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What’s an Active User worth?

Apple has sold 700 million iOS devices. Google claims one billion Android device activations. Microsoft has about 1.5 billion Windows users and Facebook about 1.19 billion. LinkedIn has 259 million users and Twitter has 232 million. Amazon has 215 active account holders and PayPal 137 million.

Markets place a value on these users implicitly when company shares are priced. For example, Twitter whose users are worth about $110 or FaceBook’s $98 and LinkedIn at $93.

This consistency suggests a universally accepted value per social media user but what is the value of an ecosystem user? Apple, Google, Microsoft and even Amazon aspire to enable ecosystems which should be seen are more valuable than mere communities. Ecosystems enable a higher level of economic activity because they are unbounded by the medium itself. Any number of media can be created. Or so the theory goes.

If we could determine a value for an ecosystem user we could test it against the going value of a social media user. Fortunately we have enough data to do so.

The total number of iOS devices sold per quarter allows us to measure the install base of device users. With some assumptions regarding the retirement and attrition rate we can get the following history:

Screen Shot 2013-11-11 at 11-11-11.52.34 AM

Since the total number of iTunes accounts is updated with some regularity I’ve added it to the graph. I’ve also shown on the same graph the total number of iCloud accounts. For calibration, I included survey data showing the number of iPhone users in two regions (US and EU5).

These combined graphs give us an upper bound of active users (iTunes accounts) and a lower bound (iCloud) calibrating our device-based estimate. The regional iPhone data offers some additional test on growth.

The result is “about 500 million”[1] with a growth of about 11 million per month.

So if we know with some confidence that there are about 500 million active users as part of the iOS ecosystem, how do we know how much value they generate? The answer is in the consolidated iTunes revenues as reported by Apple: $4.26 billion/quarter. With some attention to the reported media retail and purchases, the following picture of the average iOS user’s quarterly spending emerges:

Screen Shot 2013-11-11 at 11-11-11.50.23 AM

The bottom line is that in the last 12 months the average iOS user contributed  about $48/yr to the ecosystem via Apple’s own properties. They also bought the device and paid for cellular service in most cases. They may also have engaged in quite a bit of browsing and online purchases which fed other ecosystems. But as far as Apple is concerned, it transacted about $48 per user.

As Twitter revenues last year were $317 million, the Twitter user today generates about $1.36 of revenue per year or one thirty-fifth of what an iOS user generates through iTunes and iCloud alone. And note that the number of iOS users is about twice that of Twitter.

Of course one could argue that the iOS user’s participation is not profitable for Apple. It does obtain massive cash flow from iTunes which finances its fashionable data centers and bandwidth but it does not presume to value itself primarily through this revenue.

Or at least the market doesn’t think so. We don’t hear much about how Apple is worth so many dollars per user.[2]

The paradox is that while the device which enables this commerce is where Apple guides the consumer’s perception of value, markets discount devices and bid up services. In other words, users continue to pay for the devices which delight them enough to participate in services (especially the monthly billable kind) but markets walk right by these shiny baubles and and shower money on services which have negligible sales and even fewer profits. There must be some serious misdirection going on here. The question is who’s being fooled.

Notes:
  1. 482 million by my count but with quite a bit of margin of error []
  2. I suppose the corollary to this is that Apple users are disloyal or fickle or fleeting, and quite contrary to observed behavior. []
  • ben

    and what are the numbers for Android, Microsoft and Smasung?

    • http://www.asymco.com Horace Dediu

      There are no data points I can find on Android or any other Google user metrics. Microsoft is nominally easy to measure as Revenues/1.5 billion however that includes payment for Windows and Office and server products which may not be comparable as ecosystem purchases. If we did that comparison we’d have to think about the value of hardware as an enabler for Apple. For Samsung the answer is also fairly easy as Samsung has no materially valuable ecosystem and hence the value per user is approximately zero.

      • iObserver

        Samsung does though collect money from third parties to place pre-installed bloatware on many devices. They may not have a materially valuable customer ecosystem but I’m sure they get some nice additional fees per device.

