of course, are WWUC and IO, which is where Apple and Google set what it is that they're going to do with their platform and their operating system over the next year. And, you know, both of those are very interesting. And that's kind of the center of gravity for the mobile industry at the moment because they set so many of the terms for what's going to happen. I mean, to my point about the web browser, you know, no one sat eagerly waiting what was going to be in the next version

of Internet Explorer to find out what it would be possible for web developers to do. That kind of happened somewhat, you know, that was not where the focus of innovation was. And yet you can criticize Microsoft for, you know, stagnant innovation. But, you know, I don't think anybody's really looking at Chrome either and going, oh, my God, have you seen what you can do in the new version of Chrome? Right. You know, you get little things like WebRTC and Asia. I'm being a bit facetious but you kind of know what I mean this is not the thing that fundamentally changes what kind of stuff you can do for

people to interact with your properties whereas the mobile operating system is and so you know there's big questions about what's going to happen you know what is Apple going to do you know will this be Apple's maintenance release or will they do kind of new fundamental things to what it's possible for a developer to do

the way they did in iOS 8 for example with extensions and you know all sorts of kind of new and interesting stuff what is going to Google to going to take Android? You know, where does Google, how does Google continue to try and blur the difference between what a website is and what an app is? You know, how do they try and drive forward the consumer experience there? How do they try and change search and discovery? Does Google try and build a messaging solution? Does Apple try and build? You know, what does Apple do with I message?

Does Apple, is Apple looking at reach out and thinking, hmm, that's interesting? Let me quickly ask you about payments. Did we see anything with Apple pay and did we get any evidence of sort of it making inroads one way or the other? Well, we've got numbers, but it's kind of hard to know what they mean because, you know, yes, Apple Pay is X, Y, Z percentage of contactless card payments, but it's like, well, okay, fine. Right. To me, I've always saw Apple Pay was more interesting in apps than at point of sale. Because you go into a store, you pull something out of your pocket, you put it on a thing, and you do a thing. And whether it's a phone or a card, I mean, this is what people have been saying for five years, like, why is NFC payment a good

idea? And you do it with your iPhone, and yeah, it is like a little bit better, maybe, but it's not like this transformative, wow, that's so much better, the way it was when you went from, you know, those kind of mechanical credit card slips things where you had to kind of clunk, click, and big low-lap. That was a big change. You know, going from swiping a card to holding an iPhone on a terminal is not really an enormous change. But then when you go to apps, all of a sudden, instead of you entering your credit card and your address and your name and the authorization and do-da-da-da into the app, you just say, pay with Apple pay and you put your finger on the home button and it's done. And that really is interesting.

But we didn't see you over the holiday, for example, just a tidal wave of, you know, Apple pay payments. We didn't, no. I mean, you know, you have to remember that this is a replacement cycle issue. So, you know, it takes time for everybody to have an iPhone 6 or an iPhone 6 plus. So, you know, it's not, you're not... They just sold 75 million of them or something. Yeah, but there's... Well, no, they didn't sell 75 million because they sold a bunch of the older models as well.

So they sold some number less than that. Yeah. And then there's all the other ones, you know. So, you know, the most that they did was, you know, replace a fifth of the base or six of the base or something. And not everyone all have set it up and not all of them are in the USA and it only exists in the USA. So the Apple Pay in China doesn't exist yet. So all the iPhones in China don't mean anything for this purpose. So it will take time. But it is to my kind of my point. Then you sit and think, okay, what a building, you know, if you look at, say one back,

if you look at how Apple Pay happened, you had these building blocks there first. So they had the fingerprint scanner first and it was there and it was doing something useful. And they had passbook there first and it was there and it was doing something. useful and they had the secure element, not the same secure element, but they'd kind of shown their ability to do a secure element already. And then they kind of light it up and say, oh, all these things that we've already built and have been showing to you, they also do this other completely different thing. And so it begs the question, okay, what else is Apple going to do with this stuff? You know, what else are they going to do with the fact that they now have an identity

platform? Right, right. Well, we will be talking about all of that, I'm sure, sooner rather than later. Benedict, thank you as always. Thank you. Thank you.