Last year, according to The Information, Apple invested nearly $300 million in Google cloud services.
That represents an almost 50% increase in year-over-year purchases.
Cloud services are fundamental to most technologies today, but Apple’s eye-opening increase in investment makes one wonder what it is they are planning next.
For the world’s most valuable technology company, valued at more than $2 trillion, $300 million still seems hefty because it makes Apple Google’s biggest corporate client, overtaking ByteDance and Spotify.
In terms of memory, Apple expanded its space for user data by 470 petabytes, taking its total space over 8 exabytes.
For perspective, if, on average, a High-Definition (HD) movie on Netflix takes up to 3 gigabytes per hour, Apple can now store a film that runs for nearly 304,414 centuries.
What in the world is Apple up to?
Let’s find out.
An unprecedented rise in users
The most obvious explanation is that Apple’s users are growing at an alarming rate, and so is their reliance on Apple’s cloud services.
Apple’s sweeping business can be divided into six segments:
- Home accessories, and
Apple claims that, currently, there are more than 1.4 billion Apple devices active worldwide. More than 900 million of them are iPhones.
But Apple no longer is a hardware company.
While iPhones make up almost 50% ($137 billion, as of 2020) of Apple’s annual revenue ($274 billion, as of 2020), it is its services that rank second in earnings.
In 2020, Apple’s services earned it $53 billion in revenue, making up nearly 19% of its total.
And that number is expected to rise. Even skyrocket, according to a few experts, overtaking even iPhones to become Apple’s most important business segment.
Last year, Apple has been reported to garner more than 620 million subscribers, in total, across all its services. Compared to 2019, its subscribers have increased by almost 30%. And, compared to 2018, by almost 100%.
If Apple’s subscribers to its services, namely —
- Apple Music
- Apple Arcade
- Apple TV+
- Apple News+
- Apple Fitness+
- Apple Pay
— If its subscribers double every 4 years or so, it makes perfect sense to double-down on cloud services.
Let us not forget that Siri’s (660 million users) data as well personal documents like camera photos, videos, recordings, word documents, and so forth are also uploaded to Apple’s iCloud.
Lastly, it is not just existing services, like Apple Music, Apple Arcade, and Apple TV+, whose library of content will keep rapidly expanding, requiring increasingly more cloud space. But Apple, renowned for innovation, is perhaps planning to double-down on services itself.
There are rumors about a virtual reality (VR) headset and a self-driving car — massive innovations in hardware that could lead to massive innovations in software.
More user-generated data requires more cloud space to store that data.
You see, Apple’s principle is quite simple. Make products bundled with tightly integrated services, which compels customers to buy more products to make the most of those tight-knit services.
If you buy an iPhone and want Siri-integrated earphones, you buy the AirPods.
If you are into fitness and wish to make the most of Fitness+, you also buy the Apple Watch.
What about Siri-integrated smart home accessories? That’s the HomePod.
And what about your ever-increasing private data? Is it backed up? Is it encrypted? Well, it is on iCloud.
In essence: Buy a product to avail services, which compels you to buy more products, and so on.
In other words, lure people into their rosy ecosystem and make sure they never leave.
Apple is investing in more real estate to expand that ecosystem.
The economics of cloud services
The second explanation is that it is much more economical for Apple to buy servers instead of building its own.
The explanation makes sense when we consider the sharp rise in Apple’s users.
Apple could source, build, and maintain its own servers. It most certainly is capable.
But lately, Apple has grown so rapidly that it perhaps lacks the time to do so.
And why not? Apple is getting an incredible bargain on its purchase.
The standard rate for getting 8 exabytes of data per month is $218 million. Apple, however, is paying $300 million for 8 exabytes of data per year.
Apple could eventually build and maintain its own servers, just like it builds its own microprocessors. It is not news that Apple likes control.
However, it seems unlikely that Apple will end its reliance on Google’s services.
In fact, Apple also stores its users’ data on Amazon’s and Microsoft’s servers, as does all of Big Tech.
Because you do not want to put all your eggs in one basket.
The third explanation is perhaps most probable: it is a mix of the two.
Apple understands that its number of users will soar, and it can offer them its services at a great deal.
The result is great competition, a great deal, in turn, for consumers.
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