  • http://www.isophist.com/ Emilio Orione

    There is also an halo effect between iOS and Mac that could somewhat increase user’s value, at least for the almost 10% that owns both an iOS device and a Mac; or the ecosystem, since media are available in iOS and OSx, should be valued considering both iOS and Mac devices and users.

  • Dick Applebaum

    Horace, certainly Amazon has more than 215 active account holders.

  • Andycted

    Can you say bubble ?

    • Walt French

      Even the Nobel economist Shiller, famous for calling the US housing bubble, thinks the term “bubble” is misleading at best.

      You’ve only made a meaningless attempt at a cheap shot. Why clutter up a site devoted to quantitative analysis with empty-headedness?

      • Andycted

        Oh, I’m very sorry. Please contact the admin and have my comment removed, I don’t want to clutter anything. Please remove this (and yours) as well.

      • obarthelemy

        I kinda agree with the OP though: social network prices seems more driven by the perspective of their share price going further up, than by any reasonable expectation of them ever actually generating commensurate revenues/returns. To me, that’s the definition of bubble.

        I think using bubbly prices as a benchmark to compare non-bubbly sectors introduces a whole set of issues. How about comparing Apple valuation to BMW’s ? I’m sure BMW sell service and upgrades in a reasonably similar way.

      • Walt French

        I briefly managed a tech fund after the Dot Bomb took out the two previous managers—co-workers (and over 80% of the clients’ assets). So the sometimes wacko valuations are all too familiar to me—lots of “what were they thinking?” moments, up close and personal

        But it’s the nature of high-uncertainty enterprises that their stock is worth more than the realistic future cash flows. Why? If the company might either make a billion at some future date, or lose a similar amount, with 50-50 probability, the shareholders will make a lot of that billion, or else … why the company will disappear, but the shareholders will only be out their original stake. One way to look at the valuation of these things is as a far out-of-the-money call option on future earnings. The higher the uncertainty about future earnings, perversely the higher (!) the option value.

        That doesn’t mean some of these companies’ valuations are “reasonable” based on their current business. I personally believe there’s no way that Twitter’s current business model is worth $132 per user or whatever it pencils out at. But there *is* a chance that the company will figure out how to pivot once again, rather than repeat the sorry old ad-supported revenue model that you’re tired of hearing me rant against.

  • http://www.startupmanagement.org/ William Mougayar

    Is this number a lagging or leading indicator of something?

  • http://twitter.com/matthewwanderer matthew

    According to trefis.com, iTunes specifically accounts for 2.32% or AAPL’s share price, or $12.06.

    • iObserver

      I also like looking at that site sometimes. Unfortunately, trefis works under the assumption that a stock is valued 100% based on profits and revenues. As anyone who knows the stock market or follows Apple (AAPL) understands, this couldn’t be further from the truth.

      • http://twitter.com/matthewwanderer matthew

        Indeed, but it’s an interesting reference point, and given HD’s analysis, 2% doesn’t seem far off as an estimate.

  • disqus_84gVkDnFwo

    Horace, Apple only records their 30% portion of the revenue for third party Apps. This is another very conservative accounting policy that has two effects: 1. slightly higher reported margins for the app store (apple’s 30% share is likely highly profitable, although they do not break-out margins by product line) 2. Lower sales as they record only 30%of third part app store sales, I would bet that companies such as Amazon record the full revenue they receive for Apps as no investor seems to care in the least about Amazon’s margins and they go gaga over any revenue that money losing company can generate. Anyway, the blue and green portion of your chart should be combined as Apple only reports the green portion.

    • obarthelemy

      That’s interesting. Thanks.

    • http://www.noisetech-software.com/Home.html Steven Noyes

      The reporting depends on the model. For agency models, you only get to report your take. For the wholesale model, you get to report the entire revenue. This tends to have the following effects. You get higher margins with lower revenues with the agency model and higher revenues and lower margins with the wholesale model. This assumes sales prices remain unchanged and a 43.8% markup is applied in the wholesale model to match a 70/30 agency split.

