Company / division: Services
In our second news item about proprietary news formats today, Apple has hired Lauren Kern as its first Editor in Chief for Apple News. She was previously executive editor at New York Magazine and then took on more of a managerial role across several publications owned by the parent company. Apple has lots of editors today, but their role is curatorial rather than truly editorial, and I wonder if that will change with Kern’s appointment. Apple is purely an aggregation platform for today, but we could see it do more with pulling news together on a particular topic and perhaps highlighting the best coverage. Kern’s magazine background might also suggest a focus on more long-form content, which Apple could either continue to curate or perhaps begin to create or commission itself. Apple News as a platform has done relatively well, driving some decent traffic for at least some publishers, but doesn’t have nearly the reach of Facebook’s Instant Articles or the Google-led AMP format. It’s also at the early stages from a monetization perspective, offering only ads as a business model broadly and then subscriptions only for a handful of publications today. I would expect the subscription model to open up later this year, probably with an announcement at WWDC in a couple of weeks, so that would be another interesting angle for Kern to work on.
I’m generally a skeptic of proprietary or customized forms of web publishing because I believe they create extra work for publishers, which in turn takes us back to earlier eras when smaller publishers weren’t able to compete with larger publishers on a level playing field (this is something I’ve written about in detail here). But they also have other objectionable aspects, including making some very powerful companies more powerful. Facebook’s Instant Articles is a great example of all that, and it’s struggled to gain momentum in part because it’s not clear to most publishers that it actually helps them make more money than simply linking out to their sites, and in part because it doesn’t support any kind of payment method today. Facebook’s Journalism Project, on the other hand, is supposed to address some of publishers’ frustrations, and as part of Facebook’s response to those frustrations, it’s tweaking its SDK for Instant Articles to add support for the Google-led AMP format and eventually also for Apple News. That could help assuage concerns about having to publish in four different formats separately (FB IA, AMP, Apple News, and the web), but it’s obviously only helpful to those publishers big enough or tech-savvy enough to work with an SDK and a custom CMS to feed it. And it does nothing to address the very real monetization issues or the sense of loss of control that has caused some publishers to pull back from Instant Articles lately. This feels like an inadequate bandaid rather than a real solution. Above all, Facebook needs to bring on the monetization tools pronto.
via Facebook Media
I’m seeing this change generally being reported as a clarification (including in the piece I link to here) but this is a change from the original wording here, which explicitly said the cut in affiliate fees announced a couple of weeks ago applied to both “app and in-app content” and didn’t include apps in the list of content types to which the change would not apply. Unless that was just really terrible wording, it does seem as though there has been a change in policy here. Applying the change just to in-app purchases again makes me wonder whether there might be some change to Apple’s cut of App Store revenue in this category, announced at WWDC in a few weeks. We don’t know quite how much of Apple’s App Store revenue comes from IAP, but games dominate total revenues, and IAP is the dominant model for games, so there’s a good chance that it’s 30% or more. As such, any cut to Apple’s share of revenues would dent overall App Store growth and Apple’s ambitions to double its overall Services revenues over four years from 2016 to 2020. So I’m somewhat skeptical, but changing the cut for IAPs would certainly go a long way to addressing the long-standing complaint from content companies like Spotify that Apple takes too much of their fees, given that those are charged through IAPs. And it would potentially open the door to Amazon’s arrival on the Apple TV too.
Apple Provides Better Source Insights to App Developers (May 4, 2017)
Apple has been criticized for not giving developers good enough insights on how their apps perform and especially for not allowing developers to know where new users come from. That’s now changing with an update to Apple’s analytics platform for developers, which will be particularly useful in light of the paid ads which now run in Apple’s App Store search function. Developers need to know whether those ads are being effective in gaining new users and downloads, and how they measure up relative to other lead generation methods. The incremental steps Apple has taken to expand the range of business models open to developers, to share more of the revenue with those developers, and to improve analytics over the past couple of years are all checking important boxes in the wish lists of developers and cementing the status of iOS as the platform to develop for, despite Android’s larger user numbers.
