Morgan 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.
Top Rated Comments
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.
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)
Wow. Imagine how much money apple could have made if their online services were done really well.
:apple:
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Hey kid, this is not likely given the state of their online services.
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.
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
350 million iPods, don't know how many iPhones, iPads, and Macs. There are probably even a few pure Windows users.