For all its past success, Apple Inc. (NASDAQ:AAPL) has one glaring defect in its impressive resume: near-zero social media success. Apple briefly dabbled in iTunes Ping back in 2010, but pulled the plug on the social experiment barely two years down the road. AAPL stock though has racked up gains of 10% over a two-week period since the launch of the iPhone 7.
Apple is now ready to test the social media waters again, and is busy developing a video sharing and editing app with a tentative release date of 2017.
The Apple video app will feature filters and drawing capabilities in the mold of Instagram Stories and Snapchat, both with one-handed editing capabilities.
Will Apple video turnaround the fortunes of AAPL stock?
AAPL’s Social Media Flop
Apple can certainly benefit from lessons gleaned from its social failure. Ping was a music-based app that allowed users to follow their favorite artists and see short Twitter Inc (NYSE:TWTR)-like posts from their friends and artists. Ping did enjoy some success early on, as it managed to pick up more than a million users in the first 48 hours after launch, but soon after everything started going down south.
People complained that Ping was little more than a glorified advertisement of iTunes purchases, a claim that was not helped by an inexplicable lack of artist profiles on the platform and a host of other user-related issues.
Long story short: iTunes Ping was dead on arrival. AAPL had 160 million iTune accounts to its name, but only managed to convince a paltry 2 million to try out Ping.
It’s not hard to see why Ping was a miserable failure. Apple developed Ping primarily with a view to grow its iTunes user-base instead of focusing on customer needs. That’s eerily reminiscent of another Silicon Valley social media whoopsie: Alphabet Inc‘s (NASDAQ:GOOG, NASDAQ:GOOGL) Google+. Alphabet designed and promoted Google+ as a Facebook Inc (NASDAQ:FB) alternative.
But with the exception of a few notable features such as Circles, the app was little more than a me-too product that gave people little choice to jump ship. In the end, only a handful of people used Google+ as a social media site.
Lack of success in social media has led to Apple relying too much on the iPhone. But with sales flat lining, AAPL stock has been underperforming over the last 12 months.
New Apple Video App Has a Better Chance
Ping was admittedly a rare bum note by AAPL, and the upcoming yet-unnamed video sharing app could be the panacea. First off, this time Apple’s driving force is to increase user integration within its vast ecosystem. Essentially, it will be easy to integrate the Apple video app across the company’s multiple products.
A big reason why many people found using Ping counterproductive was due to the app’s poor integration with other Apple products. For instance, you could not share a song you liked on Apple TV or a tune on Apple Music via Ping. Worse still, Ping existed in a walled garden and it was not integrated with major social sites like Facebook and Twitter.
AAPL can also learn from the success of social media companies that have built successful systems atop iOS. For instance, Snapchat, Messenger and Instagram have all managed to build highly successful products on the iOS mobile platform. These companies have done the stress test and heavy lifting for Apple, which can borrow a leaf from their social media plays.
With Apple’s flagship iPhone line increasingly coming under pressure due to dwindling sales, AAPL is looking to leverage its Services business as the company’s next big thing. The Services business, which constitutes of Apple Music, App Store, iTunes Music subscriptions and iCloud storage plans is the company’s fastest growing business — up 19% year-over-year last quarter to nearly $6 billion. The segment is now as big as the Mac line, but with a much fatter profit margin reputed to be north of 60%.
It’s quite likely that AAPL will first try to build a large user-base for the Apple video app before trying to monetize it. Apple can do this through display ads, a revenue model employed by Instagram, or a more complex multimedia monetization approach used by Snapchat. Facebook does not reveal Instagram revenue numbers. Snapchat has however done so in the run-up to its IPO — and it’s impressive.
Snapchat says it realized revenue of $50 million in 2015, but expects it to balloon from $250 million to $300 million in 2016, before crossing the $1 billion mark in 2017. It took Facebook six years to top $1 billion in sales, and Snapchat, which was launched in mid-2011, could hit that milestone a couple of months earlier.
Video sharing is clearly a fast-growing business, which is good for AAPL stock.
New Life for AAPL Stock?
But how soon can the new Apple video app affect AAPL stock? My guess is that it will be at least three years after launch before Apple starts to monetize the app. So AAPL stock probably won’t see the benefits before 2020.
The social buzz created by a successful launch and positive reports about user growth might, however, give Apple stock a nice lift well before that.
As of this writing, Brian Wu did not hold a position in any of the aforementioned securities.
