Two of tech’s most important earnings calls for this quarter took place on Wednesday. On the face of it, everything looks like pretty dandy for Apple and Facebook. The Cupertino-based tech giant posted over US$10-billion in profit on revenue of US$45.5-billion, exceeding analyst expectations by a healthy margin. Facebook meanwhile reported a 72% bump in revenue and an 82% jump in ad revenue.
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While high-level executives at both companies are probably pretty damn happy with the results, there are (inevitably) aspects which have people asking questions. The answer to a couple of those questions, at least, is pretty much the same for both companies.
In Facebook’s case, there are concerns that it’s about to enter a phase of “slow growth” — which seems fairly inevitable when you’re used by well over half of the world’s online population and don’t stand a chance of getting into China — and that, as a desktop entity, the social network is entering a period of terminal decline.
In the US at least, the numbers appear to bear that perception out. Take a look at this graph from analyst Ian Maude, which shows just how dominant mobile is becoming as a presence for Facebook:
While the numbers are US-based only, the situation is likely to be magnified in mobile first or mobile only emerging market countries. You’d think that it wouldn’t be a worry for a company that’s been doing everything it can to get its mobile presence right. As Maude shows however, it will have an impact on the social network’s revenues:
But is there anything Facebook can do about that, especially in a world where PC sales themselves are in decline? Moreover, should it be trying to do anything, given that it now has over a billion monthly users on mobile who account for 59% of its total ad revenue?
In trying to find the answers to those questions, it’s worth taking a look at the situation Apple finds itself in with the iPad.
The end of the iPad?
As we’ve already noted, Apple’s overall results probably saw a mass popping of champagne corks at Number One Infinite Loop. The one line note that may have caused the odd flutter of anxiety was the one revealing that Apple had sold 16.35-million iPads during the quarter. That’s a decrease of 16% year over year and around 3-million fewer units than analysts were expecting it to sell.
While Tim Cook tried to gloss over the issue by pointing out that the company’s selling seven times as many iPads as it was iPods at the same point in that product’s history and that it still holds the title for the fastest-growing product in Apple history, it still has to sting a little.
The thing is, tablet growth is slowing down (especially in the developed markets where Apple holds strong) and in emerging markets where growth is still strong, there are a slew of Android tablets out there that can compete with it on specs and obliterate it on price.
In a global market where the iPad was once the only viable choice, it’s not even necessarily the ideal choice any more.
The similarity with Facebook however comes from one of the causes for that slower growth in developed markets: the iPad is as good as anyone needs it to be. In fact, it’s better. Unless you plan on running the latest, graphics rich game, the latest iPad doesn’t offer much that the one before it didn’t. Apple’s made it thinner, lighter and more powerful. It’s increased the screen resolution to beyond the point where the human eye can even notice. In other words, it’s given its users no compelling reason to upgrade from their current iPad.
And here that we can see the similarity with Facebook’s desktop decline. Outside of a wider shift to mobile, Facebook’s seeing a decline in desktop usage and revenues because its mobile efforts are actually starting to work. They might not be wowing the design crowd but the numbers prove that they’re compelling. Just as the current iPad user probably has no reason to buy the new iPad, there’s no real reason for a mobile Facebook user to use it on the desktop.
Apple will, of course, keep selling iPads and people will, of course, keep visiting the desktop version of Facebook. The point is, they will both eventually be supplanted and both companies will survive.
The real question is: how will they deal with what happens next?
