Apple’s next big revenue source won’t be another iPhone. It will be the monetization of the ID Apple assigns to its customers.
This can be accomplished with the adoption of an Apple as a Service subscription model, which will bring a steady revenue and earnings stream to the company — and help Apple’s stock climb for a long time.
That can explain why Apple has been showing less concern about iPhone sales and more about revenue per Apple ID.
“As each year passes, Apple cares less and less about how many iPhones it ships, and more about revenue per Apple ID, lifetime revenue per Apple ID, and efficiency metrics toward growing the base and value of those Apple IDs,” says Tien Tzuo, author of Subscribed. “Apple has cleverly integrated those IDs into its retail experience as well. I can walk into any Apple store, give them my ID, and walk out with a product.”
Apple’s stock has been a big winner on Wall Street, climbing 186.90% over the last five years. But there have been better winners. Like Adobe Systems and Salesfoce.com, which have climbed 458.52%and 229.52% over the same period.
Adobe’s and Salesforce’s Stock Has Outperformed Apple’s
Nasdaq 100 140.84%
Source: Finance.yahoo.com 8/8/2018
What makes Adobe and Salesforce.com such a big success on Wall Street? The “software as a service (SaaS)” business model, whereby software is centrally stored and licensed on a subscription basis.
SaaS has provided the two companies with steady revenue and earnings growth that has attracted the attention of equity analysts and investors. And it could provide similar growth for Apple, if it capitalizes on Apple ID and adopts an Apple as a Service model.
“Now, I understand that today Apple is doing just fine by selling expensive phones to affluent people,” says Tien Tzuo. “But just imagine what would happen at the next Apple keynote if Tim Cook announced a simple monthly Apple subscription plan that covered everything: network provider charges, automatic hardware upgrades, and add-on options for extra devices, music and video content, specialty software, gaming, etc. Not just an upgrade program, but Apple as a Service.”
Apple’s Key Financial Metrics As of August 8, 2018
|Qtrly Revenue Growth (yoy)||17.30%|
|Qtrly Earnings Growth (yoy)||32.10%|
Apple’s Key Financial Metrics As of June 23, 2015
|Qtrly Revenue Growth (yoy)||27.10%|
|Qtrly Earnings Growth (yoy)||32.70%|
The adoption of an Apple as a Service model could help Apple monetize their product ecosystem, a key driver of future growth.
LIU Post Adjunct Professor of Finance George Adreadis agrees.
“Their ecosystem of product and services is a major stronghold for the company going forward,” he says. “Even though the services sector is not at the same dollar value as their phone sales, the outlook for this sector and ecosystem will be a key growth component for Apple going forward.”
And overcome growth problems other product companies have had in the technology space in the past (e.g., HP and IBM).
That’s why investors should pay more attention to Apple ID rather than to the next iPhone.