Apple will become a trillion-dollar company based not on iPads and Apple TV, but payments.
Imagine taking out your iPhone and instead of buying Angry Birds you bought the latest Groupon.
Or one-click bought the latest object d'art at OneKingsLane or Fab on your iPad seconds after downloading and launching their app.
Or you took out the awesome Hotel Tonight and without ever having signed up for the service you booked a room -- and paid for it without typing in your credit card number.
Who has 100M credit cards?
Right now those purchases are uber-painful on a mobile phone. You have to create an account, enter your address and enter your credit card info.
Buying apps is easy and we do it all day long--on iOS at least -- because our credit card number is already in the device.
iOS is like being part of a university club: we know who you are when you walked in and, yes, we have your billing information. No need to show your ID and -- gasp! -- don't ever take out money in the club to pay your bills! So uncouth, are you a heathen dear sir?
Buying on Amazon is easy and we do it all month long -- because our credit card number is already stored.
Sensing a pattern here?
The person with hundreds of millions of stored credit cards wins big. There are only two people on the planet who have stored over a hundred million active credit card numbers that I can think of: Apple and Amazon.
One is in commerce and one isn't -- yet.
Imagine if app developers could accept payments from Apple users and bill their already-stored credit cards. How much would it be worth to remove the signup friction?
3%? In a heartbeat!
5%? Painful, but I'll do it.
7%? You bastards, but I'll still do it.
10% You're killing me Apple, but my product has a 30% margin so frack it.
If you're selling commodity products like flatscreen TVs, you'll break at the 3% mark, but if it's hotel rooms, flash sales or deals, well, you'll take it on the chin all the way to the 10% mark.
And if you don't, someone else will.
In the Calacanis household we buy at least 20+ apps a month. It's a $50 to $100 monthly addiction, and it's getting worse and worse by the day (or better depending on how you look at it).
Apps are the new Starbucks. Apps are our new guilty pleasure.
A daily "pick me up" that gives a longer and more fulfilling dopamine rush than a frappuccino -- and without the calories (y'all heard on "60 Minutes" that sugar is now toxic, right?).
If you're going to burn $3 to $5 a day consuming something, an app is the perfect little fix.
Apple's neuro-linguistic programming (NLP) has trained us to solve our problems with apps.
You have problems? We have solutions.
"There's an App for that" is a cult manifesto on par with "live your best life!"
Bottom line, we've been programmed that "installing" the latest app will make our lives better. The progress status bar at the bottom of an app icon is an emptying syringe.
We're all app junkies, and for good reason: they're a delightful rush and cheap.
There's a reason why crack and apps are the same price.
Apple will sell $5B in apps this year and make $1.5B from their 30% stake. Almost pure profit, as the App Store can't cost more than $100M to operate. In fact, the marketing of the App Store is probably 10x the cost of running it (someone in advertising please fact check my ass on that one).
PayPal had over $4B in revenue last year. They processed over $33B in payments in Q4 alone. Mobile payments are PayPal's huge growth area: 5x growth from 2010 to 2011.
And $ebay has been slightly above competent at running PayPal.
I mean, to let Dwolla and Square into your market, and to not advance the PayPal product over the past decade is just pathetic. Former PayPal executives have told me they're mortified, depressed, heartbroken and pissed off at PayPal's lameness.
Apple payments could destroy PayPal in short order.
When Apple releases this product -- and they will -- it will spur massive ecommerce and consumption on a global basis.
If iPhones did just 10% of the revenue of movie tickets sold in the U.S. via this method, it would be $1.2B of the $10.17B spent in 2011 on tickets.
That's a billion in pure profit.
Remember, Visa and American Express still get their take and they still handle all the billing. Apple is just charging a convenience tax that would be well worth it to internet brands and retailers.
The biggest hurdle in buying movie tickets on your phone is trying to type the characters it takes to enter your name, expiration date, security code, credit card number and zip code.
If iPhones accounted for 1% of restaurant sales, that would be $6B of the $604B spent in 2011.
Again, pure profit. What if they get 2%+ of restaurant sales -- that seems possible to me? $15M in pure profit.
Start doing the math and it gets scary: Apple would have massive margin, and vendors who didn't accept iPhone payments would be at a massive disadvantage the same way folks who didn't take credit cards were in the 70s and 80s.
If you're over 30 or 40, you can certainly remember selecting a restaurant based on which credit cards they took.
Apple could create this same effect with their NLP-lead marketing.
Get ready for a Think Different/There's an App for that campaign around "Do you take iPhone right?"
I'll write one of the following pieces this weekend based on your vote:
a) "Wake up Apple: Dividends are death!"
b) "Inside The Y Combinator Valuation Bubble"
c) "Screw a search engine, Facebook build this"
d) other: _______________
Click here to vote on SurveyMonkey.
11:39 AM PDT Fri, Apr 13, 2012