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

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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.
Click to expand...
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.

Article Link: Apple's 500 Million iTunes Store Accounts Offer Significant Potential for Growth in Services
 
Article Link
https://www.macrumors.com/2013/06/04/apples-500-million-itunes-store-accounts-offer-significant-potential-for-growth-in-services/
JaySoul

JaySoul

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True, it is set up nicely for exploring.

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

Winni

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

barkomatic

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Aug 8, 2008
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A mobile payment system would be nice. So far, previous efforts like Google's seem to have fallen flat.

I feel like there are already good and free/low cost options for streaming radio--so I'd like to see what the differentiator would be. As a consumer, I couldn't care less about ad exchanges.
 
BaldiMac

BaldiMac

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Jan 24, 2008
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Winni said:
500 Million accounts is an impressive number. So they actually have more iTunes/AppStore customers than they have sold iOS devices and Macs...?
Click to expand...

Apple has sold well over 600 million iOS devices.
 
gnasher729

gnasher729

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Nov 25, 2005
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Winni said:
500 Million accounts is an impressive number. So they actually have more iTunes/AppStore customers than they have sold iOS devices and Macs...?
Click to expand...

350 million iPods, don't know how many iPhones, iPads, and Macs. There are probably even a few pure Windows users.
 
R

rmwebs

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Apr 6, 2007
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JaySoul said:
True, it is set up nicely for exploring.

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

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)
 
FSMBP

FSMBP

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Jan 22, 2009
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Winni said:
500 Million accounts is an impressive number. So they actually have more iTunes/AppStore customers than they have sold iOS devices and Macs...?
Click to expand...

There technically could be more Accounts than devices; I know people who use iTunes to buy music and put it on their Droid/MP3 Player (they don't own iPods/iPads/Macs etc.).
 
JaySoul

JaySoul

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Jan 30, 2008
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rmwebs said:
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)
Click to expand...

Sadly have to agree with you.
 
BaldiMac

BaldiMac

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Jan 24, 2008
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gnasher729 said:
350 million iPods, don't know how many iPhones, iPads, and Macs. There are probably even a few pure Windows users.
Click to expand...

I'd estimate based on statements from Apple:

140 million Macs
375 million iPods (including 100 million iPod touches)
385 million iPhones
150 million iPads

1.05 billion devices!
 
A

avanpelt

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Jun 2, 2010
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Four oF NINE said:
Will the iPhone 5S have NFC?
Click to expand...

It wouldn't surprise me if Apple creates their own "version" of NFC that is not cross-platform. Look at their track record as of late: FaceTime, iMessage, etc. FaceTime was launched with the premise of "becoming" open to those outside the Apple ecosystem; but that clearly hasn't happened.
 
Rocketman

Rocketman

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Dec 2, 2001
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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
 
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M

monaarts

macrumors 65816
Jan 16, 2010
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Kennesaw, GA
anomie said:
Yes it will. I know it exactly. Really!
And who would buy a phone without NFC these days?
NFC is soo damn important!
Click to expand...

On a serious note, I think Apple is trying to squeeze Android (and they are smart for doing so). What I mean is that we haven't seen any real big use of NFC but Google and it's partners are doing the work on making it a known-feature. Apple can make NFC successful particularly because of a non-fragmented and loyal user base.

So let Google do the initial, hard work for free to Apple so everyone knows what NFC is and then launch an iPhone with incredible promises on a foundation that is already built. :cool:
 
A

avanpelt

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Jun 2, 2010
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anomie said:
Yes it will. I know it exactly. Really!
And who would buy a phone without NFC these days?
NFC is soo damn important!
Click to expand...

Sarcasm? I'm guessing so.

All the "normal" people I know who have NFC-capable phones have no idea what NFC is, nor have they ever used it. Which opens the door for Apple to say that NFC is an under-utilized, poorly understood technology. They just might follow that up by saying, "We have something better."

They'll have a catchy name for the "new" technology, make it dead simple for the average person to understand, and it will have many of the same capabilities of NFC but it won't be compatible with NFC. That's my best guess.
 
Porco

Porco

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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.
 
M

monaarts

macrumors 65816
Jan 16, 2010
1,168
51
Kennesaw, GA
anomie said:
Of course it's sarcasm. What do I need NFC for?
It's so damn unimportant.
Click to expand...

It is unimportant until it isn't NFC anymore and it is called something like "SafePay" and allows you to simply carry your iPhone around and pay for everything you need to.

If Apple launched an NFC service all retailers would be strong armed into adopting it because they wouldn't be "cool" to the 100's of millions of users otherwise.
 
springsup

springsup

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Feb 14, 2013
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Porco said:
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.
Click to expand...

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.
 
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