All along the Watch towers: The competitive landscape for Apple Watch

At Mobile World Conference, Pebble Time Steel (right) tried to steal Apple Watch's thunder.
At Mobile World Conference, Pebble Time Steel (right) tried to steal Apple Watch's thunder.

As usual, Apple isn't first to market. Will its smartwatch work market magic?

"No wireless. Less space than a nomad. Lame."

— Slashdot co-founder Rob Malda, famously saying something he still regrets, about the original iPod

As with the iPod, as with the MacBook Pro, as with the iPhone, as with the iPad, Apple Watch is far from the first to market in its segment.

And yet, even with what some argue were me-too features, Apple’s previous products all drove not only record sales but record enthusiasm and engagement from consumers, independent app developers and brands. Will Apple Watch be a similar boon to brands?

At last week’s Mobile World Congress in Barcelona, Spain, vendors launched a raft of smartwatches, most powered by a variation of Google’s Android Wear. The phones ranged from cheap to obvious luxury — almost exactly the range Apple is targeting. (Apple never competes for the "cheap" end of a market; the company prefers to protect its margins over chasing market share.)

LTE rolled out new LG Watch Urbane models (one of which runs LG’s own smartwatch software in place of Android Gear); Motorola had its Moto 360; and Huawei showed its Huawei Watch, which Ars Technica said might be "shaping up to be one of the better smartwatches out there."

And the surprise showing at MWC was Pebble’s Pebble Time Steel, which Marketing’s Shona Ghosh said "bears a close resemblance to the Apple Watch." As opposed to the smartwatches built by industrial giants, Pebble is running its funding on Kickstarter — and consciously tweaks Apple with "one last thing" and the Time Steel’s design.

But getting partners on board made the difference for the iPod (music labels) and the iPhone (carriers, app builders) — will that hold for smartwatches? And even if so, will that make a difference in the marketplace?

It’s been widely reported that Apple has been actively working with up to 100 companies to build apps expressly for the Watch. These companies range from ESPN to United Airlines to Facebook to BMW. It’s true that some other (or maybe the same) companies are working to develop apps for Android Gear- and Pebble-based smartwatches, such as Domino’s, but as with the iPhone/Android app economy, infrastructure and market forces may tilt powerfully in Apple Watch’s direction.

On the smartphone side of the software ecosystem, observers who merely look at App Annie numbers will note that the Google Play store is growing in sheer number of Android app downloads and even seeing an increase in total revenue. The first number is largely due to the introduction of low-end smartphones in emerging markets, however, and the latter number is primarily driven by games, whether paid or free-to-play (with in-app purchases). As Benedict Evans, a partner at Menlo Park, Calif., venture-capital firm Andreessen Horowitz puts it, "App store revenue is not an ideal way to scope the value of an ecosystem to developers." 

Evans goes on to write that though the Android user base will likely grow, as will the number of apps and revenue from them, the users driving this "will be gained at progressively lower (much lower) device price points, and with significantly lower spending profiles". He further broke down the difference in users and their value to both the ecosystem and companies investing development time in in a later, more detailed post.

If this holds true for the smartwatch app market, advertisers and brands will have strong incentives to dip their collective toes — if they wish to dip at all — into the market with the population that engages more and spends more. And this is even before considering the issues around app discoverability, security, fake/spoofed apps, that have affected Google Play.

Of course, a lot will depend on what watches sell what and where. But companies will more likely invest where they see more opportunity to get in front of customers, and Apple is working to leverage its known-quantity iAd platform onto the Apple Watch, which could make it even easier and more reliable for companies to focus their efforts there.

Perhaps the most telling, and most attractive to advertisers and developers, piece of info that has slipped out was in a TechCrunch article. When people testing Apple Watch — wearing it day in and day out — were asked how that affected their phone use, the response was that they pulled out their phone far less frequently, if at all. All those interactions with their iPhones were being replaced by glances at or taps on an Apple Watch.

If that’s not a opportunity to reach customers, what is?

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