      I think this, more than anything, is what drove Amazon to beg the DoJ to sue Apple against allowing the agency model to be the norm for eBook sales. Amazon wants higher revenues and does not care about margins.

  • Space Gorilla

    Active users is an important metric. A free-with-purchase-of-TV Samsung tablet that sits in a drawer doesn’t add much to any platform.

    Horace, do you have any thoughts on if/when Apple hits a billion active users? I would assume it’s sooner than four years from now, since Apple continues to increase unit sales annually.

    • charly

      Apple will never reach 1 billion users. Their global market share is to low for it even if everybody in the world had a tablet

      • Space Gorilla

        They’re already at half a billion. I would guess you don’t understand the difference between market share and installed base.

      • charly

        That gets to 1 billion iOS devices, not 1 billion users. A very large share of those 250 million already own a iOS device

      • Space Gorilla

        Certainly there are replacement sales, but that only delays Apple’s steady march to one billion users. Using Horace’s numbers from this article Apple hits one billion users in at most four years, and probably it will be sooner than that, hence my original question. It will be somewhere between two and four years, and at this point it does seem inevitable.

        You’re also forgetting how many older iOS devices are passed down to new users. A friend of mine just sold his old iPhone 4 as he upgraded to a new iPhone. That iPhone 4 is a new user now.

        I get it, Apple’s success upsets you, which is odd when you think about it (why do you care). But one billion users is going to happen, whether you like it or not. It’s either a couple years away or four years at most.

        Again, it’s not a question of if, it’s a question of when. Sticking your fingers in your ears and yelling “La la la la la la la” isn’t going to stop it from happening.

      • scineram

        You just ignored everything charly said. There will not be 1 billion iOS users probably ever. There will not be 8 billion people for another 10 years, and only a fraction will be able to afford and want an iDevice, certainly not over 10%.

      • Space Gorilla

        I’m just doing the math, from this article. Apple is at roughly 500 million users now, and growing at 11 million per month. That gets them to one billion users in 3.8 years (from now). But that’s assuming growth flatlines right now and never increases again.

        I think a key point you’re missing is that in the segments Apple targets (as you put it, the people who can afford an iDevice) their share is much higher than 10 percent. You only get low market share for Apple when you compare against the whole market, and Apple doesn’t compete in the whole market. They never have.

        I’m happy to admit it if I end up being wrong, but the math seems inevitable. Let’s see where Apple is at user-wise in a couple years. They should be comfortably at three quarters of a billion, possibly more.

        Here’s a more interesting question. When Apple gets to a billion users, will the anti-Apple crowd finally shut up about Apple being doomed? :)

      • charly

        According to the same kind of math there will be 400 million iOS users in the US by even though the US has only 300+ million inhabitants.

        that number is wrong just as your calculation

      • Space Gorilla

        You’re making another mistake, you can’t use the 11 million users per month and apply it just to the US. We would have to know how many users Apple is adding per month just in the US. Do we know that?

      • charly

        You don’t have to know the number of Android users. Just that there are hard limits like the total population in the World who stop growth into eternity.

      • Space Gorilla

        Who said anything about Android users? I’m talking about the number of users Apple adds each month in the US. Certainly there are hard limits, but Apple has already made it to half a billion, and they are still growing their user base.

        So, what’s your limit on the total number of Apple users? Are we already there at half a billion? Will it be three quarters of a billion?

      • charly

        The fast growth of smart phone (read Android or iOS) users is nearly over in the rich world. iOS numbers in the tablet market is stabilizing. If Apple is lucky they can still grow 15% but that is about it

      • Space Gorilla

        Okay, so that’s 575 million users. We’ll be able to see if you’re right or wrong quite soon, before the end of 2014. Hmm, if 575 million is the limit we’re going to have to see iOS devices sales plummet dramatically starting pretty much right now. Unit sales that is. I guess you better hope the holiday quarter is terrible.

