As more and more consumers are dropping their PCs in favor of more convenient mobile devices, both manufacturers and investors could see a nice payoff in terms of revenue and profits. But these upward moving financials aren’t just the result of device sales. In addition to actual hardware, manufacturers are also locking their customers into their operating platforms — essentially turning them into long-term revenue streams.
Certainly, the “big three” players in this industry — Google Inc (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN) are all coming up with cross-selling strategies for not only increasing the number of various tangible devices, but also increasing the size of content available on their platforms that will allow their customers to “keep up with the Joneses.”
The increased demand for mobile devices — today and tomorrow
Since last quarter, the total number of devices that are internet-ready per United States household have risen from 5.3% to 5.7% — an overall increase of more than 7% in just three months time. Of these devices, tablets rose almost 18 million in new sales, and the total number of those who now use smartphones has also risen by a whopping 9 million.
While Apple’s iPad has been leading the tablet pack, competitors such as Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Fire, along with the Nexus from Google Inc (NASDAQ:GOOG), have begun to take a sizable bite out of the iPad’s lead. Last year, the iPad accounted for more than 50% of the total tablet market, but today, this has dropped to approximately 46%.
One big catalyst for the decrease in market share for the Apple Inc. (NASDAQ:AAPL) iPad is the popular Kindle Fire. In fact, of those tablets that are powered by Android, the Kindle Fire currently holds the number one spot at 33% across the globe.
Looking ahead, the tablet market appears to be bright — beginning in the U.S., which accounts for almost 60% of the market share for this type of mobile device. This is due in large part to more than 50% increase in penetration for mobile devices in the U.S. internet-ready households alone.
How much can you store?
In addition to content and devices, mobile manufacturers are also putting a rope on customers through their offerings of storage for movies, books, music, and other content. Once “hooked,” it is difficult for consumers to switch to a different user as the total costs in terms of dollars and inconvenience typically far outweigh staying put.
iTunes — still going strong
At present, Apple Inc. (NASDAQ:AAPL)’s iTunes is the clear leader in terms of the sheer number of users with almost 500 million. The company’s iTunes have become a primary source of revenue for Apple — and has been since the beginning of its digital music download offerings.
The service that is offered with iTunes has also gained quite a good reputation for music distribution, and looking forward, Apple Inc. (NASDAQ:AAPL) will likely continue in this particular leadership role, given that more than 8 in 10 purchasers of digital music have at least used iTunes once.
Currently, iTunes represents 65% of the total paid digital music downloads, with Amazon.com, Inc. (NASDAQ:AMZN) firmly taking second place at 22%. Overall, between year-end 2011 and year-end 2012, music downloads have increased at a rate of 6%.
Given its firm place in the downloadable music arena, Apple Inc. (NASDAQ:AAPL) has gained a great deal of bargaining leverage as far as its contracting of third party digital content providers. Today, in addition to just music, Apple continues to expand into other types of content offerings via its App Store.
Keeping an eye on Amazon
Once simply known as the world’s biggest online bookstore, Amazon.com, Inc. (NASDAQ:AMZN) has come a long way in the digital media world. eBooks have now become a billion dollar plus segment for the company, and also due in large part to its Kindle mobile devices, Amazon has taken advantage of the opportunity to increase sales of the Prime subscription service as well.
One area that has suffered, however, due to the increasing size of more Prime users, is shipping. This is because all Prime members are eligible for free or discounted shipping on their purchases.
Recently, Amazon.com, Inc. (NASDAQ:AMZN) has been adding a substantial amount of content into its own ecosystem — that now boasts more than 24 million movies and television shows, as well as games, books, and other applications. This has made it somewhat easier for Amazon to cross sell products to its existing customer base.
A big part of Amazon’s revenue strategy is to sell its tangible devices at a break-even price in order to hook customers with continued and ongoing purchases of the company’s other more profitable products and offerings. This forward looking revenue strategy accounts for analysts’ estimation of Amazon.com, Inc. (NASDAQ:AMZN)’s share price to increase nearly 18% over the next 12 months.
Android poised to move forward
As with just about anything Google-related, Android has quickly moved into the OS marketplace and essentially taken it by storm. Along with this, Google Inc (NASDAQ:GOOG) Play has also been able to gain a great deal of momentum with users. Like Amazon, Google also sells its tangible devices at a break-even price and makes profit when users purchase any digital content.