AI: Apple iPhone is our ‘WeChat’

...the ‘Everything App Phone’ is here already

AI In My View, August 6, 2023

In this Sunday’s AI ‘In my View’ post, I want to suggest that we already have an ‘Everything App’ outside of China, where the coveted ‘One’ is ‘WeChat’, by Tencent.

It’s Apple’s iPhone itself, complete with built-in social messaging, payments via Apple Pay & the Apple Store, core Apple & third party Apps, AI/ML, along with the growing number of Apple subscriptions that make up the company’s burgeoning ‘Services’ revenue lines. Before Elon or others try to create one from scratch. 

As I outlined earlier this week, ‘Services’ are  already a quarter of Apple’s revenues in the most recent quarter, and over 70% of its gross margin. So it’s a home run already for users, stakeholders, and investors, and a contributor to its market leading $3 trillion valuation. These are core Apple Apps and the ubiquitous iOS ecosystem, with growing, global Scale. Let me unpack it here, and make my case. 

To take a step back first, one needs to underline again the global ‘Holy Grail’ chase by companies large and small to build an ‘Everything App’, also known as the ‘Super-App’, or the ‘One App to Rule them all’. 

And it’s been a burning ambition driving the ‘world’s richest man’, Elon Musk, for almost a quarter of a century. Thus his impetus to turn his $44 billion ‘X-Twitter’ purchase into the ‘X Everything’ app. And build an AI company called xAI to infuse AI smarts in our hands to boot. 

As I highlighted in “AI: Elon’s ‘Everything App” a few days ago, this NY Times piece underlines the current inspiration of this quest:

“Much of the desire to create an everything app is rooted in Asia, where such apps have flourished for more than a decade. In Japan, people use Line, the country’s dominant messaging platform, to store vaccination cards and shop for clothes. In South Korea, people turn to KakaoTalk, which started as a messaging service, to send money and request taxi rides.”

“None have been as successful as Tencent’s WeChat, a messaging, social media and payments app used by more than one billion people, mostly in China. WeChat dominates the mobile internet and is a one-stop shop to read news, talk with friends, order pizza or pay the landlord.”

It highlights the range of folks that have tried to build one here:

“Four years ago, a billionaire tech executive leading one of the world’s pre-eminent social platforms laid out a vision to transform it into an app that could do it all. In an online manifesto, he wrote that the app would not only be central to written communications but have audio, video, payments, commerce and more.”

“The idea was akin to that of an “everything app” espoused recently by Elon Musk, the owner of Twitter. But the dream belonged to Mark Zuckerberg, the founder and chief executive of Meta, which owns Facebook, Instagram and WhatsApp. In a 2019 blog post, Mr. Zuckerberg outlined how he would turn WhatsApp into an app that could be a platform for many “kinds of private services.”

“In Silicon Valley, the pursuit of an everything app has come up time and again as tech leaders have strained to expand their digital empires. Mr. Zuckerberg tried it. So did Dara Khosrowshahi, the chief executive of Uber. Evan Spiegel, the head of Snap, said he wanted to go for it, too.”

“Yet those efforts fell short, with the tech executives unable to replicate the magic that has abounded in Asia with “super apps” like China’s WeChat, Japan’s Line and South Korea’s KakaoTalk. U.S. tech giants have instead run into cultural differences, regulatory scrutiny and a splintered financial system that has made the quest to build such apps more difficult.”

And there are contenders for this ‘Everything App’ in the US already. My friend and investment luminary Josh Brown makes a well-reasoned case for Uber potentially being the closest contender in 2023 with its market leading Uber and second in the delivery category Uber Eats service:

“While Elon Musk fantasizes about the possibility of Twitter users turning over their financial information to his demented fighting pit circus, Uber has already laid the groundwork to actually become the “Everything App” that “X” will never be. Uber has a ten year head start technologically, a massive user base (that is actually paying money) and a revenue base across which to spread the cost of this vision.”

It’s a comprehensive and well-argued case. And worth reading in its entirety. I do think that in those categories, Uber is well on its way to fusing user identity, trust, and payments into a service that brings so many things to one’s door, in addition to transporting them from door to door.

