Five things to learn from Apple and Facebook's profit reports

Apr 24, 2014

Apple is now just a phone company, Facebook wants to sell your private chats, and three other revelations


TWO of the world's tech heavyweights, Apple and Facebook, have surprised the markets with unexpectedly impressive revenue reports. Apple announced record revenues last quarter, with a rise of five per cent to $45.6bn, while Facebook said that in the same period profits tripled to $642m and revenues soared by 72 per cent.

Many analysts had thought that both companies were stagnating, blaming a lack of innovation at Apple and Facebook's inability to wring profit from its huge user base.

So what can we learn from the surprise announcements?

1: Facebook ads work - and soon they will be everywhere
Facebook's chief operating officer Sheryl Sandberg said Facebook's profits demonstrated that, contrary to prevailing wisdom, Facebook ads work. In a recent head-to-head competition that pitted Coca Cola ads on Facebook against those on TV, "we were the most efficient", Sandberg said.

Facebook is beginning to consider how it can use the information it has on its users, who now account for half the world's internet population. "Facebook is just now tiptoeing into using its vast cache of data about its billion-plus users to target ads on other websites, and ultimately in other media, such as television," reports the Wall Street Journal reports. "They know more about their users than any company has ever known about a population," adds Forrester Research analyst Nate Elliott.

2: Apple is now a mobile phone company 
Sales of iPhones now account for more than half of Apple's revenues and the devices "are the long and the short of Apple's meteoric rise", says Christopher Mims of Quartz. "And wherever their sales go, so goes the future of Apple."

While iPhones experienced a huge period of growth, Apple reports that there has been a significant slump in iPad sales. Before the quarter began, analysts had projected sales of 19.7 million iPads, but Apple sold just 16.35 million. Ars Technica's Peter Bright speculates that this may be because people are just now discovering that tablets "are not really a thing", or that other tablets can do the job just as well as an iPad for a fraction of the price.

3: One billion people can be magically turned into two billion users 
Facebook now has 1.01 billion daily users accessing its mobile app alone. So when the company created a glossy new messenger app (and forced people to use it), thus splitting its services into separate apps, the company effectively turned one billion people into two billion users overnight by "brilliantly double-dipping", Android Community notes. Add to that separate apps for Instagram and WhatsApp – both of which were acquired in the last two years – and the company now has four different places to sell ads.

4: Investors are still waiting on Apple's next big thing 
Apple's rise in profits may have come as good news for shareholders, the FT says, but investors will still be impatient to find out what the company is planning next. "The quarterly performance and capital manoeuvres will help investors bide their time, but... the prospects of the next big product – whether wristwatch or television or whatever – remain a great unknown", the FT says.

5: "Private content" is worth money 
Facebook divides your conversations into two categories: public content and private content. Public content is what you see in status updates, picture galleries, or on your friends' walls. Private content is everything you do or say in private messages. With the advent of services such as SnapChat – an app that allows users to send each other messages that erase themselves after a few seconds – Zuckerberg sees a potential new revenue stream. The 29-year-old Facebook founder calls private content "an ecosystem that's growing incredibly quickly". Acording to Forbes, Zuckerberg now hopes to grab "a bigger share of its users' personal conversations".

"People want to share all kinds of different content with all kinds of different audiences," Zuckerberg said yesterday. "At the intersection of each type of content and each audience, we think there's a really compelling experience to be built."

As Forbes notes, though, many users may not be all that happy with Facebook thinking of their private chats as "content".

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