Apple’s results for calendar Q1 (its fiscal Q2) were out today, and they largely continued the trends from the December quarter. Revenue growth continued and actually accelerated despite the lack of the extra week which made last quarter’s numbers slightly harder to parse, but the connection between iPhone growth and revenue growth was broken as iPhone shipments dipped slightly (though a change in inventory patterns from last year eliminates some of the dip). Notably, Tim Cook said Apple is starting to see a pause in iPhone buying ahead of a big anticipated upgrade this Fall, which is bad news in the short term but potentially feeds the super-cycle narrative that’s become so popular lately if Apple is able to deliver. Other things worth noting: continued rapid iPad declines, though entirely in the Mini size (revenues from the rest of the lineup grew); strong Apple Watch sales, up nearly double year on year (likely around 3.2-3.5m), with total wearables (Watch, AirPods, and Beats sales) likely around $6 billion for the last four quarters combined. Services continues to be the strongest growth driver by far, up 18% for the second straight quarter driven by 40% App Store growth and likely strong Apple Music revenue growth too. Overall, this is a solid quarter for Apple, with nothing out of the ordinary or too unexpected – all the existing trends are ticking over nicely, with the iPhone roughly flat (up slightly on revenue, down slightly on shipments), and some of the growth drivers delivering well, while the iPad and China continue to be a drag. Next quarter’s guidance is going to be fascinating because it will have to address the issue of what new devices will launch, when, and at what prices without explicitly mentioning any of that!
via Apple (as usual, I live tweeted earnings with tons of charts which you can see in this thread, and I’ll have my earnings deck on Apple up for Jackdaw Research Quarterly Decks Service subscribers in the next little while)
Apple Watch Loses Google Maps, Amazon, eBay Apps (May 1, 2017)
This piece does a good job digging up the news that several iPhone apps from high-profile names have quietly ditched their Apple Watch companion apps. I’m seeing some spin this as a sign that the Apple Watch isn’t working for people, but the reality is that we’re seeing two rather different things at play here. Firstly, apps on the Apple Watch were one of the big misjudgments on Apple’s part: as a group, they really haven’t taken off, not least because in their first couple of iterations they were painfully slow to use. Performance of apps has improved markedly in watchOS 3 and on the Series 2 hardware, but that leaves us with problem number two: many of the apps launched for the Watch simply don’t provide enough utility either on a standalone basis or as alternatives to the iOS versions to be worthwhile. And what we’re seeing now is some of those failed experiments going by the wayside.
We’re still figuring out what works and what doesn’t on the Watch, although a glance at the official App Store for the Watch gives you some idea of what Apple thinks: health and fitness apps dominate the first screen, followed by games, news, sports, and finally utilities. Apple obviously has its own play for navigation, which works particularly well for walking directions, and the Amazon and eBay apps were always a bit of a stretch. The eBay app is a great example of a use case that doesn’t actually need its own app but can work perfectly fine with interactive notifications or a widget on the iPhone. So we’re likely to continue to see apps come and go from the Watch, not least because developers now have many possible areas of investment around iOS apps, including watchOS, tvOS, iPad support, support for the unique hardware features on the iPad Pro line, and so on. As such, some are likely very wise to prioritize other features and platforms over the Apple Watch, while others will do well putting their investment on people’s wrists.
via Apple Insider
I noted this change myself this morning as I’m part of the affiliate program at Apple (we’ve very occasionally linked to the App Store and iTunes Store from the Beyond Devices Podcast site). The change affects app and in-app purchases, and represents both a short notice and significant reduction to the commissions affiliates have been paid in the past, without any kind of explanation or justification from Apple. There are several possible explanations: Apple could be adjusting this cut downward ahead of a reduction in its cut on apps and in-app purchases to be announced at WWDC in just over a month; it could have decided that too many companies are gaming the system, e.g. by linking to their own apps on the store and taking a bigger cut; it may have decided that it would rather foster better discoverability on the App Store than have third parties do it; or it could be something else entirely. Hopefully the other shoe will drop at WWDC – whether in the way I’ve suggested above or in some other way – but it’s entirely possible that we’ll never know. This isn’t a great signal to send people trying to build a business around the App Store, though, because it suggests capriciousness and unpredictability. And especially because it hurts those businesses which – like Apple – have eschewed advertising as a business model largely or entirely because of the tradeoffs it entails.
