- Apple Inc. announced the airdrop, handoff and iCloud drive features at the WWDC conference, which enhance the user experience across multiple devices.
- Apple has also started allowing the sharing of iTunes purchases with upto six members of a family, increasing the potential of device sales in the process.
- The decision to allow family sharing could translate into huge revenues and topline growth for the Cupertino based software-cum-hardware giant.
Apple (NASDAQ:AAPL) made tons of new announcements at the Worldwide Developers Conference. Here’s a brief summary of what happened:
- Apple revealed OS X 10.10 (Yosemite) which comes with a more modern look, a better looking web browser, and better syncing with mail application.
- Apple iOS 8 comes with additional features like interactive notifications, quick type, and audio and video chat.
- A new cloud storage feature referred to as iCloud Drive will allow users to store content in the cloud, making Apple a more serious competitor with Dropbox.
- Apple revealed Instant hotspot, which is a feature that allows users to use their iPhone as a hotspot for their Mac computers.
- Apple announced air drop and handoff. Air drop will allow users to share files between iOS and Mac OS, assuming users have the latest versions of both operating systems. Handoff will allow users to pick up work from where they had left off on another device.
Software to drive value
Overall, the WWDC highlighted software rather than hardware. After all, it’s called a “developers” conference for a reason. The software features are nothing to sneeze at, and continues to build upon the internet of things (IoT).
Airdrop and Handoff are two of the most important software features coming out of the event. The features allow for significantly better integration of web capable devices. Consumers can work on multiple devices on the go, and share information between the devices. This makes for a richer user experience, pair that with Apple ID, and you don’t have to worry about transitioning to the next Apple device, everything can be stored in the cloud as software application can be managed from multiple devices.
Family share feature on iTunes increases Apple moat
Apple continued to build on its competitive moat by allowing iTunes purchases to be shared with up to six members of a family. In the past, iTunes purchases would only apply to a single person.
Family sharing will continue to build upon Apple’s competitive moat. This will diminish the likelihood of whole households from leaving the Apple ecosystem. This is similar to the family plan concept that mobile carriers are leveraging in order to win subscribers. Apple can now win whole household into a full spectrum of consumer electronic devices and computers. Assuming each person owns five web capable devices in the next five years; this can translate into 20 devices being sold to a single household (four people) over the course of a single refresh cycle.
Winning a household into an ecosystem of products and services will give Apple’s moat additional stickiness. To quantify the impact I will combine the revenue generated from an iPad, iPhone, iMac, MacBook, and iWatch. The five devices when combined could total to $3,450 or more depending on the hardware features consumers decide to buy. Also, back-end revenue from application sales, and iTunes would have to be factored into the total revenue figure (currently iTunes generates $40 in revenue per user per year). I estimate that Apple will generate $120 in additional revenue from iTunes and other services, per person over the course of a three-year refresh cycle.
So when you combine the total revenue of a household over the course of a refresh cycle, you’re talking about $14,280 in revenue. In the United States there are 114,800,000 households. Converting a small fraction of members within households into Apple users can result in a massive stream of revenue over the course of a two or three year product refresh cycle.
Apple has united its product ecosystem, which should accelerate sales of the iWatch. And if history has proven anything, each successive addition to the ecosystem becomes more successful than the previous addition.
The family sharing feature is the most important feature coming out of the WWDC. After all, the family sharing plan will improve the stickiness of the Apple ecosystem by allowing Apple users to share resources with family members, which will retain entire households to buy next generation Apple devices. This increases the moat of Apple Inc. and it's stock.
Also, Airdrop, Handoff, and iCloud Drive will boost cross-selling of various Apple devices. By converting entire households into five or six web capable devices per person, the cumulative revenue over the course of a product lifecycle may average more than $14,280 per household.
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