      • charly

        They screwed up the tablet market and the iphone 6 market depends if they can buy enough or at all (idiotic) curved screens

      • Space Gorilla

        Please, not this again about iPad sales. We’ve been down that road. I’m not discussing that nonsense again.

        Yeah, “at all”, as if the next iPhone won’t sell a single unit. Come on dude, connect to reality.

      • Space Gorilla

        If I remember correctly Horace already did an article on platforms reach one billion and projected that Apple would reach that sometime in 2014. But I think that was devices, and users obviously trail the total device number. From this article it seems the number of users is a little over 70 percent of total device sales. Calculating that out puts Apple at a billion users three years from now, or just a tad sooner. The math isn’t that difficult.

      • charly

        But the math is foolish. There are to few people who can and want to spend so much money on a personal device

      • Space Gorilla

        Now you’re making an assumption about how many people can afford Apple products.

      • charly

        That assumption is that there are to many poor people in this world. Sadly that one is correct

      • Space Gorilla

        Yes, there are many poor people in the world, but we can’t say for sure if that’s going to mean Apple can’t get to a billion users. Windows has an installed base of well over a billion, and even the cheapest PC isn’t that cheap.

        You haven’t answered my question, what’s your take on Apple’s limit re: users? Since they are already at half a billion and you’ve said one billion isn’t possible, then you obviously think Apple will end up somewhere between half a billion and one billion users. Do you think the limit is three quarters of a billion users?

      • charly

        Windows is work, shared and the cheapest option when pirated. Also i don’t know if the majority of windows pc sold are cheaper than an 5s but it wouldn’t surprise me if that was true because if i’m in a Best buy kid of shop than half the pc seem to be cheaper than an 5s

        North America + Oceania + Japan(+/- .5 billion) 50% is around 250 million
        EU(+/- .5 billion) 20% is around 100 million
        Rest of the world (6 billion) 5% 300 million

        Maximum of iOS is around 650 million.

        ps. according to the graph in this post there are almost 500 million iOS devices in use a couple of months ago. But a user can own more than one iOS device. In fact it isn’t unlikely that an iphone user also has an ipad or an Apple TV

        Totally unscientific i assume that each iOS user does not one one device but 1.25 so total worldwide number is around 400 users. Personally I think this is a very believable estimate

      • Space Gorilla

        Apple already has 600 million (plus) iTunes accounts. That should map to users pretty well. But half a billion is a very credible estimate for current number of users.

        So you’re saying that Apple will top out at 650 million users, just 150 million more users from right now, and that’ll be it. That’s a good deal more than the 15 percent increase you said earlier, double in fact, a 30 percent increase. And if we go from your new 400 million figure for current users, that means you expect a little more than a 60 percent increase in current users.

        Which is it? Apple will grow its user base 15 percent and that’s it? Or is it 30 percent? Or is it 60 percent? You gotta pick one.

        At any rate, you’ve picked 650 million as your maximum possible users for Apple. We’ll be able to revisit this in a year. For you to be right Apple will have to stop growing its users fairly soon.

        By the way, 500 million users is quite an accomplishment, that’s a robust platform. And still we hear lots of doom and gloom for Apple. Half a billion users! Dooooooooooomed!

      • Space Gorilla

        You’ve got some interesting population numbers there. Funny how your North America + Oceania + Japan adds up to around 500 million, since there are 529 million in just North America alone. Also interesting how you pegged Europe at 500 million when there’s currently about 740 million people living there. Truth and numbers don’t seem to mix well around you.

      • charly

        I didn’t include Mexico, and 50% for Apple is a bit high so it adds up to 250 million.
        EU isn’t Europe

      • Space Gorilla

        I get it. That’s conveniently selective. Well, we’ll know soon enough. Your excuses will be interesting when Apple goes past 650 million users. I have scheduled your tasty claim chowder in OmniFocus.

      • Space Gorilla

        Interesting, ASP for a PC in 2013, according to IDC, $635. ASP for the iPhone, also according to IDC, $635.

