In many ways, Apple Watch is the ultimate halo device. Apple's new wearable is even more dependent on another device than the iPod was, and this time around I'm pretty sure Apple isn't going to open it up. It doesn't merely want to get Apple Watches on people's wrists, it wants to deliver the perfect experience.
That means not only selling it to existing iPhone users, but getting interested buyers to upgrade and/or switch. The allure of the Apple Watch isn't all that different than the iPod--namely portability, good looks and convenience--but Apple is going to attract a good deal of customers who aren't interested in how many gigabytes and pixels it has. That halo effect will open up the iPhone (and possibly even the new MacBook) to an audience it might not presently be able to reach.
Of course, Android users will be touched by the halo effect too. Many of the major players already offer smartwatches of their own, and if Apple Watch offers as superior an experience as it seems, it might compel some of them to saunter over to an Apple Store to trade in their old Android phone.
And unlike the iPod, where nearly all of the would-be switchers were naturally drawn to the iPod first, this time the halo effect works both ways. Apple Watch will surely attract its share of Android users to the iPhone, but at the same time, Apple already sells tens of million of iPhones each month. And some of them will surely walk out of the Apple Store with a new watch in hand--especially iPhone 6 Plus buyers concerned about keeping a 5.5-inch handset on their person all day.
Tied and true
The iPod's halo effect was never about building an ecosystem; rather, it was the iTunes Music Store and its FairPlay DRM that created the lock-in. The iPod's job was simply to introduce the Mac to the millions of people who had never used one.
Apple Watch, on the other hand, is all about the ecosystem. It may as well come attached to a two-year contract; by being dependent on the iPhone, the Apple Watch halo effect has the potential to cast a brighter and wider glow than the iPod ever did. Apple sells more iPhones in a quarter than a year's worth of iPods, but in order to keep the momentum, Apple is using its new smartwatch to appeal to iPhone and Android users alike.
It's about upgraders as much as switchers. With the iPod, Apple only converted a small percentage of users to the Mac; in the first quarter of 2008, for example, 22 million iPods translated into less than 2.5 million Macs. But Apple Watch is a 1:1 correlation, and every sale is an opportunity for lock-in, whether it's an iPhone 4 user upgrading to an iPhone 6 or a Samsung Galaxy user switching teams. And if Apple Watch is as desireable as the iPod, it could lead to tens of millions of more iPhone sales each quarter.
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