Zuck Plays Checkers, Cook Plays Chess

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When Facebook first grew to prominence, a lot was made of how much attention per day Mark Zuckerberg’s company captured among users. It was common to see the average daily usage was close to a full hour per day per person.

Over time the scale of Facebook’s base proved astonishing. A full 1 billion users tapped into Facebook, and before we knew it, the number had grown to 2 billion.

Any company that enjoys close to 2 billion hours per day of the world’s attention is going to be a revenue monster but surprisingly that’s not even a fraction of the engagement Apple’s devices receive.

With 2.2 billion devices, Apple doesn’t command  just an hour a day of its users attention but multiple hours and that’s why while Facebook is busy playing checkers, Apple plays chess.

If a user gets tired of scrolling on Facebook or Instagram, that’s a real problem for parent company, Meta. The odds of users not needing the thousands of apps connected to the Apple store is near zero.

So while Facebook may one day wither on the vine, Apple never will – absent some global catastrophe where internet access is fully lost.

Key Points

  • Meta’s applications may enjoy an hour per day of users attention but Apple commands much more engagement by facilitating thousands of applications.
  • Apple efficiently generates significant profits through strategic partnerships and minimal cost ventures, such as the lucrative default search engine deal with Google.
  • Apple continuously enhances user experience and product integration across its ecosystem, differentiating itself from competitors who focus primarily on hardware specs and pricing.

Apple’s Genius $15 Billion Deal

Having distribution of 2.2 billion devices also means that Apple can command a massive premium when partners want access to those users. For example, Apple has struck a deal reportedly between $12 billion and $15 billion to allow Google be the primary search engine.

There really isn’t a cost to that revenue generated so that’ $15 billion of essentially pure profit that Apple enjoys annually. It’s another example of how Apple plays chess by generating revenue with virtually no cost by leveraging its massive distribution.

And then there’s the AI play where speculation is rife that Apple will do a deal with OpenAI. By so doing, Apple can tap into the development of a leading artificial intelligence firm without investing heavily in capex as others have done.

The key takeaway is that Apple is managing to boost profits at every step. It’s not a classic growth company that invests heavily in the hopes of one day being profitable but rather is leveraging its existing ecosystem to vastly boost the bottom line without incurring heavy costs to do so.

Ignore Apple At Your Peril

Looking back a couple of decades, you’ll see the smartphone space was full of phone makers competing on specifications and price. Apple flipped the script by emphasizing user experiences and design aesthetics.

While competitors focused on delivering a phone, Apple built out a broader ecosystem via the AppStore to distribute software more widely, yet have it all tied to and reliant on the phone.

And while most electronics companies sell devices that are standalone, Apple has managed to integrate the iPhone with the Apple Watch and the Mac and so on.

Among its most recent transformative moves is the development of its M1 Chip to mitigate dependency on chip manufacturers.

These are just a handful of the way that Apple has stood apart from the competition who play checkers while it plays chess. And as it succeeded at each step, its moat grew and the investment case has grown stronger. Today, it’s as strong as ever.