How to Launch a $1B Product

Scott Francis
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The easiest way to launch a $1B product – in year 1 – is to first have a $9B product trending toward $23B, and then sell a must-have accessory alongside it:
I’m estimating that at least 60% of iPad buyers will get one. Based on an estimate of 36 million iPads sold in 2011 and an average price of $48 (70% polyurethane and 30% leather mix), the total revenue for Smart Covers will top $1 billion this year. I further estimate that with a very modest gross margin of 75% (average cost to produce of $12), the Smart Cover could contribute $777 million to Apple’s gross margins.
Until other innovative covers come to market (and they will), Apple is going to sell these to more than 60% of iPad buyers.  My anecdotal evidence at the pop-up store in Austin during SXSW was that everyone buying one for themselves bought a cover.  Only people buying them for others skipped it (and they were obviously not buying the iPads for friends or they would have splurged for the snappy cover).    

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