Has mobile made Apple the world’s most valuable company?

Posted on October 19, 2010

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(Mobile Marketer Daily) The success of its mobile devices from the iPod touch and the iPhone to the iPad has made Apple the most valuable technology company on the NYSE and it will soon become the most valuable company in the world, surpassing Exxon/Mobil on the S&P 500.

The company has sold countless mobile devices and more than 250,000 applications have been listed in Apple’s App Store. More than anything, its savvy marketing efforts have effectively communicated to consumers the power and appeal of mobile as a whole.

“The power of mobile is only really just starting to be leveraged by consumers,” said Nitesh Patel, senior analyst of global wireless practice at Strategy Analytics, Milton Keynes, England. “Apple has indeed played a big part in catalyzing demand beyond the early-adopter segment.

“There’s still some way to go before the mass market of consumers realizes the benefits of these types of devices, with more affluent markets like the U.S. and Western Europe ahead of the curve,” he said. “The ability of mobile to add contextual information about the user—location, velocity, address book, etcetera—can help to improve service delivery and bring efficiency, which will in turn help to increase usage.

“For marketers, mobile services are becoming mainstream and clearly becoming a channel through which to engage with customers, if done cleverly and in a way in which is not irritating.”

Without a doubt, Apple has reinvigorated mobile marketing, advertising and content ecosystems and has helped to raise the bar across all of those areas, per Strategy Analytics.

In particular, it has put a spotlight on the mobile channels and is helping to boost activity in these areas.

“Advertisers and marketers need to experiment more with mobile to test its effectiveness vis-a-vis alternative channels and therefore I can only characterize Apple’s impact as positive,” Mr. Patel said.

Apple’s fourth-quarter results
Apple’s financial results for its fiscal 2010 fourth quarter that ended Sept. 25 did not disappoint, to say the least.

The company posted record revenue of $20.34 billion and net quarterly profit of $4.31 billion.

These results compare to revenue of $12.21 billion and net quarterly profit of $2.53 billion in the year-ago quarter.

International sales accounted for 57 percent of the quarter’s revenue.

The company sold 14.1 million iPhones in the quarter, representing 91 percent unit growth over the year-ago quarter.

Apple sold 9.05 million iPods during the quarter, representing an 11 percent unit decline from the year-ago quarter.

The company also sold 4.19 million iPads during the quarter.

Apple’s CEO Steve Jobs reported said that the $20 billion-plus in revenue and $4 billion-plus in after-tax earnings were both all-time records for Apple.

Mr. Jobs said that iPhone’s sales of 14.1 million “handily” beat the 12.1 million BlackBerry phones that RIM sold in its most recent quarter.

Looking ahead, Apple’s chief financial officer Peter Oppenheimer said that he expects revenue of about $23 billion for the first fiscal quarter of 2011.

Mobile advertising boom
In July, Apple’s iAd officially launched, and eMarketer predicted that the platform will help grow mobile display advertising 59.7 percent this year to reach $166 million.

With Google and Apple entering the fray, eMarketer estimates United States mobile advertising spending is set to grow 42.5 percent this year, reaching $593 million.

By 2013, the total U.S. mobile advertising market is expected to reach $1.56 billion – a cumulative average growth of 37 percent from 2008 (see story).

Among the iAd advertisers that Mr. Jobs mentioned at the iPhone 4 launch were Nissan, Citibank, Unilever, AT&T, Chanel, GE, Liberty Mutual, State Farm, GEICO, Campbell’s Soup, Sears, JCPenney, Best Buy, Target, DirecTV, TBS, Liberty Mutual Group and Walt Disney Studios.

These brands had to pony up at least $10 million to be one of the initial iAd advertisers (see story).

“Mobile is now about apps first, not Web browsing,” said Sam Altman, CEO of Loopt, San Francisco. “The extra capability of apps allows for much richer experiences around ads and marketing—and is quite different from search targeting, for example.

“Apple has introduced a leading example of what can be done with iAd, which many others are now trying to replicate,” he said.

WAP or app?
With the rise of smartphones such as the iPhone, connected devices such as the iPod touch and tablets such as the iPad, the great debate between the mobile Web and applications has been raging.

Discoverability is of paramount concern for brands, publishers and developers.

While 250,000 applications in the App Store is not as major of a milestone as 10,000, 100,000 and down the road when it hits 500,000, what this shows is the continued power of applications as a vehicle for all the types of applications people are commissioning and creating for the Apple platform.

“From a consumer perspective, it has already become an overwhelming number of applications, and we see the behavior patterns for success being much more around integrated marketing campaigns than ever before,” said Scott Michaels, vice president at Atimi Software, Vancouver, BC, Canada.

“You really do need to get the word out about your great app to have users find it, and the good news is not only are the looking—they have an expectation that you have an app for them to use,” he said. “From there, it is all about retaining them and making them happy with the download.

