Apple Airpods Is Going To Be A Game Changer In The Near Future And Here's Why We Bet On It!

One of my friends once joked about Airpods asking me, “Do you know who are the top three richest people in the world right now?” While my answer was of course Jeff Bazos, Bill Gates and Mark Zuckerberg, he mockingly said you missed a vast segment of the population that owns Airpods.

Yes, Apple Airpods are that big of a deal and not just another iPhone accessory at the moment. But before we get into the details of “how”, let me give you a scenario; Imagine a startup that earns $12 billion, is enjoying 125%+ YoY revenue growth ever since its inception two years ago and scores a gross margin of 30-50% (pretty much equal to that of Apple’s standard products). Now, if you were to do its valuation without knowing anything else about the products or brand, what would be your figure? $50 Billion? $100 Billion? Or you think that is also still less?

Okay, let me help you a bit now. The figures given above is of Apple’s Airpods business and it has rapidly become the fastest-growing segment of the most valuable company in the world.

However, Airpods still had to go through an extensive period of criticism. Back in 2016, when the wireless earbuds were launched by Apple, many believed it to be an odd product which could help Apple boost their average sale price at that point in time. But Tim Cook and his team had some other plans related to Airpods in their minds.

Apple thought that instead of selling earphones with every new phone, why not make an improved version of the same earphones and sell it separately, without causing any impact on the price of the iPhones. While the move was definitely smart enough to earn more revenue, but Airpods was perceived as a new concept and hence surpassed all the expectations to a point that other rival companies also opted to remove the headphone jack from their smartphones.

So, looking at the immense success, we believe Airpods can be much more than an iPhone accessory in the near future.

To back our stance with proofs, let’s look at the comparison of iPhone sales and Airpods Sales

iPhone Revenue

Apple has sold approximately 215 million iPhones since 2017. If we go by the price, which is near to $1000 for every iPhone that people mostly love or buy, then the company has been able to generate around $215 billion by selling iPhones only and in total that comprises of 81% of Apple’s total revenue.

Airpods Sale

Unfortunately, Apple hesitates to share the right sales numbers when it comes to the Airpods but if we go by the reports of industry analysts then according to their estimates from the last three years; Apple sold 15 million Airpods in 2017 and 35 million pairs in 2018, all priced at $150. What did they get in total? $2.25 billion revenue boost in 2017 (that came equal to 1% of $215 billion revenue mark from the iPhones) and $5.25 billion in revenue in 2018 (jumping upto 2.4% of $215 billion)

However, that was not all. The real show began in 2019 where Apple sold 60 million units according to the estimates by experts and the prices also increased this time. Furthermore, Apple also launched the second generation of the same Airpods and increased the price to $200, along with another flagship model of the Airpods with Pro feels and put a price tag of $250.

If we sum up the sales of Gen 1, Gen 2, and AirPods Pro, then Apple earned $12 billion in 2019, all with the help of Airpods (now 4.5% of Apple’s iPhone revenue). This also gave a signal to the investors that Apple has another big hit in hand!

The Growth In Sales and Potential of Airpods

If you think 4.5% is still not impressive, then bear in mind it is 4.5% of the world’s most successful product that has brought Apple to $1.3 Trillion mark over the years and made it the most valuable company in the world. So, if Apple gets valued at 5x revenues, you can imply the same for Airpods business to go up to $60 billion.

But the icing on the cake is that the sales of Airpods is growing at a triple digit rate with every passing year. In 2018, AirPods revenue went up 133% as compared to 2017, and in 2019 AirPods revenue hiked another 128% versus 2018.

This also leaves the fact of no surprise that Airpods alone stand head to head with top tech companies in the world when it comes to revenue and the list of companies include Adobe, Spotify, Twitter, Snap, and Shopify. Moreover, with triple digit growth for two years in a row, one can expect them to beat the revenue mark of Uber in 2020.

What Can Apple & Its Investors Achieve From Airpods In the Future?

First and foremost, there is still room for massive growth in the sales units. As estimates tell that more than 100 million units have been sold ever since Airpods first got released, there are almost 900 million iPhones which have been sold till date by the company. That means, it’s about time that Apple pushes its users to move from wired earphones to Airpods.

The second point is connected to the units sales growth as the stock price will eventually go up for the investor. But the real question here for the investor to ponder upon is “What will Airpods become in future?”

Some reports revolving the upcoming features in Airpods suggest that Apple is already working on building an operating system for Airpods and audio first apps like TTYL and YAC. If Apple becomes successful in building an ecosystem of applications around Airpods and audio experiences, then Apple will be free to dominate again with a raise in prices of Airpods and make more money.

Not to forget, the audio experiences can also be the key difference between iPhone and other smartphones, as the competition already is becoming tough. In the end, Apple also need its iPhone to remain the giant for the accessories to keep doing good in the market especially.

Final Words

While much of the further success of Airpods depend on the growth in sales and hike in the sales price, the wireless earbuds can still contribute to be a core part of an entire audio ecosystem that Apple would love to move forward with and keep the needle of revenue moving upwards.

As consumers or Apple fans, we should keep our fingers crossed for improvements in features of Airpods and possibly Apple audio operating system as well in 2020.

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