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European Tech Analysis

Apple as a Subscription

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Business Insider:

In fact, the note estimates that Apple services revenue could more than double by 2020 to $53 billion. Apple bragged that it managed to book $21 billion in services revenue last year, while alluding that that figure by itself was larger than some of its competitors. (Facebook reported $17.9 billion in revenue for 2015, for example.)

But it’s not just the size of Apple’s installed base that makes its services an attractive investment. Apple users are significantly richer than non-Apple users. According to Credit Suisse:

  • Emerging market Apple users have 50% higher per-capita incomes
  • Apple users use their devices more often with 63% of mobile traffic coming from Apple devices compared to 29% from Android
  • Apple users tend to replace their old devices regularly
  • Apple enjoys a nearly 90% retention rate among its customers

A very insightful way to look at Apple. (And not an entirely new one, though just not popular yet: Industry analysts like Horace Dediu or Ben Bajarin are looking at Apple’s future through a similar lens.)

The dominance of Apple

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DIGITS to DOLLARS:

One customer commands a huge share of the industry. You either do business with that customer, or fall behind competitors who do business with them.
Most hardware executives I speak with today are very aware of this fact. It is a big factor driving consolidation inside the semiconductor industry. It is causing a lot of transition among senior executives in hardware looking to move to software and Internet companies.
The really troubling part is that I see no sign of it changing any time soon. This reality is part of the reason the companies have been marketing the “Internet of Things” (IoT) products so aggressively, it is the only business out there big enough to re-balance things.

“Apps on iOS sell for unsustainably low prices due to the lack of trials.”

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Emanuel Sa on We need sketch for the iPad Pro! – Designer News:

We don’t have plans for an iPad pro version at the moment. Yes, it has a beautiful screen, but there’s more to consider, such as how to adapt the UI for touch without compromising the experience.

But the biggest problem is the platform. Apps on iOS sell for unsustainably low prices due to the lack of trials. We cannot port Sketch to the iPad if we have no reasonable expectation of earning back on our investment. Maintaining an application on two different platforms and provide one of them for a 10th of it’s value won’t work, and iPad volumes are low enough to disqualify the “make it up in volume” argument.

The paradox of information goods, which is that you only know wether it was worth the price after you have bought and consumed the good, still applies to software.

Being unable to provide trials to minimize that problem leads directly to prices that are unsustainable for applications that might otherwise be profitable. (The other route are in-app purchases.)

It is rather fascinating that Apple has still not addressed the problem that is a lack of trials. It might be indeed that Apple still does not see itself as a platform company. (For more read Ben Thompson on the state of the iOS platform and what Apple should do, but probably won’t.)

The next version of Safari will let users block ads on iPhones and iPads

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Nieman Journalism Lab:

What this means is, when iOS 9 launches in the fall, you’ll be able to go to the App Store and download an extension that will block ads on most news sites.

Is there any chance that won’t be incredibly popular? The desktop version of Safari currently allows a variety of custom extensions, and what’s the most popular? Hint: It’s called AdBlock.

Interesting Development.

Think about this in the context of Apple vs. Google and also Apples new News app for iOS 9.

The mobile OS is not as neutral as the desktop browser.

“advantages of a multifunction device are obvious, the advantages of a multifunction app aren’t”

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Dr. Drang:

The elevator pitch is that Apple Music is three things, an attempt to tie it to the 2007 introduction to the iPhone. But while the advantages of a multifunction device are obvious, the advantages of a multifunction app aren’t. The App Store’s success is largely based on tightly focused apps, not sprawling suites.

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Apple Music and the question wether Apple can still say “No”

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Ben Thompson about Apples Tim Cook saying that Apple Management never just adds things for the sake of them but says constantly “no” to stay focused:

“That” sure sounds like Apple Music: there is this (streaming music) and that (curated lists) and this (BeatsOne radio) and that (Ping Connect) and no cogent thread to tie them together beyond the assumption that Apple must do a music service because that is what they do. That’s what big companies do.

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Imagine an alternate reality where the Watch had the exact same Watch face functionality (including complications), the exact same notifications and communications capabilities, the exact same performant Apple apps, the exact same unexpectedly strong battery life, but no apps beyond a promise they were “coming soon.” Surely reviewers would gripe, but with a “It’s already great, and it’s going to get better” sort of vibe. Yet Apple couldn’t bring themselves to say “no”.

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Maybe it’s time for Cook to spend less time talking about how “the management team of Apple would never let that happen” and make absolutely sure that a loss of focus is not, in fact, happening.

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Apple should review App Review

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Apple wants to enrich iOS by giving apps more ways to interact and present themselves on the platform. Extensions, the widgets, the new file approach. But this, this or this shows that Apple is quite unsure how to approach this change in their control of iOS. Or, to be more precise, they seem to want to expand the platform possibilities but at the same time keep control of the direction(s) all this is going in.

The ‘today view‘ is for ‚viewing‘ what is going on ’today’. No matter that you can do more, that developers did more and that users wanted more. Or that Apple did not explicitly say you can not do way more than that.

The problem is not that Apple doesn’t seem to want the richness that is possible, for whatever reason. The problem lies, as John Siracusa articulated very well on the recent episode of ATP, with the fact that Apple seems to be unable to articulate beforehand what exactly they allow developers to do and what direction it is they expect all this to go. This leads to invested time and energy by developers that now got wasted. ‚They‘ -big and small third-party-developers- don’t forget that. New features on iOS will not be as exploited as they could be going forward. That is unfortunate for the platform. (and hence everyone involved; Apple, devs, users)

Apple won’t loose developers other this. The current mobile platforms are different enough to not have this kind of repercussions. But iOS is loosing potential apps. The tension between Apple as the platform provider and its developers should go down not up.

It will be interesting to watch how Apple will handle this going forward. iOS will become more and more complex and richer with possibilities with the arrival of the Apple Watch and the integration of Smart Home devices and more.

They can not expect to keep a close eye on every corner of their emerging super platform. The future of iOS is just too complex (and so the needed guidelines). And App Review doesn’t look right now like it can scale well. If they still try they might seriously hinder innovation on iOS.

Monthly Apple Users

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Monthly Apple Users

Horace Dediu:

“This view shows just how different the economic value of users can be. In the case of Apple, it’s growing its user base at (literally) exponential rates. The revenues per user does, understandably, decline. This is because new/later users don’t spend as much as early users. There might be some stability toward the later stages of adoption in revenue per user. The other point about iTunes data is how the mix of revenues has shifted from music to Apps and Services pointing out how users can be migrated across revenue sources over time.

In the case of Amazon it’s growing its user base at a linear rate (note equation). The revenue per account remains very steady however.”