Apple Inc. (NASDAQ:AAPL)’s web services and data applications are in dire need of modifications. Its falling share price is mainly due to the fact that investor’s expectations are not being met; people expect a “platform company” to dominate the tech market, but Apple's innovation seems to be at a standstill.
Innovation can be a time consuming process, you have a ‘stroke of genius’ and then you come up with something; it’s a little hard to innovate on command (Steve Jobs however was best at it, he knew how to create and maintain a team that could predictably innovate). The point is, innovation can take some time, but what Apple Inc. (NASDAQ:AAPL) has in its hands is what Barclays PLC (LON:BARC) (NYSE:BCS) calls a “differentiator” against all peers over the long term – the Apple App Store.
Since its inception in July 2008, Apple apps has made nests in smartphones, laid eggs and now profitable babies are hatching. No matter which OS your phone has (Android, iOS or Windows), Apple’s apps somehow make their way to your mobile device. These apps have an edge over Android and other platforms. Why?
If you look at the survival of the species, insects are probably the oldest inhabitant of this planet and their strength lies in their numbers, huge numbers, for every human there are thousands of insects – the App store is not so different.
A weird analogy, probably I’m stretching it way too far, but if you look at the history of apps downloaded, you will somewhat agree with my argument that apps are huge in numbers and there are more than one for each of us. On January 7, 2013, Apple Inc. (NASDAQ:AAPL) announced that over 40 billion apps have been downloaded from apps store. The following table illustrates apps downloaded by due date;
As of January 7, 2013 there were over 775k apps in the App store compared to 700k apps as of 9/12/12, plus there are over 300k apps developed specifically for iPad.
Over 14 million copies of iTunes U app have been downloaded by 7/24/12. iCloud is also one of the major forces that makes Apple a fan favorite back up, many apps offer this service automatically. Apple’s apps are in fact windows to Apple’s other services, the same way Google Inc (NASDAQ:GOOG)’s Chrome and Android open the doorway to Google’s business of search engine.
iCloud serves Apple in more than one way, it is a useful backup like any other quality online backup service plus it allows users to purchase apps from App store from one iOS device and use them on others – customer loyalty swells.
In less than a year, 100 million apps have been downloaded from Mac App Store. Apple’s main rival in the app match is Google Inc (NASDAQ:GOOG). In comparison Google’s Play Store has 700k apps available for downloaded.
Bear in mind that apps create “stickiness”; people get used to the app plus they give the best customization anyone can offer. The result is that users simply don’t move away from these apps and in turn strengthen Apple loyalty.
There are over 500 million active accounts on Apple App Store. This makes it obvious that even if Apple doesn’t come up with a truly innovative, ‘Jobs style’ product, the power of apps can retain its customers and generate healthy revenues (apps used over iPhones generate revenue for Apple from carriers).
Top iPhone Apps
Top iPad Apps
Top Mac Apps
The misadventure of Apple Maps made people question Apple’s ability to come up with truly useful web based services. But the way they handled it only adds strength to my argument about the power of App store. Apple took their map app off of iOS and replaced it with fan favorite Google Maps and within 48 hours, 10 million downloads were recorded.
It’s not just the number of downloads that I’m highlighting, in terms of revenue Apple app store has been growing really fast. In fact, due to increasing revenue Apple has changed the way it used to report iTunes and app store on their balance sheet, so there shouldn’t be any transparency issues.
Previously every product category was merged with accessory revenue, and the app store revenue would be reported as ‘Other Music Related Products and Services’. Now the app store revenue and iTunes revenue are reported as AppleCare revenue under “iTunes/Software/Services”. This category alone earned Apple $3.7 billion in the last quarter, which is a tremendous increase of 22% from previous year.
There is a separate category for accessories, which contributed $1.8 billion in the last quarter, also a remarkable increase of 25% from last year.
a) Twitter’s Vine
A brilliant entry from Twitter; video sharing app Vine has been launched on Apple app store. You can record vignettes up to six seconds with this app – a nice way to say ‘hi’ with a video. Six seconds was the best time scale they settled on after experimenting with time lengths of between 4 and 10 seconds, six was the best number that satisfied both the consumption and production sides. Twitter has plans to offer Vine on other app platforms.
b) Pebble app
Pebble smart watch app has been offered on App store. It is an iPhone app that makes the smartwatch an interface for iOS and Android smartphones. Smartwatches have been around for decades, but never really created a lucrative market. Now Apple Inc. (NASDAQ:AAPL) seems to have taken an interest in them, so 2013 could be their year.
c) Temple Run 2
The newly launched Temple Run 2 hit the 20 million download mark on iOS in just four days. The second version is an upgrade of Temple Run, which was launched back in August 2011. The new version offers better graphics, new arenas, more power-ups and special powers for each character.
Exploit App Store
Apple App Store may or may not be the answer for Apple’s problems. They need a lot of innovation to win back their investors. They can’t hang on to their brand forever. Talks of Apple TV have been around for far too long, it is obvious that users (even loyal Apple customers) would be asking, when will they see Apple’s smart TV?
But I believe Apple Inc. (NASDAQ:AAPL) can (at least they should) exploit the power of app store. This way they can stay on top of the software market, and buy time to innovate, which is much needed at this moment to satisfy the worried investors.