      • charly

        Average sales price is not the same as median sales price. Finding an iphone who costs more than a $1000 is difficult, finding a computer that cost $4000 isn’t hard. Seeing your numbers and the large numbers of expensive PC sold and my guess that the median price for pc’s is lower than that of an 5s seems incorrect. It looks like it is cheaper than a 5c

      • source

        “only a fraction will be able to afford and want an iDevice, certainly not over 10%.”

        Source?

  • Christian Peel

    The Market Cap / Number of Users metric for Apple also gives something like $90/user, similar to the social networks you mentioned above. This gives more credence to the idea that Apple is valued like a social network, rather than for the profit it brings in.

    • http://aaplmodel.blogspot.com/ Daniel Tello

      It’s $900, not $90. There’s no comparison, social networks’ $100-worth user generates low single digits annual revenue. Apple’s nearly $1000-worth user generates not only the $48 in service ecosystem revenue, but several hundreds more per year on recurring hardware upgrades, as Walt mentioned below. Apple is valued nothing like a social network (it would be worth tens of $trillion$ if it were).

  • Walt French

    There are some interesting collaterals from Apple’s iOS user base that don’t show here.

    Charles Arthur’s recent piece at the Guardian notes the number of mobile Google Maps users off by something like a third since iOS6 debuted Apple’s Maps. Very roughly (but defensibly), users valued Google’s Maps service as worth the revenues that Google gained in ads. So therefore, Apple is capturing the value of that service through incremental hardware sales — where users pay cash instead of eyeball distraction.

    Also, the greater value to Apple of having an iOS user is the high probability that user will replace his device (handing it down to a relative or selling it to a friend). That might generate another device sale every 3 years—at $600, an incremental $200/year—besides virally increasing the user base.

    • http://aaplmodel.blogspot.com/ Daniel Tello

      “an iOS user [...] might generate another device sale every 3 years—at $600, an incremental $200/year”

      A Mac user generates even more, at $260/year. The Mac installed base is around 75m loyally upgrading their Mac for $1,300 every 5 years on average.

      • http://www.asymco.com Horace Dediu

        Brings to mind the old rule of thumb: Every Apple user generates $1/day in sales for every device they own.

    • nuttmedia

      The lost value to Google, in terms of data points (location, search patterns, retargeting etc.) far exceed that derived from any ad revenue, particularly given the demographic of iPhone users (high income, high engagement, etc). Location is a big piece of Google’s “Enhanced Campaigns” effort so any lost user signal in that dimension deprecates that offering.

      I tend to think it is a more passive than active choice in using Apple Maps over Google Maps in most cases. But your point of value transfer is still perfectly valid… with likely greater avenues to realize similar transfers in the future as the ecosystem expands.

      • Walt French

        Well, all that location info exists to increase their ad revenue, so I think we’re in agreement.

        It does raise the interesting point, though: The 100th tidbit of information that Google learns about me today doesn’t add much to the other 99, and especially doesn’t add much to the thousands of things they “know” about me.. Whereas a service like Bing, which I use much less often, could make its ads quite a bit smarter with the first items each day, to add to their puny dossier on me.

      • nuttmedia

        I was thinking more narrowly about ads in Maps specifically, but yes, you are right… agreement indeed.

        There are certain, seemingly high value, use cases tied to location that would break the diminishing return cycle. Just as a simple example, a user on her mobile, searching for pizza during lunch hour in midtown Manhattan. AdSense is structured now such that Joe’s Pizza can overweight time and location to drive bids higher — higher relevancy, higher ad revenue. I’m sure you can imagine countless other examples where location might be similarly valuable.

        Location is such a rich dimension… Another reason why Microsoft’s failure with mobile is so damning.

    • obarthelemy

      OTOH, the whole Maps situation illustrates why Google need Android: if they’d left the market to Apple and Nokia and MS, Google Maps would have no mobiles to live on now.

      • Walt French

        The situation strikes me as a repeating game of “Prisoners’ Dilemma.” Google and Apple appeared to have superior outcomes from collaborating, but Apple found Android to be a defection from that cooperation, and retaliated.

