Apple’s Next Multi-billion Dollar Opportunity: Location

Since the launch of first iPhone almost 12 years ago, Apple has become the world’s most profitable, valuable company and a thriving ecosystem of close to a billion users. These users are spending tens of billions of dollars per quarter on both Apple hardware and services. To understand the scale here, Apple users spent a massive $95 billion in purchasing Apple’s shiny new hardware offerings during the holiday season quarter in 2020. In the same period, Apple’s users spent a record $15.7 billion on software (App store) and a strong portfolio of services (like Apple Care, iCloud, Music, Books, News+ and Arcade). For 2021, the spend on software and services is expected to be more than $70 billion. For some perspective, this is more than twice Tesla’s 2020 revenues and almost 1.5x revenues of the world’s largest cloud services company, AWS.

We have already highlighted the emerging trend of ARPU (and CLV – Customer Lifetime Value) for Apple climbing every quarter as the company introduces more meaningful software, tools and services tightly integrated with its highly differentiated hardware. App Store, Apple Care, iCloud, Music and Books are some of the most lucrative software and services so far with tens of millions of active paid subscribers.

We believe there is huge room for growth with not only current services penetrating further into hundreds of millions of potential paying subscribers but also in terms of new spread of potential. Location-powered offerings have the potential to be the next multi-billion dollar opportunity for the services as well as hardware revenues.

Counterpoint Research - Apple Services Revenues vs iOS User Base Millions

Source: Counterpoint Ecosystem Tracker

Location: The Next Big Revenue Segment

Apple has significantly revamped its location capabilities, working with Apple Maps (which has seen generational shifts over the last eight years) and the sensor and component capabilities in its devices (iPhones, smartwatches, AirPods, etc

) to build a “live network” of billions of active devices and users. Apple’s “Find My” app is transforming into a location platform tightly integrated with Apple Maps and its hardware. Apple aims to solve a significant latent problem to track and locate assets using this vast location-based “Find My” network.

Apple AirTags

At its Spring 2021 event, Apple also announced AirTag, an own-branded tiny coin-shaped form-factor tracker device for $29 (pack of four for $99). AirTag is an IP67-rated ruggedized tracker, 32 mm in diameter and equipped with sensors, connectivity tech (Bluetooth/NFC/Apple U1 UWB chip) and a built-in speaker. AirTags can be easily attached to any asset to track and, in cases, locate it using the FindMy network. The beauty of this Apple offering lies in the focus on security and privacy when the tracker communicates with the device, with location data being anonymized and encrypted. Apple is further expanding its “Find My” platform to support even third-party devices and assets designed with Apple’s MFI program.

 

Opportunity

We believe this is a huge opportunity for Apple to deliver high-value service to not only its ecosystem of users but also partners. As the ecosystem expands and users see tremendous value in locating their expensive lost assets, Apple should look to make Find My a “paid subscription” service, possibly at $4.99 per month (or $49.99 annually) or bundled into the Apple Care+ program. This will also drive interest from insurance companies and help Apple alleviate its insurance costs. So, Apple could settle into two primary subscriptions – Apple One (for content services) and Apple Care (for safety and security of devices).

With a combination of Apple AirTag hardware sales and a potential Find My subscription, Apple could clock at least $10 billion in revenue cumulatively over the next five years by reaching 10% penetration of the user base in the fifth year. Obviously, there could be significant upside to this on how Apple expands the ecosystem and generates revenues with a double-sided model for the location-based platform and offerings charging licensing revenues from other third-party hardware players.

In addition, Apple will look to expand and scale the location and mapping capabilities to future projects, from Apple Glasses to Apple Car, driving a new dimension of experiences from spatial computing to mobility, and further upside on how Apple can monetize this platform and hardware across enterprises and also optimize its supply chain. By the end of this decade, location will be one of the key technologies powering multi-billion dollar offerings directly and indirectly for Apple.