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The Second Time's the Charm: Apple AirPods Sprint Out of the Gate

Just don't lose them. Image source: Apple.

What's old is new again.

A decade ago, Bluetooth headsets were all the rage. Apple (NASDAQ: AAPL) launched its initial foray into Bluetooth headsets in 2007 alongside the original iPhone, priced at $129. The company subsequently reduced the price to $99 before quietly discontinuing the device in 2009.

Remember this old thing? Image source: Apple.

With last month's launch of the (delayed) AirPods, Apple hopes to usher in a sort of renaissance in wireless headphones, not unlike the tablet renaissance that it kicked off in 2010 with the iPad. So far, it's working.

Survey says

E-commerce analytics specialist Slice Intelligence released a report earlier this week, suggesting that Apple's AirPods are sprinting out of the gate following the launch in December. While that's a couple months late relative to the original target launch of October, the AirPods are making up for lost time. Slice notes that an overwhelming 75% of all headphones sold online in December were of the wireless flavor, and there was a noticeable spike in sales on the day the AirPods went on sale.

Image source: Slice Intelligence.

Following the launch, AirPods now comprise 26% of all online revenue for wireless headphones. Apple's other headphones brand, Beats, also grabs another big chunk of the market, with 15% revenue share following the AirPods launch. That means that Apple represents over 40% of the market in terms of revenue. Considering Apple's premium pricing with both AirPods and Beats, the company is likely grabbing a disproportionate share of revenue relative to unit share.

Image source: Slice Intelligence.

Even before the AirPods launch, Beats was the dominant brand by far, with 24% of revenue share. Beats' strong position in the premium headphone space, which was mostly a function of marketing instead of product quality, was always one of the key motivators for the 2014 acquisition.

There's more where that came from

Slice's data is even more impressive when you consider how severely supply constrained AirPods have been and continue to be. If AirPods have been able to grab that much of the market immediately, even though Apple is still unable to sufficiently fulfill demand, that's a good sign for Apple's wireless audio ambitions. New orders placed on Apple's online store are quoted shipping times of six weeks.

It's unfortunate that AirPods mostly sat on the sidelines during the bulk of the holiday shopping season due to severely limited availability, but in all likelihood, those are simply delayed sales instead of lost sales. Apple users are particularly loyal and willing to endure waiting instead of defecting to another brand. That's especially true since AirPods include a number of integrated software features that are designed specifically for Apple devices -- features that differentiate AirPods from other headphones.

Maybe Bluetooth headphones are here to stay this time around.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.