Apple CEO Tim Cook had an esoteric explanation for why Apple bought Beats, the headphones and music-streaming company. “These guys are really unique,” Cook told the New York Times. “It’s like finding the precise grain of sand on the beach. They’re rare and very hard to find.”
But here’s the grim financial logic that shows why Cook felt he had to pay $3 billion for the company. Revenue from iTunes is in decline, according to this analysis from Morgan Stanley’s Katy Huberty.
Huberty notes that iTunes revenue is falling as users turn to streaming services such as Pandora and Spotify to meet their music needs. This decline “raises concerns about Apple’s ability to monetize the new base of emerging market customers,” writes Huberty. According to Huberty’s calculations, each iTunes account spent an average of $3.29 in the first quarter of this year, down 24% year-over-year.
This chart shows iTunes revenue falling as a percentage of Apple’s online services unit:
And this one shows iTunes’ revenue per user falling:
Given those headwinds, it appears that music was actually a battle Apple was losing to challengers like Pandora and Spotify. Beats, presumably, is intended to give Apple a new beachhead in subscription music services that run alongside iTunes Radio’s legacy free streaming service. And ! — another factor for Apple — the headphones themselves give Apple a device platform with its own existing distribution network that it can also improve and build out.
Overall usage on social media platforms is exploding. Millions and millions of consumers are expressing likes on Facebook, tweeting about products on Twitter, and pinning on Pinterest every single day.
Retailers and brands are increasingly focusing their attention on social commerce.
But many struggle with the question: how do you convert a “like,” a “tweet,” or “pin” into a sale? Is social media really going to be a source of dollars and foot traffic?
In a recent report from BI Intelligence, we look at successful examples of businesses and business models for generating commerce via social media-based strategies, analyze Pinterest’s success as a social commerce platform, look at Facebook’s potential as a social commerce contender, and we examine the numbers behind the social commerce conversion and order value gap. The report is supplemented by rich datasets on social commerce, and subscribers will also receive full access to BI Intelligence’s full library of hundreds of in-depth reports, charts and datasets — including up to date coverage on social commerce.
Here’s an overview of the converging trends that promise to transform social media into a viable commerce platform:
- The rise of mobile: The rise of mobile, which means shoppers can price-compare and solicit advice from friends wherever they are. Overall, mobile accounts for just under 40% of time spent on social media. Facebook has passed the 50% mobile usage mark and Pinterest is at 48%. Together, they combine for over 56% of social generated e-commerce at the moment, according to social commerce platform, Addshoppers. Given the continued growth of mobile devices, it will only rise. Brands’ desire for guaranteed attention in the medium, coupled with this explosion, helps to explain social media’s move away from traditional display ads – like Facebook’s right-rail ads – and into the realm of social commerce.
- The rise of the visual Web: Sites like Tumblr, Pinterest, Instagram, and Wanelo are becoming repositories for shopping ideas, fashion tips, and wish lists — in essence user-generated catalogs. For example, in a recent survey by Zmags (a mobile catalog company), 63% of online shoppers said they plan to use online catalogs. And 35% said they plan to use Pinterest to make purchases.
- Demographics: Today’s mobile-savvy consumers in their teens and early twenties are accustomed to shopping online and tend to see their smartphones and tablets asan important shopping tool. Pinterest’s average user is between the ages of 30 and 49, which is an age bracket with considerable disposable income. Pinterest users tend to be women (anywhere from 80 to 85% of its user base is female). Marketers know that it is women who usually control the purse strings for household purchases for clothes, home decoration, and gifts — three strong areas for Pinterest. There is increasing evidence that Pinterest is driving shoppers into bricks-and-mortar stores.
- Significant challenges remain: Social commerce — whatever the model — needs to better reflect the fundamental rule of e-commerce, which Amazon has always championed: Consumers will click to buy when it’s relatively effortless. That’s even more true of a casual shopper who ends up on a retailer’s site because of a social recommendation. That intent to buy is fragile and can quickly evaporate. Currently, social commerce strategies involve too many intermediate steps before a user ends up in front of the crucial “buy” button.
The internet has caused massive disruption across the media landscape, causing a surge in job insecurity at traditional establishments.
But now we have a good look at the numbers.
The Bureau of Labor Statistics has put together a presentation on the recent history and direction of media jobs. It’s not pretty.
Across several different industries (radio, TV, newspapers, film, etc.) there’s been a steady downward march in employment.
Total media jobs peaked at the beginning of the decade.
Employment in the book/periodical/music industry has been on a steady downward trend, and in 2011 the bottom completely fell out of the industry.
Sound recording? Same deal.
Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.
Collaborators – Digital Profs
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