Search This Blog

Thursday, January 10, 2013

Web Services chatter... $AAPL

"When Maps for iOS fails, the iPhone fails with it."

This line best sums up the perception of the elevated negative chatter related to Apple.  Suffice it to say, when Apple Map was introduced, the fever pitch emotional chatter simply took off.  

The chatter is gaining traction again, with analysts highlighting the the poor web services as a correlation to the stock's decline.

Looking at a chart overlaying GOOG and AAPL, one is inclined to see an interesting correlation. The rise of a web services company vs one that is perceived to lack it. (The chart is of Google, and the red line is AAPL.)

Web Services, with all its vague meaning, is a weak spot for Apple. Fortunately for Apple, the weak spot from a financial perspective is not detrimental, and will not be for the next few years. Simply because their current strategy of 'great hardware merged with great operating-system software, and an easily accessible third party ecosystem' dwarfs whatever revenue they will ever make from Web Services. 

Web Services differentiates a product.  Currently, for Apple, it adds intangible value to the iPhone.  (Web Services drives revenue for Google because Google depends on the advertisements from its Web Services.)  Phone users want a service that works. Users want to use Google Drive or Drop Box to store files and access them anywhere.  Again, there is no monetary value for Google or Drop Box, as the vast majority of users are free users. 

So the lack of a service that currently adds no tangible value to a company is the cause for about a $100BILLION loss in market capitalization. 

I am very critical of all companies I trade, and I completely agree in that Apple needs to improve their Web Services, but the fundamentals do not make sense with the perception.

Many want to point out Apple's attempts and failures at the web (ie Ping, MobileMe etc), but those very critics are forgetting Google's strategy in Web Services.  The level of failures at Google are monumental. They were and are willing to try and fail, vs never trying at all. (Thats a good thing.)  

Despite letting pesky facts get in the way of a nice argument, Apple is moving to improve services. Case in point:

1. iTunes 11 - critically haled as a vast improvement. Obviously more can be done to improve it, but its a very good step in the right direction. (Although, achieving 40Billion downloads and the highest level of revenue for developers, and has been doing so prior to the version 11 upgrade, is pretty impressive.  At least to me.)

2. Apple Maps - It was crapy at first, but it has improved.  And Apple is actively improving it with Eddy Cue.  Despite this, I did not find it to be a $100billion dollar mistake. In fact, I thought it to add value.  It did not hurt sales of the iPhone, as current data suggest, and it forced Google's hand to produce a Map App with navigation, that is by all accounts kick-ass. (Although I find myself using Apple Maps more now. The constant request to login to Google Maps frustrates me.)

Apple's mere attempt at web services upped the ante, and forced a better user experience on the user. (IMO, whether the improved experience on the iPhone comes from Apple or a competitor is irrelevant.) 

All-in-all, I think the web services argument is a bullshit one from a fundamental perspective. But the chart above supports the perceived trading dynamic. 

The one area of "web services" I really would like to see Apple improve, is the developer interaction in iCloud.   

As for this being the battle ground, that may be true. But the Maps fiasco also taught us that competitors will come back stronger, and make the user experience better.  So long as Apple can continue to drive the best experience on their device is the paramount issue.

(The irony is that blogger, a google cloud web service, is acting up and not letting me save or publish the post. Brilliant.)

No comments:

Post a Comment