But as I look at the iPhone in my hand, it seems like but for the ‘App’ moniker, we have the ‘Everything App Phone’ in our hands already.

It starts of course with the coveted ‘Blue Bubble’ Apple Messages (vs. Google Android’s ‘Green Bubbles’), already connecting me to everyone that’s important to chat with personally and professionally.

Just like WeChat is a critical social messaging service for a billion plus hard-working folks in and around China. There are over two billion Apple users on iPhones, iPads, Macs and other devices, so there are some hefty numbers there already, as the FT outlines:

“Gen Z users — those born after 1996 — make up 34 per cent of all iPhone owners in the US, versus 10 per cent for Samsung, according to new data from Attain, an adtech data platform. The figure helps to explain how the iPhone grew its overall market share of actual phone usage from 35 per cent in 2019 to 50 per cent last year, according to Counterpoint, enabling Apple to grow its profits even as the broader market stagnates.”

For payments of course, I have Apple Pay, introduced in 2014 by Apple, and is the leading mobile payment contender in so many markets outside China. Some high-level numbers:

“Top Stats At A Glance:

-In early 2023, Apple Pay had a strong presence in the US, and other markets: US (53%), Canada (55%), France (62%), Australia (50%), and the Netherlands (44%) are the countries where the highest percentage of in-store users is recorded.

-Approximately $10 trillion worth of transactions are handled annually by the leading credit card system Visa, while Apple Pay manages over $6 trillion in transactions.”

And that’s before Apple’s nascent efforts with its Apple Card and Apple Bank with now over $10 billion in deposits. And that’s whether or not Goldman Sachs remains a partner in that complicated endeavor to bring fintech Apple style to the mainstream masses.”

Next up, of course there’s the Apple Store, introduced in 2008 (against Steve Jobs’ initial wishes), which boasts $1.1 trillion in App Store commerce in 2022, with $104 billion in digital sales, as this report outlines:

“Apple says its App Store ecosystem generated $1.1 trillion in developer billings and sales in 2022, 90% of which was commission-free — a metric it likes to tout to downplay the growing complaints about the high cost of doing business on a marketplace that generally takes a 15% to 30% commission on in-app purchases and paid downloads, with some exceptions.”

“This $1.1 trillion breaks down as $910 billion in total billings and sales from the sale of physical goods and services, $109 billion from in-app advertising and $104 billion for digital goods and services.”

“The figures are a sizable increase from 2019 data, when Apple said the App Store had facilitated $519 billion in commerce, with then “just” $61 billion coming from digital goods and services.”

Even Elon appreciates the power of the Apple Store and it’s economics, with his just-announced intention to ‘talk to Apple CEO Tim Cook’, about a deal on those Apple Store fees:

“Apple does take 30%, but I will speak with @tim_cook and see if that can be adjusted to be just 30% of what 𝕏 keeps in order to maximize what creators receive.”

So Apple has payments in its iPhone/iOS ecosystem, via Apple Pay and Apple Store, a fast growing Apple Card and Bank, a growing and loyal multi-billion global user base of social network driven messaging fans, the widest range of ‘vetted’ third-party Apps, and a whole array of online and offline products and services that can be accessed via the iPhone. 

And it doesn’t even have to be the latest and greatest model of iPhone. Unlike the much more fragmented Android ecosystem, Apple services via iOS are supported on iPhones going back multiple generations. For no extra charge. It’s a long appreciated iPhone feature worldwide for a reason. 

And this is before we talk about the advantages of doing all this on related and inter-connected Apple ecosystem platforms like the iPad, Macs, market leading Apple ‘Wearables’ like the Apple Watch and Apple AirPods, and of course the upcoming game-changing Apple Vision Pro next year (bargain to boot at $3499). With over two billion users worldwide.

So for those reasons and more, I view Apple as being the leading contender for “The Everything App Phone”. That’s what I think we should be calling this coveted holy grail opportunity. And that’s before new AI driven capabilities being added to the Apple Machine Learning (ML) software and hardware driven ecosystem and Edge, in the months ahead.

It all depends on the frame one looks at the opportunity and current reality. Doesn’t mean Elon and others won’t try hard to build one and compete, but there’s already a leading horse in the race. Stay tuned. 

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here).