Backchannel has a piece out this week which argues that the iPhone’s declining market share in China is due to the poor competitiveness of its services, notably Apple Music and Apple Pay. The piece is well worth reading, but it offers few real answers. It states that Apple fails to compete effectively with its music and payment services in China, but then also says that the music and payments markets in China have been sewn up by strong local competitors, with music rights in particular subject to exclusives from Chinese services. As such, it’s really not clear what Apple could have done differently in these categories. At the end of the day, Apple’s lack of competitiveness in services in China is a symptom of a much broader issue, which is that Apple doesn’t bend much to local custom when it comes to pricing or service structure (see also India). It does localize content stores, and indeed is one of the strongest players in that respect globally, but China is such a massive market, has so many homegrown competitors, and is run by a government which is not afraid to disadvantage foreign interlopers, that it’s hard to see how Apple could compete effectively there on services. As such, I think it’s smart to compete more on its devices, its growing retail presence, and its non-content software and services. But that does mean that the ecosystem Apple has built elsewhere is missing some of the appeal it has elsewhere.
But all that is to ignore the central premise of the argument being made here, that it’s this services weakness that’s at the root of the recent decline in iPhone market share in China. I think that’s debatable at best, and it’s worth remembering that that decline isn’t about ownership but sales, and Apple went through a massive cycle earlier off the back of the iPhone 6 in China, and then came down to earth over the ensuing year, so that change in market share is reflective of cyclical rather than permanent trends, with some signs of recovery recently with the iPhone 7. So overall this piece feels like it makes some interesting points, some of them legitimate with regard to Apple’s services competitiveness in China, but overdoes the narrative about its impact.
I recently shared an item about Facebook struggling to help publishers monetize their traffic through Instant Articles, and this article now suggests that Apple News is actually doing fairly well in generating traffic (though not much revenue) for publishers. That gels with what I’ve heard from other sources, who say Apple News is now bringing them decent sized audiences, but isn’t giving them all the tools they need to monetize their content on the platform (analytics and integration with third party services like Nielsen are still pretty rudimentary). I think Apple News has made big strides, and arguably gives publishers a lot more control over how their content appears, while also being the only one of the three big proprietary news formats (Apple News, Facebook IA, and Google’s AMP) to allow for paid subscriptions. It’s got a long way still to go, and those subscriptions are still only open to very few publishers, but it sounds like it’s making some decent progress in building an audience which is willing to consume news content through the app.
Apple Acquires First Movie at Tribeca Film Festival (Apr 20, 2017)
This didn’t get a ton of attention, but it’s symbolically important. Apple has so far mostly commissioned content rather than acquiring existing content, while existing online streaming companies Netflix and Amazon have been bidding up prices for movies at festivals for several years now. But Apple has now acquired its first festival film, a documentary about the live of Clive Davis, a music executive. As such, even though the format and origin of the content is different, the subject matter of music is very much the same as Apple’s other original content, suggesting that it still sees Apple Music as the home for this stuff. But Apple is also testing out different models for original content, which will stand it in good stead if (when) it eventually decides to launch its own video streaming service.
Apple’s Clips app offers promising & fun editing features, but confusing & difficult UI – 9to5Mac (Apr 6, 2017)
Apple announced the Clips app a couple of weeks ago along with the new iPad and other announcements, and when I commented on that announcement I said the proof would be in the pudding with regard to how well the app performed. We now have reviews (and the app itself is out now too), and it looks like a bit of a mixed bag. The app looks clever, with some nifty new features, but it looks like it may suffer from the same problem as some other Cook-era Apple product releases, in that it seems like it may try to do too much, and therefore can be confusing to use. Here, as with the Apple Watch, Apple Music, and other recent efforts from Apple, it looks like it may have been better served by starting simpler and adding functionality over time. The real test will be whether we start seeing Clips-generated videos showing up in a big way on Instagram, Snapchat, and Facebook, because since this app lacks its own social features the output needs to be shared elsewhere. I still suspect, as I said in my first comment, that this is a better fit for the older Facebook generations than the Snapchat and Instagram generation, but we’ll see.
Apple Pay Promised to Make Plastic Obsolete. Then Came Wary Shoppers, Confused Clerks – WSJ (Apr 5, 2017)
It’s been clear from the very beginning that Apple Pay was only going to get so far as long as most retailers didn’t support the technology. Mobile payments are a tough habit to get going when it only works occasionally, and when there’s significant uncertainty about whether it will work at a given retailer, and both are certainly the case right now. As such, I would guess that many iPhone owners have either never tried it or tried it once or twice only to stop using it because it’s rarely available as a payment mechanism. Compounding the problem is the fact that, though the EMV liability shift drove adoption of new payment terminals, and many of those terminals have NFC capability, but Apple Pay support is switched off because retailers favor other methods of payment. As such, even the widely-recognized contactless payment symbol present on many terminals is no guarantee of availability. Ultimately, unless acceptance rates at retailers rise considerably, adoption by users it going to continue to be a long, slow slog.
