iTunes has quickly become a major economic force within the digital economy. By some estimates, Apple now controls more than 70 percent of online music sales and has a larger share of the overall music market than Walmart stores. The success of the iPad will only add to consumption of media within Apple’s tightly controlled OS environment.
From an advertising perspective, Apple’s lack of financial transparency within the iTunes economy is frustrating if not troubling. Any large market suffers when financial performance data is limited. And iTunes, especially for its size, is one of the least financially transparent markets out there. It has about as much transparency as a hedge fund.
Some level of transparency in the market is necessary to build trust, fair play and a level playing field. Limiting these factors will only limit the overall size and growth of the market.
Just to be clear, I am not referring to the transparency of Apple’s overall company performance, but to the specific performance of the plethora of content on iTunes.
What little data that’s available for the iTunes App Store is published by independent sites and developers who regularly scrape the store’s applications and/or websites. While several sites do this at regular intervals, the practice is in violation of Apple’s terms of service. Apple does not provide a sanctioned method for pragmatically gathering and aggregating App Store sales data. As responsible marketers, we have always strived to provide the highest ROI on marketing programs. As our knowledge increases, so can the potential ROI for our clients.
Below are some of what’s discernible from scraped data in terms if iTunes use:
•Count of active applications
•Total Active Apps (currently available for download)
•Total Inactive Apps (no longer available for download)
•Total Apps Seen in U.S. App Store
Count of application submissions
•This Month (Games)
•This Month (Non-Games)
•This Month (Total)
Application price distribution
•Current Average App Price
•Current Average Game Price
•Current Average Overall Price
We have access to more extensive data regarding other markets and networks. While none of these sources is perfect, they provide consistent and robust insight in the performance of sites, online ad networks and broadcast channels.
•Comscore provides key behavioral data on all major websites.
•TNS provides competitive ad spending data for all channels.
•Nielsen provides a host of detailed broadcast viewer statistics (similar statistics are also available for print).
In comparing iTunes to Comscore, TNS and Nielsen, we are practically blind. As marketers we should care about this because, as the saying goes, “In the country of the blind, the one-eyed man is king.” And in this case, that king is Apple.
Besides your 99 cents, let’s take a second to look at what Apple collects and accesses when you purchase a track. A user installs iTunes, registers for a new account (providing CC information), browses Apple’s catalog and then purchases a specific track.
There is no getting around this process as guest purchases are not possible within the iStore. Every bit of digital information from browsing through purchase is available at the customer level, and past, present and future actions are all connected. But more important, any information associated with your credit report/history is also available.
Since everything in the iTunes store is captured at the user level, all browsing and shopping information is also tied back to individual user records. This is what’s powering the recommendation engine within the store. None of this is available to us as advertisers, content creators or content aggregators.
Is iTunes a network, a product, or just a distribution channel? While it seems clear that it is both a distribution channel and a product of sorts, it isn’t clear if it is yet a network. Most advertisers would hold that at this point it is not a network (emphasis on “yet”). The line is blurry and it will undoubtedly become more so over time.
Monopolistic dominance, unfair competitive practices and a lack of overall transparency are not viewed positively by either the Justice Department or the FTC. In the early days of broadcast media, NBC was so dominant that the 1940 FCC “Report on Chain Broadcasting” effectively broke up NBC and created ABC as a result.
As an avid consumer of iTunes content (music, video and apps) I believe that Apple’s success is well earned. However, tales abound of successful networks and products running seriously a-foul of antitrust laws with their uncompetitive business practices.
iTunes is a very large and important economic market place; let’s hope its success doesn’t create a blind spot regarding issues of transparency and fair play.
Steve Kerho is the Senior Vice President of Strategy, Analytics, Media and Marketing Optimization at Organic, Inc.