“The bar certainly has been raised since the days of 100,000 apps in the store.”

However, that is not to say that the mobile Web should be ignored. Far from it.

While reaching iPhone, iPod touch and iPad users is great, the mobile Web offers a wider reach.

To be a leader in a particular sector, a brand, retailer or publisher must have all of their mobile bases covered, and that includes both the mobile Web and applications.

“For the marketer, those of us in the industry have been saying for a while now that mobile Web is table stakes, meaning you better have that in place already,” Mr. Michaels said.

“Apps have been the extended component to really service or grow a more personal relationship with the consumers and the trending points to very simple extrapolation—that the market is driving the expectation that you also have an app,” he said.

With iAd, Apple is focusing on making compelling mobile advertising for its own stable of mobile devices, having phased out Quattro Wireless, its multi-platform mobile ad network (see story).

Whatever one’s opinion of iAd, it did get marketers to start thinking of their mobile spend in the millions rather than the tens or hundreds of thousands.

“The impact of Apple has been to create this whole new channel where funds need to be spent in order to be seen as a brand that is current—using modern marketing techniques,” Mr. Michaels said.

“They have caused pain of course—I mean, not every marketing budget is ready for or has planned for the cost to produce an application that will have significance and relevance in the market today,” he said.

“So certainly, they have been disruptive to everyone’s budgets and accountability on the success of that spending.”

Secondly, Apple has given mobile advertising the kick in the pants that industry has needed for a really long time, per Mr. Michaels.

The drive to the bottom in price and quality of the ads in mobile is seeing some real pushback as the expectations have risen in both what you can do, and the amount of time and thought brands and agencies now need to put into mobile campaigns.

“The days of seeing success from a simple banner in mobile is over, and the numbers prove it,” Mr. Michaels said. “Hence why you see some much more interesting campaigns out that try to take advantage of alternate plays like sponsorship of an entire app rather than a mobile banner—or integration with applications and the advertising such as you see in many of the farming or exploratory games on the device.

“While iAd may not have been as disruptive as Apple hoped, it still served to force the thinking about ads and revenue in mobile and make the marketers in the world go back to being more creative than just having the mobile ad spend as a line item in the budget,” he said.

“In that way, the impact has been completely positive.”

Bumps in the road for iAd
Apple successfully built up a lot of buzz for the debut of iAd as it always does for its launches. But aside from a Nissan campaign here and a JCPenney campaign there, the rollout was quiet (see story).

Apple has frustrated some clients using its iAd advertising platform with a lack of transparency about campaign metrics (see story).

Chanel and Adidas have both backed out of their iAd commitments.

Many have debated the Apple iAd network’s pros—engaging rich media—and cons—lack of cross-platform reach (see story).

“A lot of focus has been put on iAd, but it feels like an April or June story,” said Eric Litman, founder/CEO of Medialets, New York. “It’s great that Apple has helped the industry become aware of the richness of mobile and the buying opportunities in the space.

“The more they do to simplify the consumer experience in mobile, the more it drives innovation and competition across the sector, and that benefits everyone,” he said.

Apple creates buzz for new category with iPad
On the heels of Steve Jobs’ official introduction of Apple’s iPad in January, marketers and developers raced out the door with applications and advertising services for the new tablet (see story).

Since then, various tablets based on Google’s Android operating system have been announced, and Research In Motion will launch its PlayBook tablet.

The larger form factor and touch-screen interface provides a compelling canvas for brands’ advertising campaigns.

“This year, the single thing that I would highlight is the iPad—Apple has introduced a device to demonstrate to the community at large that computing doesn’t have to be as difficult as it is perceived to be,” Mr. Litman said. “We’re seeing a flood of innovation in areas thought of as traditional industries and emerging sectors that is creating enormous opportunity for new revenue categories to be defined.

“The iPad is the most familiar-feeling medium to date for traditional print publishers moving into the digital world, and as a result of that familiarity, we’re seeing rapid adoption by both publishers and advertisers as a strong complement to what those folks are doing in traditional channels,” he said.

“The interesting thing we’re seeing in the iPad space is that the predominance of advertising dollars spend are not digital dollars, but print teams from traditional print advertisers.”

There are a couple of reasons aside from the tablet medium’s familiar feel, per Mr. Litman.

Since the growth of the digital advertising space, print teams have increasingly had to defend their budgets in the face of digital opportunities.

The tablet screen translates print content seamlessly into the digital world.

“The iPad has all of the measurability of digital but the increased interactivity you can get from a mobile device,” Mr. Litman said. “Print buyers are looking at that with enthusiasm and an opportunity to defend their role in the ecosystem.

“We’re seeing print dollars move to the iPad faster than they otherwise would have, because print and traditional ad agencies are defending their territory,” he said.

 

 

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