Digital Ecosystems – Not so skewed.

Facebook sponsored report is very misleading. 

• Comscore’s latest study seems to indicate just how dominant Apple and Google are on their own platforms but I think this is very misleading as RFM’s research tools quickly point out how much more balanced the real situation is.
• Comscore’s study surveyed 4,000 people in the USA along with the data that it gathers from apps to create a tiering by MaU (monthly active users) of Digital Life services used by US users during the month of November 2020.
• The findings are striking:
  • First, iOS: 9 out of the top 10 apps by MaU on iOS are 1^st party apps from Apple including Weather, Photos, Camera, Clock, and so on.
  • Only YouTube (8^th) makes it into the top 10 with Facebook coming in at the 11^th spot.
  • Second, Android: 8 out of the top 10 apps by MaU on Android are from the Google Ecosystem with only Facebook (5^th), and Facebook Messenger (6^th) making it into the top 10.
• This data strongly implies that both Apple and Google utterly dominate their platforms and adds weight to the notion that they compete unfairly to keep competing offerings at bay.
• It also underlines the big advantage that is conferred by preinstalling apps on devices prior to sale and setting them by default.
• This has long been known to be an advantage which is why Google pays Apple billions of dollars every year in order to be the default search provider on iOS.
• Apple has rejected the findings of this study and, in my opinion, is completely right to do so for the following reasons.
  • First, RFM’s Digital Life Analysis: For 9 years, RFM has assessed the digital ecosystems on the basis of time spent in addition to active users.
  • RFM’s most recent assessment of developed markets suggests that Apple services cover 52% of the time spent on smartphones and tablets while Google covers 54% and Facebook 44%.
  • This indicates that the true competitive situation is much more balanced than the Comscore study suggests.
  • This highlights some of the problems with looking at MaU in isolation as a single server ping per month can be counted as a user.
  • Second, money: From mobile devices in the USA during calendar Q1 2021, Google generated $17.5bn in revenues (RFM estimate) while Apple generated $10.0bn in services (RFM estimate) and Facebook generated $12.4bn.
  • Furthermore. App Annie’s revenue grossing charts reveal that in the top 10 apps generating revenue on iOS and Android, there is not a single 1^st party app present.
  • This cuts strongly against the view that Apple and Google are dominating their platforms and that 3^rd parties are unable to get a foothold or sell their products and services.
• While it makes complete sense that almost all iOS and Android users use 1^st party apps that come with their devices (hence the high MaU), the data indicates that they do far more on top of that and spend the majority of their time elsewhere.
• Hence, I suspect that if Facebook wants to use this study as part of its current rivalry with Apple and Google, it is going to experience a lot of pushback and with good evidence to support the rebuttal.
• The complete picture also suggests that Facebook dominates its segment of social networking and that attempts by both Apple and Google to encroach on its user engagement and the revenue it earns have so far been unsuccessful.
• Facebook along with Amazon are viable challengers in the world of digital ecosystems as their revenue growth and their market capitalisations also suggest.
• Despite the positive fundamental outlook, I still view the FAANG names as being skewed towards the downside in terms of risk.
• This means that good news gives a small rally while bad news results in a large correction.
• I continue to look elsewhere.