Busting the myth of the iPod Halo Effect

by Chris Seibold Apr 07, 2005

People love to gamble. Folks will gamble with dice, bet on a single pitch in a baseball game, they will even wager on the future prospects of a corporation. In order these behaviors are known as: craps in Vegas, bookie in the bleachers, and investing in the stock market. In each instance after the gambler has won or lost they will patiently explain why they were successful (or not). The explanations, as involved as they will be, amount to nothing more post hoc reasoning. In short, they were either lucky or unlucky, all the myriad of reasons they give to enhance their perceived prowess as futurists or mitigate their responsibility as prognosticators is little more than window dressing. With this in mind an examination of the near sacrosanct iPod halo effect is in order.

First a brief restatement of the iPod halo effect is in order. The effect is said to be as follows: people who don’t use the Mac buy an iPod. Impressed with the quality engineering and ease of use they consider buying a Macintosh instead of a Windows based PC as their next computer. Some certain percentage follows through and Mac sales skyrocket. Which is a nice, comforting scenario for those who care deeply about Apple’s market share.

The next time Apple reports sales I confidently predict that they will sell a record number of Macintosh computers. I’ll go further and predict that the second quarter of 2005 will feature computer sales growth of 50% over the same quarter of 2004. When this happens, and it surely will, the analysts touting the iPod effect will all sit back and congratulate themselves on their seeming prescience. The problem is that while they were correct in predicting record sales it turns out it had little to do with the iPod halo effect. In short they might have chalked the sales effect up to the big slashes in PT cruiser prices because the evidence connecting the two events is just as solid.

So where have the Haloers gone wrong? How can we possibly conclude that the halo effect is, in fact, simple logical fallacy? Well one of the best ways to ascertain the validity of a claim is by the predictive value of the preposition. This, unfortunately, will not be the case with the Halo effect. Sure Macs are flying off the shelves at a remarkable clip but with the introduction of the Mini it would be foolish to assume that the record numbers will be owed to the halo effect. The increased sales might be more a product of the voluminous excitement generated by the Mini or the widened availability of the iMac than people jumping ship after being impressed by the iPod.

So with the convergence of a multitude of likely factors for the (predicted) monster upswing in Mac sales how can we be sure it isn’t due to the iPod halo effect? The predictive value of the claim has already been dismissed as a source of validating evidence. There is another avenue worth pursuing to adjudicate the veracity of the iPod halo effect and that entails discerning just how completely the iPod halo effect explains the past data. The excursive is based on the assumption that if the data explains past events it may be useful for predicting future events. Worded in a different fashion: If the supposed effect doesn’t explain past data then there is no reason to assume that it will explain future data.
At this point the astute reader has realized the point: thus far there has been no discernable iPod halo effect. It is one thing just to blithely note the absence and it is quite another to actually provide confirmation of the non-effect. The necessity of stating parameters is a given at this point. We note that the iPod was introduced in 2001, we further note that the diminutive hard drive gained windows compatibility in 2002. Finally we note that the iPod halo effect is claimed to be somewhere between six and twenty percent (both the polls are horribly flawed in methodology). Unfortunately we are now faced with the prospect of examining actual numbers (we’ll avoid the graphs to minimize the numbers of eyes glazing over).

First we’ll start out with the assumptions used: the computer upgrade cycle will be estimated at three years and 75% of iPods are purchased by Windows users. Remembering the iPod first featured Windows compatibility in 2002 we note that there have been roughly 7 million iPods sold since then. Going with the 75% number we note that that is some 5 million iPods going to Windows users. Using the analyst’s figures somewhere between 300,000 and 1,000,000 people should be salivating to buy a Mac. Unfortunately this is not reflected in the sales of Macs..at all. 2003 saw exactly the same number of Macs sold as in 2002. 2004 did see a nice increase in sales of the Macintosh, some 400.000 units, but this was attributable to the introduction of the iMac (sales were fairly stagnant until the fourth quarter).

So with the effect effectively dispensed and with the prediction of a stellar quarter we are left to wonder where the actual credit should go. Call it the “Jobs effect”, or the “Apple effect” or even “every thing Apple does lately is perfect effect.” Call it whatever you want but the fact is it isn’t the iPod that is moving Apple towards a record quarter. It is the iPod, the Mini, the iMac, OS X, Windows issues, iTunes, and the G5 chip. In short it is the whole picture. Sure the iPod brings some badly needed market presence but it is the whole package that moves the computers.