        Great article at Wikipedia that I just scanned, suggesting defection is optimal. But it strikes me that I saw some similar game recently where it’s rational to trust but retaliate tit-for-tat.

        I used to believe, as I think Horace said, that Google closed lots of doors by competing so aggressively against Apple. I don’t think Apple would’ve wanted to do maps had they had a sound relationship with Google, even after Android. (And Apple Maps has all the hallmarks of having been started well after Apple became aware of Android’s competitive positioning.) But putting it into the game theory context shows how it certainly COULD have been absolutely essential for Google to do Android, *AND* for Apple to do Maps.

      • https://twitter.com/#!/azulum azulum

        The break with the iPhone came when Apple became frustrated in late 2009 by Google’s refusal to provide turn-by-turn navigation for maps on the iPhone – a feature which was available on Google’s own Android, and which is hugely useful for car drivers. “They broke their promise,” <a href="http://www.theguardian.com/technology/2013/nov/11/apple-maps-google-iphone-users"one Apple executive told the Guardian.

        That was before things went thermonuclear with the original Droid. I think that if Google played nice with Apple back then, even with Android, thermonuclear might never have come about and both companies would have been better off. Google seems to have been afraid of Apple turning into Microsoft. Yet Apple has only entered the realm of services somewhat unwillingly.

      • Walt French

        “Late 2009” sounds suspiciously close to the launch date of the Droid, October 1 2009.

        Sounds as if Google wanted to have a proprietary feature for Android to give the line some commercial success. I have seen, but can’t track down, claims that Google’s licenses of third-party maps info prohibited them from re-selling it for turn-by-turn. (Several data suppliers also make/made nav boxes and wouldn’t want uncontrolled proliferation of competition without getting paid.) But in personal correspondence with the author of that Guardian article, I haven’t been able to shake loose any other reason for withholding turn-by-turn other than the competitive edge you note. I still think it’s quite likely that Google would’ve had to pay extra for putting TBT on others’ phones, and couldn’t get the payback in terms of collecting user info, under Apple’s privacy terms. That’d be a very banal “different directions” reason that’d lead to a split at a time when the relationship was frayed.

        PS: on my machine, clicking near the end of your post brought up the original Guardian article. Maybe Disqus is not handling your original post right, perhaps a nisspecified link in your note?

      • https://twitter.com/#!/azulum azulum

        Ha. Ambiguity strikes again — That was when they launched the original Droid, before things went thermonuclear.

        And closing tags do do wonders. It’s a bit obvious I was distracted when hammering out that post, isn’t it.

        That said, I think you are on to something with the motivation not to add turn-by-turn. Though I would imagine that Google could have passed that cost onto Apple, no matter the wording of the 5-year deal that was in place.

      • Walt French

        Just another tidbit: Sometime Long Ago, Apple’s iPhone ToS demanded that Map Data NOT be used for TBT. If that language predated ’09, the thrust is very different than if it only appeared in ’09, no?

      • https://twitter.com/#!/azulum azulum

        Yes and no. I think that no matter what, since Google was offering turn-by-turn on the Droid, some kind of deal could have been worked out. Apple drives a hard bargain, to be sure, but they have money. Maybe Google didn’t want to the extra money and wanted data instead even then. Maybe Google had a deal with Verizon to keep turn-by-turn a Droid exclusive. Maybe Apple didn’t offer enough to offset the lack of user data. Either way, to invoke a cliché, it’s starting to look like Google won the battle and lost the war.

      • Walt French

        I’m a little less confident in scoring the contest to date, but agree. Perhaps the conversations went something like…

        2007 G: Sure, use our service! But no TBT. TomTom, supplied some of the data & it’s restricted. A: OK, this looks interesting!

        2009: G: We worked out a deal for TBT. We’re monetizing our costs thru Latitude. Wanna play? A: Latitude, selling our customers’ souls to you? No, we don’t roll that way. How ’bout we just pay a bit in cash to promote your brand? G: Sorry, our game is about matching users and advertisers. Cash would be a distraction to us and leave us with empty slots. Oh, by the way: Droid!

