Apple's 500 Million iTunes Store Accounts Offer Significant Potential for Growth in Services

app_store_icon_170Morgan Stanley analyst Katy Huberty released an extensive new report today offering a look at how Apple's base of 500 million iTunes/App Store customers fits in with other services and how Apple can leverage that user base to drive future sales and revenue growth.

Huberty notes that Apple's account base is second only to Facebook's one billion accounts among technology companies seeking to build out e-commerce or subscription services, easily topping third-place Amazon's 200 million accounts. Apple's 55% growth in 2012 also led the field by a comfortable margin, while its users also generate the most revenue per account. With Apple also scoring well in iCloud/iTunes Match adoption and user loyalty, the company is primed to take further advantage of its massive ecosystem with new services. Huberty outlines three possibilities for these new services:

1. Mobile payments. With hundreds of millions of credit card numbers on file, Apple could easily turn iTunes/App Store accounts into a payment service. With rumors of fingerprint recognition and perhaps near-field communication (NFC) coming to future Apple hardware, the company already has a number of pieces nearly in place for such a service.

2. Streaming music. Apple is rumored to be introducing its "iRadio" streaming service next week at its Worldwide Developers Conference, and Huberty suggests that Apple could generate $1 billion per year in revenue from such a service. Huberty's numbers do, however, include both subscription and display ad revenue, while recent rumors have indicated that Apple's service would be free to users with no mention of paid tiers.

3. Ad exchange. Earlier this week, it was reported by a source in the ad industry that Apple is looking to launch its own ad exchange, leveraging its existing iAd business and its massive ecosystem of users and devices to provide targeted advertising.

Developers could potentially charge higher rates than ad impressions on other devices, as Apple could offer better targeting given its insight into the user from information gathered from the hardware (GPS, accelerometer, gyroscope and digital compass), the software (operating system and some applications), iTunes and app stores, user profiles and cloud storage. Of course, some of the data will be stored anonymously and Apple will need to clearly disclose what data is gathered and how it is used.

Apple CEO Tim Cook has been playing up the potential of services, repeatedly referring to the "magic" happening at the interaction of hardware, software, and services. At his D11 interview last week, Cook touted iMessage, the iTunes Store, and FaceTime as examples of how Apple's services are tying Apple's ecosystem together, and acknowledged that the company is working hard on improvements to its services.

Popular Stories

Apple Intelligence General Feature

Apple Intelligence Features Not Coming to European Union at Launch Due to DMA

Friday June 21, 2024 9:44 am PDT by
Apple today said that European customers will not get access to the Apple Intelligence, iPhone Mirroring, and SharePlay Screen Sharing features that are coming to the iPhone, iPad, and Mac this September due to regulatory issues related to the Digital Markets Act. In a statement to Financial Times, Apple said that there will be a delay as it works to figure out how to make the new...
iOS 18 on iPhone Feature

Everything New in iOS 18 Beta 2

Monday June 24, 2024 12:52 pm PDT by
Apple today released the second betas of iOS 18 and iPadOS 18 to developers, and the software adds support for new features that Apple is working on, plus it tweaks some of the interface changes that have been made in the updates. Apple will refine iOS 18 over the course of the next few months, with multiple changes and refinements expected from now until September. We've highlighted...
Apple WWDC24 Apple Intelligence hero 240610

Apple Explains iPhone 15 Pro Requirement for Apple Intelligence

Wednesday June 19, 2024 4:48 am PDT by
With iOS 18, iPadOS 18, and macOS Sequoia, Apple is introducing a new personalized AI experience called Apple Intelligence that uses on-device, generative large-language models to enhance the user experience across iPhone, iPad, and Mac. These new AI features require Apple's latest iPhone 15 Pro and iPhone 15 Pro Max models to work, while only Macs and iPads with M1 or later chips will...
amazon echo dot

Amazon Could Charge Up to $10/Month for Alexa

Friday June 21, 2024 2:55 pm PDT by
Apple competitor Amazon is working on a revamp of its Alexa assistant, and the new version could cost up to $10 per month, according to a report from Reuters. The upcoming version of Alexa will support conversational generative AI, and Amazon is planning for two tiers of service. There will be a free tier and a second, premium tier that is priced at $5 at a minimum, with Amazon considering...
top stories 22jun2024