  • Nice article but you have neither proved that the iPod Halo effect exists nor disproved.

    Me personally I do believe the iPod is the trojan horse into converting PC users.  But I wouldn’t just attribute this to the iPod but rather the “system”  which entails iTunes and the iPod with the synergy between the two.  Couple this with the affordable and chic Mac mini and you have a recipe for people looking to rid themselves of viruses and bulky loud minitowers.

    Time will tell.

    hmurchison had this to say on Apr 07, 2005 Posts: 145
  • Well, the IPod halo effect worked on me.  After purchasing a silver Mini in January, I bought a 12” powerbook 2 weeks later.  Apple wasn’t even on my radar as I started my laptop search, but after holding the iPod in my hand in the middle of a store that sold apple computers, the lights came on for me.

    Yes, the whole apple package is what closed the deal for me, but as a first time mac user who had never even been in a apple computer store before, it was the iPod that opened the door.

    derosa1989 had this to say on Apr 07, 2005 Posts: 4
  • One more comment on the number of iPod users.  I own 4 iPods, and on almost every iPod forum I read users explain how they’ve had 1G, 2G, 3G, 4G versions, and warrenty replacements multiple times, and such.  If Apple has sold 7 million iPods, how many individual users are there really?  Maybe 3 million?

    derosa1989 had this to say on Apr 07, 2005 Posts: 4
  • The reasoning in this article starts off strong, (iPod isn’t necessarily the reason behind rising Mac sales, and it’s specious reasoning to say that correlation implies causation), but then the article does a 180 and crashes in flames as it then tries to do what it just demonstrated is fallacious. Just as suggesting that the iPod *is* the reason behind rising sales because you noticed a correlation is a logical fallacy, so is claiming that it is *not* the reason because you noticed the lack of a correlation. You came up with a nice plausible argument: past behavior doesn’t show a correlation between the two, so the current correlation must be spurious, but I can think of a simple countertheory: a lag effect. It took a while for the “Halo Effect” to ramp up. Isn’t it only relatively recently (last year or so?) that iPod sales really started to explode? And how often do people upgrade their computers? I’m sure most don’t upgrade every year, or even 2 years. Maybe 3, 4, 5 years? A Halo Effect could easily take 5+ years to really show itself.

    I like the inital thrust of the article, but it ends up commiting the same mistake it’s observing in others. Really the only way we will ever know what’s going on is with some good, long term, empirical data.

    I personally have no opinion either way, I think the iPod probably helps, but it isn’t sufficient, Apple must also make good computers that appeal to people.

    daver had this to say on Apr 07, 2005 Posts: 13
  • Hey, I just had a thought about the halo effect. In fact of the 10 million iPods sold as of Apple’s fiscal Q1 05, 8.2 million of them were sold in the last calendar year 2004. while your reasoning that the iPod halo effect has not yet shown itself, i contest that we will see a major unseasonal upswing in fiscal Q4 (consumer back to school sales) and see another larger spike in the same quarter 2006, and 2007 as the sheer mumbers of iPods sold begins to cause change in the consumer mindset. the first round of potential upgraders will be buying for their kids.

    I may be off base here, but I believe that we could see, on the CPU side of Apple’s business what happened with the iPod business in Q1-3 last year, where sales went from 733k to 860k to 1.06 million iPods sold when analysts were predicting a modest slowdown in sales due to “seasonal trends.” it is my personal prediction that in fiscal Q2 apple sold more computers than during the holiday season despite problems with the powerbook line, and that the quarter is traditionally apple’s slowest.

    my predictions for the next two quarters in numbers sold are 1.2million units for the just ended quarter, with 1.5 million+ in Q3 as the mac mini penetrates the budget market, and a jump to over 2 million total unit sales in Q4 as the iPod halo finally takes affect.

    I can’t even begin to imagine how many computers apple will sell in Q1 2006, but lets just say it will be a butt-load.

    Mark my words people, Apple Computer is finally back and in a big way.