      • https://twitter.com/#!/azulum azulum

        I’m pretty sure the NSA has that conversation verbatim on a hard drive somewhere. LOL

      • nuttmedia

        If memory serves, a required Google log-in was another sticking point in negotiations. Apple did not want a core mobile feature in their proprietary product to be tied to a login at a third party company. Perhaps Google was holding TBT hostage to convince Apple otherwise.

        Nokia had already demonstrated the value of location in the mobile space. Given Apple’s history of wanting to own core technology, I think their parting ways on maps was inevitable.

      • https://twitter.com/#!/azulum azulum

        That was the sticking point in 2012 for sure, but in 2009? There was no Google+ back then. Google had a number of different ways to log in to their services. I wouldn’t be shocked if Google wanted more data on the user, but I think it was a more of a prisoner’s dilemma type of thing because Google didn’t trust Apple, despite Schmidt being on the board.

        And on the prisoner’s dilemma, if you are playing the game once, defect is the optimal strategy, even though both will end up worse off. But if it’s a repeating game, as things in real life tend to be, the overwhelming choice is to not defect, but then engage in tit-for-tat with forgiveness. If the defector continues to defect, this is bad for everybody.

      • Walt French

        I seem to recall some computer simulation of iterated PD that showed cooperation, with retaliation for non-cooperation by your partner, was optimal.

        But the very interesting Wikipedia page says otherwise, that infinite PD apparently has NO optimal solution. If you can point me to proof of your assertion — I’m biased to believe it’s true even in the strict confines of PD—I’d be ver appreciative.

      • https://twitter.com/#!/azulum azulum

        Within standard economic theory, though, [defection] is the only correct answer.

        As the inimitable Yogi Berra said:

        In theory, there is no difference between theory and practice. In practice there is.

        I find this quote useful whenever I see “““standard economic theory”””. If such theory actually reflected reality, we wouldn’t be here to make the observation — intelligent life would not exist. [citation needed] One cannot make a repeating game work that way, unless, of course, the cumulative payoffs are meaningless save for calculating the highest score, who then wins everything. This is not real life. We are predisposed to cooperate because that is the better strategy evolutionarily.

      • specious

        So you think that the world would be exactly the same as it is now, just with no android? Seems specious, and forgets history.

  • http://blog.jamiequint.com jamiequint

    “This consistency suggests a universally accepted value per social media user.”… Uh, only if you have no understanding of statistics. This is a very very weak argument for correlation, much less causation.

    • http://www.asymco.com Horace Dediu

      There is nothing in my statement implying causation or correlation. Value placed by markets on equities are a matter of perception.

      • http://blog.jamiequint.com jamiequint

        There is absolutely nothing to suggest a universally accepted value per social media user. Equity value is perception, yes. However, you don’t even show that stock price is correlated to number of users in any meaningful way. You have no statistical basis for saying that there is any sort of universally accepted value for a user. I could just as easily say that there is a universally accepted value for each square foot of office space at company HQ, or the number of words in the company’s TOS if those numbers happened to be close to each other. Does that make it true?

  • def4

    Isn’t there a half famous saying that if you don’t know who the fool is then you’re it?

  • obarthelemy

    3 things:

    1- Platform service revenues are minor compared to hardware sales: assuming in 2-yr update cycle and $500 ASP, Apple sell $250/yr of hardware to their users, and only $50 of services/content. Margins are probably even more uneven than that. This explains why Apple is valued as a hardware company, not as a social network. The costs of switching are so low ($50 to get all needed apps, vs $700 for a top-end phone ?) that ecosystem engagement is immaterial, “ecosystem superintendant” is not really a bankable job.

    2- Social networks are comparable to Amazon in a way: social networks are ecosystem-agnostic, as Amazon is manufacturer-agnostic. No matter whether on iOS, Android, WP, BB, … people will continue to buy devices, and to socialize over them. A fair bit of that resilience is priced into their shares ?