Top Stories: Apple Watch X Rumors, New Final Cut App for iPhone, and More

Saturday June 22, 2024 6:00 am PDT by
The avalanche of news coming out of WWDC earlier this month is finally starting to slow, but that doesn't mean there wasn't still lots to talk about in Apple news and rumors this week. This week saw some additional rumors about the upcoming Apple Watch models, the release of major Final Cut Pro updates, the launch of Apple's annual Back to School promo in the U.S. and Canada, new...

Top Rated Comments

ConCat Avatar
144 months ago
500 Million accounts is an impressive number. So they actually have more iTunes/AppStore customers than they have sold iOS devices and Macs...?

Makes sense... Part of the iTunes store's success was its availability on Windows. I'd imagine a large percentage of people who use iTunes don't own Apple devices.
Score: 6 Votes (Like | Disagree)
rmwebs Avatar
144 months ago
True, it is set up nicely for exploring.

But the services have to be intelligent, refined and reliable.

Three areas Apple sadly has failed at with every single online service launched so far.

(and no. This isnt a silly 'fanboy/fandroid' troll attempt - I'm being realistic based on...well...facts from what we've seen of Apple online services)
Score: 5 Votes (Like | Disagree)
iChrist Avatar
144 months ago
.

Wow. Imagine how much money apple could have made if their online services were done really well.


:apple:

----------

Take over the world!

Hey kid, this is not likely given the state of their online services.
Score: 2 Votes (Like | Disagree)
springsup Avatar
144 months ago
I'm really starting to be reminded more and more how I liked things better when Apple just made computers, nicely integrated software and iPods.

The thing I really noticed with Cook's interview and language in general is that it's no longer hardware and software; it's about hardware, software and services.

He's been really careful to add that mention of services every time.
Score: 2 Votes (Like | Disagree)
Rocketman Avatar
144 months ago
If Apple or a spinoff associated with Apple were to act as a payment gateway parallel to Mastercard, Visa, and Amex, using bank ACH and "Credit Bank" services similar to what Wal-Mart does in UT, it could start to have a hold in commerce outside Apple itself.

Services like Paypal, Google Wallet, Dwolla, Square, and others try to act as alternate payment gateways, with interaction at the edges with existing credit cards, debit cards, checking accounts, etc.

Apple could offer retail POS hardware and services, online POS software and services, and peer to peer payment services.

I don't think I have seen even two retail POS machines with the same method of use or UI ever!

Imagine having an account that takes and makes payments, has minimal transaction fees, is international, pays interest on large balances, and has a built-in credit line to prevent overdrafts and further fees. Maybe even a built-in business and mortgage loan service. That would be magical.

By not relying on the Federal Reserve for overnight liquidity, it could bypass the morass of regulations and restrictions that prevent credit worthy businesses and persons from gaining access to low cost credit in this record low interest rate environment.

Apple can issue paper at 2% and could make a large profit offering finance at between 6% and 10% to users. Credit card companies and consumer credit firms currently offer credit at between 18% and 635%!! Blessed by NEW REGULATION under this administration.

Rocketman

Cites:

http://www.checkngo.com/stateDisclosures/Michigan/StoreScheduleMI1.jpg

http://www.checkngo.com/stateDisclosures/Tennessee/StoreScheduleTN1.jpg

http://www.checkngo.com/stateDisclosures/Ohio/license3.jpg

http://paydayloanfacts.org/category/fees-and-aprs/

http://www.fdic.gov/news/news/financial/2005/fil1405a.html
Score: 2 Votes (Like | Disagree)
gnasher729 Avatar
144 months ago
500 Million accounts is an impressive number. So they actually have more iTunes/AppStore customers than they have sold iOS devices and Macs...?

350 million iPods, don't know how many iPhones, iPads, and Macs. There are probably even a few pure Windows users.
Score: 2 Votes (Like | Disagree)