Apple and Google's App Stores Are Still Posting Solid Double-Digit Growth
App analytics firms SensorTower and App Annie have each released estimates for Q1 spending on Apple (AAPL) and Alphabet/Google's (GOOGL) lucrative app stores. And though their numbers differ a little, it's easy to spot some common trends.
Though global smartphone sales have been declining in recent months, SensorTower estimates total spending on the iOS App Store and Google Play rose 16.9% to $19.5 billion in Q1. App Annie estimates total spending on the App Stores rose 20% to over $22 billion. Previously, SensorTower estimated total App Store and Google Play spending rose 22.7% last year to $71.3 billion.
Apple and Google, as a reminder, typically take a 30% cut on app store transactions such as paid downloads and in-app purchases, and cuts ranging from 15% to 30% on subscription payments made through their platforms.
SensorTower and App Annie both think Google Play spending grew faster than App Store spending in Q1, but also that App Store spending remained much higher -- depite the fact that Google Play is now easily handling more than twice as many app downloads. SensorTower thinks App Store revenue rose 15% to $12.4 billion, and that Google Play revenue rose 20.2% to $7.1 billion. Apple's favorable demographics help out here, as does the fact that the App Store, unlike Google Play, operates in China.
China, it's worth adding, appears to have been a headwind for the App Store in Q1. SensorTower estimates App Store downloads fell 21% annually in China, but were up 3.6% elsewhere. The Chinese government's 2018 halt on game monetization approvals (it began to thaw in Q1) has weighed on the country's game developers and app stores.One thing to watch going forward: How much Apple's Arcade game-subscription service, which launches this fall and will provides access to over 100 games lacking ads or in-game purchases, will weigh on App Store gaming revenue. SensorTower estimates games accounted for over two-thirds of the App Store's Q1 revenue. Much as it was ready to cannibalize iTunes music download revenue via Apple Music subscriptions, Apple now seems ready to cannibalize some of its App Store gaming revenue via Arcade subscriptions.
Tesla's Latest Moves Suggest It's Scrambling to Prop Up MarginsHardly a week passes at this point during which Tesla ( TSLA) doesn't make some kind of meaningful change to how its cars are priced and/or sold. Last night, Elon Musk's company:
- Announced that the recently-launched, Standard Range version of the Model 3 will no longer be sold online, nor will the long-range, rear-wheel drive version of the sedan. Tesla, which six weeks ago said it's shifting to an online-only sales model, now says customers will have to call Tesla or visit a retail store to buy those two cars.
- Began offering leasing options for Model 3 trims. Tesla says customers can choose between annual mileage options of 10,000, 12,000 and 15,000 miles, while adding they won't be able to buy their car once their lease is up, since Tesla plans to use the cars to support its planned driverless ride-hailing service.
- Announced that all vehicles will now be sold with Tesla's Autopilot system enabled, and that prices are being hiked as a result. Tesla notes that the Standard Plus version of the Model 3, which previously had a $37,500 base price with Autopilot costing an extra $3,000, will now cost $39,500.
One clear takeaway from the changes is that Tesla, though having gotten a boost lately from the start of European and Chinese Model 3 sales, is still scrambling to turn a profit at a time when sales of its costlier Model S sedan and Model X crossover have come under pressure.
Ending online sales for the Standard Range version of the Model 3, which had a $35,000 base price before the Autopilot-related price hike and had long faced questions about its margin profile, very much feels like a move meant to boost Tesla's gross margin. So does hiking vehicle prices across the board while making Autopilot standard, given that Autopilot has been activated via software -- the hardware has been included within Tesla cars whether or not it has been activated -- and thus costs virtually nothing for Tesla to enable.
And by refusing to give consumers who lease the Model 3 the option to buy the car, Tesla seems to be deliberately trying to limit leasing activity -- and thus the capital needed to support its leasing business -- in the wake of a Q1 for which the company has suggested it posted a loss.
None of this is too encouraging for a company that still has an enterprise value (market cap plus net debt) that's around $57 billion. One doesn't have to buy into the predictions of imminent doom made by some die-hard Tesla bears to remain cautious about its stock (in spite of its recent selloff) on account of the company's recent sales trends, profit commentary and sales and pricing actions.
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