    3- The upside looks limited on Apple’s front. Their markets are growing strong, but their share and sales and profits seem on the defensive. Apple are dependent on rich customers and subsidies; there’s a limited supply of one and a dwindling supply of the other. I think money has to go somewhere, and investors looking for the *possibility* of an upside see more of that in immaterial and immature social networks than in Apple. Even I don’t agree, but that’s what bubbles are.

    • nebular

      “Their markets are growing strong, but their share and sales and profits seem on the defensive.”

      What does this mean? Declining or something nebulous?

    • charly

      $50 is minor when you sell a $500 phone but it is major when you sell a $200 phone. The question is will the semi standard phone still be $500 in 3 years time or more like $200. My guess is that it will be $200 and in such an environment players like Meizu will be winners.

      • obarthelemy

        If you’re in a subsidized market, $50 is negligible compared to your monthly rent, so I think the logic remains valid.

  • Jessica Darko

    Apple has activated 4.9 Billion iOS devices. Every time you talk about google “activations” and compare it with iOS sales, please use consistent metrics. Apple is beating google 5:1. (you get this figure by multiplying the number of devices sold by the number of OS releases, the same way google does. 700M times 7 iOS releases is 4.9 billion. Yes, it’s a BS number, but you’ keep putting it in there for google, so lets compare apples to apples.)

    • https://twitter.com/#!/azulum azulum

      Again with your “Google activation numbers are worthless” ranting. It gets old. These activation numbers from Google seem to line up with independent analysis of the market, or else Horace wouldn’t be using it.

      What do these numbers mean? From the horse’s mouth:

      “For those wondering, we count each device only once (i.e., we don’t count re-sold devices), and “activations” means you go into a store, buy a device [and] put it on the network by subscribing to a wireless service.”

      via Engadget

      And your notion that iOS users have upgraded their devices 7 times is another plane of ridiculous. That’s a BS number if I ever saw one. 1 billion Android devices seems perfectly legitimate even when factoring out cheapo tablets. I don’t know whether Google-free phones are included in the activation numbers (and could believe it either way).

      • Tatil_S

        I am always suspicious when the “official” definition is from a quote of an executive in a tech blog. Too much plausible deniability. It probably means roughly what it seems to mean, but I would not take it to the bank without seeing it on an official document filed with SEC.

      • Walt French

        Don’t old your breath. Companies don’t give that specific of data to the SEC.

        If there were a fraud issue, eg inflating sales numbers to mislead advertisers, that might be a DoJ or FTC issue, but I wouldn’t expect that concern either.

        I might feel less that @Jessica wasn’t off on a tangent if her posts were a little less aggressive in denying the official claims or offered some support suggesting a 10:1 error.

  • http://www.twitter.com/aainslie Alexander Ainslie (@AAinslie)

    @asymco:disqus, how much of this rev is from iAds? Has iAds generated any meaningful rev via iTunesRadio? Any other insight(s) on iAds?

    • http://www.asymco.com Horace Dediu

      I have no idea but iAds is not likely to have meaningful contribution.

      • http://www.twitter.com/aainslie Alexander Ainslie (@AAinslie)

        would be interesting to know what $AAPL is charging for iAds campaigns for iTunesRadio and what the channel uptake is like by #brands… I’d be grateful if you wouldn’t mind pointing me to any iAds data you run across in the future Horace, it’s an area of interest to me.

  • http://twitter.com/matthewwanderer matthew

    Let’s not forget that Apple also has a messaging platform in Messages app. There’s no revenue to plug into the equation, but it’s sticky.

  • Klajd

    Hi, thanks for the data. What is the definition of an active user lets say in itunes? It is someone who downloaded an app/song in the last month or 3 months or just someone who has an account in itunes?

    • http://www.asymco.com Horace Dediu

      Every company defines activity differently. Apple does not distinguish active from non-active. It only offers account totals. It becomes the burden of the analyst to calculate active users.

    • charly

      A lot of people used itunes as an mp3 ripper. I have so my doubt about the usefulness itunes user numbers.