SPECIAL REPORT
Apple Hitting Youth Market with Right Message at Right Time

Consider the news that Apple posted a net income for its first quarter ending December 31 of US$295 million -- that's up 74 percent from the year-ago quarter -- and projects sales of $2.9 billion in the current quarter, which ends in March.

What accounted for the dramatic upswing in sales? Its popular digital music player iPod, in part. Apple shipped 4.58 million iPods during the quarter. That's a 525 percent increase in iPods over the year-ago quarter. The computer maker also shipped 1.046 million Macintosh units in the period, a 26 percent increase. Analysts said this suggests that the so-called "halo effect" is a real phenomenon.

Spending Power

However, it also suggests something else. Whether you call them Generation Y, NetGen or Echo Boomers, Apple is appealing to a youth market that has plenty of spending power. In fact, 10- to 23-year-olds represent 57 million Americans who earn roughly $211 billion per year -- and spend all but $39 billion of it, according to research by Harris Interactive.

"This shows that this age group has been willing to forgo savings in order to keep their spending levels consistent," John Geraci, vice president of youth research at Harris Interactive, said. "Generation Y's needs and opinions drive many adult purchase decisions, and they, literally, represent the future market for most consumer brands."

While other computer makers have targeted the youth market -- Dell (Nasdaq: DELL) runs its "Dude, you should have bought a Dell" commercials featuring a teenage surfer type -- analysts said it is Apple that is proving it has the right message for the youth market at the right time.

Mac Generation

"The generation of youth coming up now are much more community oriented," Jupiter Research analyst Joe Wilcox told MacNewsWorld. "It's much more buzz oriented. It's much more 'what are my friends using?' oriented. Apple is playing to that very well in its marketing. Apple has always positioned itself as a lifestyle choice, and there has always been a Mac community. It's all coming together now in the youth market. If other computer vendors aren't careful, this could very well be called the Mac Generation."

Look-Look, a youth marketing and research firm in Los Angeles, reports that Apple consistently comes in as one of the top brands for young people. Analysts said it truly is a halo effect that started with the iPod and is boosted by the iTunes Music Store.

"The iPod has been a huge product success and continues to dominate its segment," NPD Group analyst Stephen Baker told MacNewsWorld. "Apple has done a tremendous job in leveraging the iPod into the rest of their business, and they continue to do that."

Onward, Upward

Many financial analysts are convinced that it's onward and upward for Apple, especially with the recently announced Mac mini and iPod shuffle. Citigroup Smith Barney analyst Richard Gardner expects the mini could double Apple's market share in PCs, to 4 percent. That would mean an extra $4 billion in revenues for Apple.

"I would strongly encourage other vendors to closely look at Apple's recipe for success, which is much more than about music," Wilcox said. "Apple has successfully reinvigorated its brand and masterfully courted the youth market, in part with music and the Ocool' appeal."