Apple Watch Sales Eclipsed the iPhone in Its First Year, but Agencies Have Already Moved On

Marketers haven't seen payoff yet

One year after making a splash as the next "it" device for marketers, Apple Watch has slipped noticeably in the estimation of many marketers.

Earlier this week, Apple reported it has sold twice as many Apple Watches as it sold iPhones in the year after that device was introduced in 2007. The company doesn't break out how many individual devices it sells, but analysts have pegged the number of Apple Watches at 12 million compared with an estimated 6 million iPhones sold in its first year.

The Apple Watch initially sparked a lot of interest from brands—Starwood, BWM, Target—that retooled their mobile apps for the wrist. And tech companies like Tapsense went all-in early on, even rolling out programmatic ad buying for the watches. When Wall Street began to question how big Apple Watch could get last summer, marketers seemed relatively unfazed and were willing to wait and see how the gadgets fared in the long run.

But with the emergence of new platforms like messaging apps and bots, and new competition in wearables, enthusiasm from agencies is waning.

"The richer app and emerging messaging space is seemingly stealing Apple Watch's thunder," said David Hewitt, SapientNitro's mobile lead. "Apple shareholders keep looking to Apple to create the next big thing. However, what hasn't hit mass realization yet is that the next big thing is not a thing [but] rather a service."

Firstborn strategist Leif Eng said the number of requests from brands to create campaigns for the Apple Watch has dropped in the past six months.

"It isn't leading to much investment," he said. "Even in the few cases where a brand's value proposition is well-suited to the device or there's an appetite to go deep on innovation, a more in-depth analysis finds that marketing dollars are best spent elsewhere."

Eng said his recommendation now is "to look to the Apple Watch only when a brand's offerings are uniquely aligned with its functions."

"For example," he said, "we would and have advised clients in the air travel space to extend their booking apps to the watch because it's a natural fit. But for most brands, it's best to wait until the audience has grown."

Brett Leary, Digitas' svp of mobile and digital shopper innovation, added that drop-off in hype around the Apple Watch has also put a damper on the wearable market in general.

"We had hoped the Apple Watch would have pushed the wearable category further up the priority ladder, but internal interest has remained relatively flat," he said.

Indeed, it seems agencies' initial attempts with the Apple Watch haven't moved beyond tests.

"Early on, we invested in building out a prototype health-tech application that ran on Pebble, Apple Watch and Android as a capability proof—haven't had an excuse to move beyond that," said Jordan Gray, executive director of technology at Organic.

Unlike the iPhone that immediately gave millions access to basic features like the internet, the Watch requires "an app build or additional functionality on top of a mobile app," Gray said. 

In other words, it creates more work for agencies on top of their usual mobile projects.

Only the best apps work on the wrist
That said, Gray said wearables are included in RFPs from brands with apps heavy on notifications that send short pieces of text—think news and travel apps—to ping a message to someone's watch.

A new report today from research firm Strategy Analytics backs up the anecdotal disappointment. Apple's share of the smartwatch market slipped from 63 percent in December to 52.4 percent in March thanks to new competition from Samsung, LG and Motorola.

Tom Edwards, chief digital officer at Epsilon, said he's seen a healthy number of requests from brands to be on the Apple Watch, but he's also interested in other wearables like Under Armour's HealthBox platform. Both cases require brands to be tied to strong mobile apps, though.

"Developing for the Apple Watch is considered for clients that have a strong native application install base and high engagement," Edwards said.

Plus, translating the right combination of features from a mobile app to a minimalist smartwatch app is easier said than done.

"The context within which the Apple Watch is used and the expectations of what a smartwatch should be is what's proving most difficult," said Chris Fohlin, Engine Digital's director of client strategy. "Some brands try to cram too many features, while others have hit it on the head like Uber, Foursquare and Dark Sky."

Outside of the technical challenges, Brenda Fiala, evp of global strategy at Wunderman Health, said the public's meh perception of the watch has changed agencies' views.

"Consumers have just gone from excited to indifferent," she said. "The number of people who have taken off their Apple Watches is significant because they don't find it useful."

So, will the tech giant's upcoming Apple Watch 2—which is rumored to work without a smartphone—make wearables easier for agencies to work on? That depends on how mainstream Apple can make the next round of the devices, Fiala said.

"What becomes interesting is not only do you have 10 to 20 million people who have already bought the first one—so you have an install base—but if the watch is significantly different, that base could grow very quickly," she said. "For an agency, 10 million, 12 million is interesting because those people are early adopters. But I think [if] Apple Watch 2 truly connects globally—closer to 50 to 100 million—then you really start to see the trend."Comment settings