WWDC, the Calm Before the Innovation Storm

WWDC, the Calm Before the Innovation Storm

For some watchers, WWDC’s keynote may have been viewed as a sleeper, given there were no new announcements that will directly impact revenue. This was generally expected, given the event is focused on developers and adding new features to tighten the integration between the company’s products, something only Apple can do.  

Out of the flurry of announcements, these five stood out to us:

  • Mail Privacy Protection that will reduce spam.
  • FaceTime scheduling, along with music, video and document sharing features.
  • Apple Wallet driver’s license support.
  • Siri voice control expands in the home to Apple TV and third-party hardware.
  • Watch adds biomarker: respiratory monitoring.

The calm before the innovation storm

Some observers may view WWDC as evidence that innovation at Apple is waning. We disagree. The announcements today collectively add up to a tighter ecosystem, which means products that are easier to use. Keep in mind that Apple’s most exciting hardware announcements typically come in September and October. From a high level, this year, and maybe even next year’s WWDC event, will amount to a calm before an Apple innovation storm. Out of view today is Apple’s intense ongoing development related to new product categories around augmented reality wearables and transportation. While the details and timing of these efforts remain a mystery, we believe it’s a function of time that these product categories see the light of day. Today, Apple is stepping into a new growth curve thanks to the accelerating digital transformation. In the next five years, new addressable markets will be added to the growth story.

The elephant in the room: developer relations

The backdrop of this year’s developer’s conference is unique because it falls under the shadow of the recent trial with Epic which takes aim at the App Store take rate. On that topic, we think the decision will largely favor Apple. While Apple did not address the trial directly, it made a subtle overture to remind developers what the company is doing to earn its 15%-30% commission. This included reporting for the first time the App Store’s reach, which is currently 600m unique users per week. In essence, every two weeks every global Apple user visits the App Store.

Regarding announcements, the company added “In-App Events,” a feature that will allow developers to promote live events to better engage users. Additionally, Apple introduced “Xcode Cloud,” a cloud-based solution that makes it easier to build, test, and deploy apps across the family of Apple devices.

A laundry list of announcements

iOS

As expected, Apple announced an enhanced notification management system, “Focus,” that allows users to control their notification flow based on their current status, e.g., driving, working, sleeping. While not a game changer, it’s a nice tool to control the increasing notification barrage.

FaceTime was overhauled with better sharing and scheduling features. On a feature by feature basis, we view FaceTime as now superior to Zoom. From a branding perspective, Zoom still owns the lucrative business market, which will likely take years for FaceTime to erode.

Physical drivers licenses are finally going away, as iPhone users will be able to add their driver’s license to Apple Wallet. Adoption will take time, given only a hand full of states will accept a digital license initially. Apple’s emphasis on privacy uniquely positions the company amid its big tech peers to offer this feature.

Privacy

Mail Privacy Protection will hide a user’s IP address, location and whether they opened an email or not in an attempt to cut down on spam and declutter inboxes.  There’s likely going to be a slight negative impact on advertisers, which at this time is difficult to assess.

iCloud+, which will be priced inline with the existing iCloud service, will use a private relay to ensure traffic leaving your device is encrypted. A “Hide My Email” feature will allow users to sign up for online services without sharing their actual email address, eliminating the need to use a burner email account. In short, iCloud+ is an example of Apple increasing the value/price proposition for users to ultimately grow its services revenue.

WatchOS

Within WatchOS, the new “trends” feature allows users to track key vitals including heart rate, activity, blood-oxygen levels, respiratory rate, and walking stability and share the data with health care providers. Users can also monitor these vitals for an elderly parent. The big picture is health and wellness continues to be a focus for Apple and the Watch is a central piece to that end. We estimate just over 10% of iPhone owners have a Watch, and will climb to more than 40% over time.

MacOS

MacOS Monterey brings a “Universal Control” feature that lets users control a Mac and iPad with the same mouse. Essentially, an iPad can be used as a Mac’s second monitor.

ARKit

The new “Object Capture” will making it easier to convert photos into augmented reality content. Unity is currently using the capture tool which increases the likelihood it gets broadly adopted. This is a welcomed feature, given streamlining content creation for augmented reality is a bottleneck to the theme’s adoption.

Home

HomeKit now allows a HomePod to be paired with Apple TV to control a TV. Additionally, HomeKit will expand the Siri API for more third-party hardware makers. Apple Watch is also being integrated with HomeKit to control and monitor the home from your wrist.

Announcements we were hoping for and didn’t see

Apple did not reveal new MacBook Pros with M1 chips, which was a WWDC prediction of ours. Separately, there was no mention of MR goggles, which we had in the long-shot category. Our best guess is that an MR device will be previewed at next year’s WWDC.

Disclaimer

Apple