Apple has been reported to be working on some kind of subscription TV service for years now, and yet nothing has ever come to fruition. Meanwhile, Amazon has gone ahead and quietly built a fairly interesting set of TV service components under the Amazon Channels banner. That set of components includes the big premium channels mentioned here (HBO, Showtime, and Starz, as well as Cinemax), but also lots of more niche channels including several targeting particular genres or international content. If Apple wanted to build a similar service, I’m sure the pay TV providers would be amenable, and the big sticking point would probably be pricing for such a bundle: Amazon charges the same rates for the three channels as Apple does on a standalone basis at the moment, with the exception of Showtime ($9/month vs. Apple’s $11/month), but Apple would want to provide some kind of bundle discount. To take a step back for a minute from this specific offer, it’s worth thinking about trends in online video at the moment. Whereas one of the big trends we’ve seen so far is one of disaggregation, with these premium channels and others offering standalone apps and services, people want aggregation, both for the price and convenience benefits of bundling, but also having a single user interface for consuming this TV content. With its new TV app, Apple has such a user interface, and I’d expect it to try to add more and more channels into that interface over time. Beyond Apple, I suspect this kind of aggregation will be a big theme this year across providers.
This App Annie analysis is interesting for two reasons. Firstly, it’s one of the first times I’ve seen anyone attempt to quantify the whole Android app ecosystem including the third party app stores, which are a factor globally but particularly important in markets like China, where Google Play basically doesn’t exist. That provides a much better view of the whole ecosystem, but of course Google only benefits directly from the part it controls, which is Play. Secondly, though, the forecast that this ecosystem combined will surpass Apple’s app ecosystem by the end of the year is striking because the Android user base has been much larger than the iOS user base for years, and only now is the app ecosystem (on this more inclusive basis) starting to rival Apple’s. That, in turn, is a symptom of just how completely Apple has dominated the premium users within the smartphone market, those who are more likely to pay for content and apps. But all of this is also a great refutation of the idea that apps are somehow dying or about to be replaced with something else – the sheer growth numbers here are astonishing.
This story has been somewhat misreported, although this article does a decent job. It appears a hacking collective is claiming to have lots of username / password sets for iCloud accounts, though it appears that the source of the data is a hack of some other site or sites rather than any of Apple’s own. That breach then seems to have allowed the hackers to take iCloud.com email addresses and the passwords used on other sites and use them to access iCloud services as well. In other words, this isn’t an Apple hack at all, and is only effective because people are reusing passwords on multiple sites. Using two-factor authentication and unique passwords is therefore still the best defense against this kind of thing, although Apple still has to deal with the headache of both false claims and threats from this hacking group.
Apple’s App Store Gets a Makeover – Bloomberg (Mar 21, 2017)
The headline makes it sound like there are changes coming to the App Store, but this story is really about all the changes that have already happened on the App Store since Phil Schiller took it over from Eddy Cue a little over a year ago. One of the notable things in the story is the impact that better analytics have had, and how that’s made it easier for more dynamic developers to update their apps more frequently in response to user behavior. More generally, though, the article suggests that big strides have been made in the way the App Store runs from a developer perspective, which is a story that hasn’t been told much. It’s been subtle, and if you’re just a user you might not be aware of most of these changes, but better experiences for developers make for better end user experiences too. I know there are still lots of developers, especially Mac-centric developers, who have complaints they feel have gone unheeded, but Apple has at least made some progress in fixing big pain points on the iOS side.
Apple Debuts Clips, a New Way to Create Videos on iOS (Mar 21, 2017)
Alongside the iPad announcement it made this morning, Apple made three other announcements, of which this is the most interesting (the other two concern a PRODUCT(RED) iPhone and new languages for Swift Playgrounds). Clips looks like a hybrid of Snapchat and iMovie, with lots of new filters, stickers and other effects and an easy editor for creating a montage of video clips and photos, but apparently without any kind of social component. This is a funny sort of inbetweener software product from Apple, which doesn’t have an explicit social network and whose creative tools around editing photos and videos are far less used among young people than those which come with the social networks they use. I don’t necessarily see that changing with this product, though there are some clever-looking features like auto-generating titles. The proof will be in the pudding, though – the app comes out in April, though I’m guessing it may appear in developer betas before then, giving us a chance to try it out. It’s interesting to see Apple experimenting to try to fill a gap here, but I’m not convinced it’s got it right just yet.