Did Apple find another goldmine?

A couple of days ago, Apple introduced a host of new services and products in an hour-long event, including a new iPad, a new iMac, upgrade to Apple TV, Podcast+, an update on Apple Card and AirTag. While all of the announcements are all exciting, I want to talk about AirTag today.

The idea of a small accessory using Bluetooth technology that helps users track and find lost or stolen things isn’t new. There are different providers in the market, the most known of which is Tile, which was founded almost 10 years ago. The upcoming AirTag will be very similar to Tile. At the size of a small coat button, AirTag emits an encrypted unique Bluetooth identifier that Apple devices can pick up and relay the location of the AirTag back to the associated Apple ID. If your AirTag is within your Bluetooth range, it will make a sound or haptic when prompted by you from the Find My app. If the AirTag is not within your Bluetooth range, it can tap into the vast network of Apple devices to communicate its location to iCloud, which will, in turn, relay to you where your AirTag is. I wrote about how Find My works.

Even though Tile and AirTag look fairly similar, there are quite a few major points of differentiation. Apple has more than 1.5 billion devices (1 billion iPhones) in circulation. We don’t know how many Tile devices are being used, but it’s unlikely that the number is anywhere close to what Apple can boast. Otherwise, Tile would be the darling of Wall Streets and on the stock market by now. Because there are more Apple devices, the Find My network, as a result, will be more useful and powerful than the Tile Community, in finding lost and stolen things. Two years ago, Techcrunch reported that the US is still the biggest market for Tile. Granted, that might have changed between now and then. In fact, Tile’s website says that its Community is available in 195 countries, but the density of Tile devices in each country is unknown. Hence, if a user travels overseas to another country where Tile isn’t popular and loses his or her luggage, what then? As Apple devices are popular around the world, this advantage should not be discounted as it can be a great incentive for consumers to go with Apple instead of Tile.

True to form, Apple sells its privacy features on AirTag hard. According to Apple, the emission and receipt of the unique Bluetooth identifier is totally encrypted so that no one, not even Apple, can access an AirTag’s location, except for its owner. Also, the Bluetooth identifier is randomized and changed multiple times in a day to avoid persistent tracking. To prevent the scenario where AirTag becomes a weaponized surveillance tool, Apple notifies users when an unknown AirTag is traveling with them. In other words, if someone slips discreetly in your pocket an unknown AirTag not paired with your Apple ID in order to track your movement, the Find My network will let you know with a notification. If the person in question doesn’t have Find My network, aka Android users, AirTag will make a sound letting him or her know the existence of an unwanted AirTag after a period of time. Right now, the default length is 3 days. Furthermore, strangers will not know your identity if they pick up your AirTags. Each AirTag comes with a unique serial number. Only when the owner of an AirTag flags it as lost and willingly wants to share contact details, others won’t be able to know whom that AirTag belongs to. As consumers become increasingly conscious of privacy, these features can play an important role in differentiating AirTag from competition. I am not sure that Tile can offer the same.

Additionally, Find My is a native and pre-installed app on Apple devices; which makes it more accessible than the Tile App for which users have to head to the App Store to download. The deep integration into the Apple ecosystem cannot be discounted either. We have seen Apple make accessory products like Apple Watch and Airpods extraordinary successes before. AirTag is available at $29 apiece or a $99 for a pack of 4. However, consumers will need to shell out more money ($30) for a loop to hold an AirTag. Let’s assume that on average, an AirTag will cost $50. Apple will only need to sell 20 million of these accessories to generate $1 billion in revenue. As mentioned above, the company boasts 1.5 billion devices in the wild. Hence, 20 million doesn’t seem like a tall order. Moreover, Apple can generate more money by selling replaceable batteries that run out every year with everyday use.

According to Fast Company, an Apple ID can pair with maximum 16 AirTags. As the market for AirTag develops more in the future, it’s possible that we may see a subscription from Apple that provides free battery replacements. Currently, Tile sells a subscription at $3/month or $30/year for the free battery replacements and extended warranty. I don’t see any reason why Apple wouldn’t do the same if the average AirTag user has multiple of this accessory. Another option is to bundle it with their flagship subscription – Apple One.

In summary, AirTag is another example of how Apple knows how to leverage its strength to offer a competitive product in a market where it is a late entry. The potential for AirTag to become another billion product line is there. I look forward to seeing how successful AirTag will be and what applications as well as auxiliary markets (accessories) it will bring about.

Disclaimer: I have a position on Apple in my personal portfolio.