    William had this to say on Apr 07, 2005 Posts: 2
  • I see I made a mistake by not including graphs and such. I was tempted to include more data but as numbers start getting tossed about readers become quickly bored (I know, I get mail on this) mix in a few graphs and it is head nodding all around.
    However in this case the argument would have been better served by including graphs with the expected growth in Mac sales. Perhaps I will rework the graphs and post a link if there is any interest.

    chrisseibold had this to say on Apr 07, 2005 Posts: 48
  • Next time, you might want to organize your hypotheis a little better as ultimately, you made a lot of points but they don’t really lead to your conclusion.

    The basic points are that there are a lot biases built up against the Mac - some true, some merely inaccuracies and some outright lies but it’s not worth going over old history - the point is that when your competitors are MS, Intel, Toshiba, Dell, Compaq, HP, IBM (until 2000), Sony, Tandy, Gateway, eMachines, Zenith, etc ... a lot of market ammunition has been weighed in against you. No matter the ttruth or the lie, that’s a lot to overcome ... and once someone believes something to be true, it’s takes great effort to move the needle back.

    The ipod helps. Is there ancedotal evidence that there are people happy/thrilled with their ipod that they are buying Macs? Yes. Remember that for Apple, even selling an additional 10,000 PB’s a quarter is a good thing since Apple margins are much nicer than’s HP’s or Gateway’s. So, every little bit helps. It’s the best marketing of all - not only have you not wasted buying another ad but this person has spent $200+ dollars and is suddenlt willing to consider spending more.

    But this is also a complex buying decision. If you don’t like the mop you have, you’re willing to spend another $30 to try out another one - not so much with a computer. 1) because for 70% of people, the Windows PC is NOT much fun so to them, how much better can the Mac be? It’s at $499 to prove them right or wrong - it’s safer to spend $999 to buy a new PC. In this case, their experience with the ipod will help. And the Apple stores help.

    So, it will take time and it’s the greatest advertising of all - you make money from this “non-believer” and they might possibly spend more.

    It’s too soon to tell what the ipod effect will be but mindshare is the first step. 2 years ago, the price of entry was $1,200 (for an Emac) or $1,500 for an iMac, now, the actual price of entry is $499 ... so, it’s less of a stretch but it still takes a bigger commitment since they are stepping into the unknown and unlike you or I who enjoys the Mac/computer experience - for them right now, it’s drudgery ... so for them, it’s like buying laundry detergent - not really a fun purpose. 

    jbelkin had this to say on Apr 07, 2005 Posts: 41
  • Graphs are good, I like pretty pictures! But even with graphs and such, to *really* prove your point that iPod sales has no effect on Mac sales you need a well designed empirical analysis controlling for everything possible, and prob. using sophisticated regression analysis or some other statistical analysis techniques. Until then, you can throw all the numbers and pictures around you want and it still won’t eliminate possible alternative explanations for the apparent lack of effect.

    daver had this to say on Apr 07, 2005 Posts: 13
  • I see this is an issue I will probably have to revisit. Luckily enough I am trained in the use regression and plenty of other statistical methods. The trick will be to keep it interesting for people not into stats and math. The other trick is getting it done before April 13th.

    chrisseibold had this to say on Apr 07, 2005 Posts: 48
  • The article and the comments all make one (major) assumption…

    That all the iPod purchasers are computer savvy, so to speak.

    I personally don’t own an ipod but in my circle of friends and family and aquaintances, I am only one of two people who uses a mac out of a very large amount of people who have iPods and iPod minis.

    They don’t really care about the windows platform, or even the Mac platform… they buy the iPod to listen to music and if the iTunes software is a joy to use, so be it.

    But they wouldn’t (and I know they won’t) even consider switching a whole computer just to complement their choice in music players. I know because I have tried to explain the advantages of the Mac system.

    What you are forgetting is that people who take an interest in these Apple sites are apple ‘fanatics’ so to speak and ‘computer savvy’ people. The rest of the population just want a decent, good looking music player and they have just that.
    Most people wouldn’t even know (or care) that sites like Apple Matters existed.
    As long as they can get their music from their PCs/Macs onto their iPod, they are happy.

    The minority are people like us to care about the numbers of apple sales etc etc and ofcourse it is going to be a more biased view.

    rayhau had this to say on Apr 07, 2005 Posts: 7
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