Apple Inc. (NASDAQ:AAPL) is beginning to look a lot like Twitter Inc (NYSE:TWTR), at least in one segment. The firm’s Apple News service has become very popular since its launch back in 2015, but Tim Cook still hasn’t figured out how to make money from the service. Twitter CEO Jack Dorsey has been dealing with exactly this problem since his firm was born. Unfortunately for Tim Cook, he likely has no advice to offer.
Apple News is, according to ComScore, the 15th top app in the United States. It has about 47 million unique monthly users.
Apple Inc. is one of the biggest, and more importantly most profitable, firms in the world. The fact that it’s not making money from one of its smaller segments isn’t a worry for shareholders. It is, however, an interesting trend to look at in relation to the overall tech and web landscape.
Apple ad tech is far behind
The big problem for Apple Inc. is that it simply doesn’t have reliable well-performing ad technology. That means that publishers need to waste huge amounts of time setting up campaigns on the Apple News service. As a result very few have bothered to do so.
This is the exact same problem that Twitter Inc (NYSE:TWTR) has faced in recent years. The firm has an incredible number of users, amazing engagement, extreme reach, and no profit. It has been trying its best to improve its ad offerings. Right now it offers an incredible number of campaigns, from promoted tweets to follower campaigns.
The firm is, despite, all of its efforts, still failing to impress Wall Street. Twitter Inc (NYSE:TWTR) stock has lost more than 50 percent of its value since going pubic. Right now, as the firm develops new ad products, focuses on video and improves communication with advertisers, things seem to be looking up.
Apple lets Alphabet Inc move in
The Apple solution, in the short term at least, appears to be very different. Instead of putting all of the work into developing its own ad technology, the firm is simply going to allow publishers to use their own. For most publishers that likely means DoubleClick, from Alphabet Inc (NASDAQ:GOOG), (NASDAQ:GOOGL).
That development was reported by Garett Sloane over at Advertising Age. A publisher who revealed the Apple News plans said that bringing in third party ad technology was just one part of the new strategy from Cupertino. The firm is also expected to bring in article micropayments that would allow users to pay just a few cents to read what they want.
The moves are important for Apple to keep publishers interested in its news service. If they can’t make money, they are likely to end support for the app, ending the company’s ambitions of competing with Google and Facebook in the ad area.
The publisher told ad age “Apple is acknowledging it can’t force its ad technology into the marketplace and it makes more sense to allow standard ad serving.” That’s a lesson that Twitter Inc (NYSE:TWTR) could stand to learn from the iPhone maker.
Apple can’t monetize services
Apple Inc. (NASDAQ:AAPL) has a huge advertising advantage. The people who own an iPhone or an iPad tend to be much wealthier than average, and they tend to spend more money on goods and services as a result. This has been shown time and time again in the firm’s app store. That said, Tim Cook and his team have yet to find a way to monetize a large number of the services it offers.
Maps, search and everything else are services that Alphabet Inc can afford to offer because it’s information hungry. The firm wants to collect every possible detail of its users lives so that it can use the data to target advertising. Apple doesn’t do ads, and it doesn’t collect information in the same way that Google does. Why then does the firm offer these services?
The first reason is simply to add value to the iPhone. Siri, Apple Maps and now Apple News have become everyday touchstones for those who own a Cupertino device. The firm has, however been looking to monetize all sorts of services it offers, with Music being the most famous. It now seems that effort is in trouble.
Pacific Crest’s Andy Hargreaves, in a report published on June 28th, said that he expects the firm’s service revenue growth to slow. The big problem according to the analyst is in the App store. The online software store makes up about half of the firm’s services revenue.
“While App Store appears well positioned to continue growing for several years, App Store sales per iPhone user appear likely to decelerate, which, along with slowing iPhone user growth, is likely to drive a significant decline in the pace of growth going forward,” he said.
He reckons that even Apple Music isn’t a bright spot for the firm. In his view the service likely generates no operating profit. Going forward, annualized growth in the segment will hit just 3 percent over the next three years.
Apple News will have its day
Investors have been giving Twitter Inc a lot of time to sort out its problems, and it’s likely that Apple will have as long as it wants to fix its ad tech problems. Apple News is just part of the massive array of Apple services that add value to the firm’s iPhone. That’s likely enough for shareholders to think about right now.
Given the plans, however, it seems that Apple Inc. (NASDAQ:AAPL) wants Apple News to be more than that. It is clearly looking to make the service a real part of its services segment. That’s where the firm actually books the revenue it brings in from its range of apps and services.
However Hargreaves, the Pacific Crest analyst, says that the firm actually has a “relatively poor track record of launching successful new services.” Its record of developing the ones it already has on the market is not much better.
Even if the concern never gets the hang of monetizing its news platform, it seems unlikely that a Twitter-shaped future is in store. Though some on Wall Street may have been hoping for big growth in the firm’s services segment, that’s not the only thing Apple has going for it.