Which Companies Win Big With iOS 6?

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Apple's (NASDAQ: AAPL) announcement of the iPhone 5 last week has created the usual buzz regarding the search for companies that stand to profit from Apple's latest must-have product.  Typically, these analyses focus on manufacturers of components found in the iPhone, such as BroadcomCirrus Logic, and Skyworks Solutions or major wireless carriers such as Verizon Communications, AT&T and Sprint.

The Impact of iOS 6

While it is true that each of these companies will be impacted by the new iPhone, there is a group of companies that are being overlooked as a result of the usual bias towards focusing on the iPhone's hardware.  The release of iOS 6, which will be available for not only on the iPhone 5 but also older models dating back to the iPhone 3GS, should not be overlooked.  The changes in iOS 6 will impact millions of users in addition to those that purchase the iPhone 5.  In particular, there are several companies poised to benefit from these changes.

The first on the list is Facebook (NASDAQ: FB).  As I wrote in a recent blog post, Facebook's recent focus on successfully growing its mobile platforms took a major leap forward when Apple announced that iOS 6 would have integrated Facebook functionality.  As noted on Apple's website, iOS 6 allows users to "Share photos from the Camera app, locations from Maps, links from Safari, high scores from Game Center, and more. Or post a status update from Notification Center or with Siri."  This level of integration directly into an operating system is unprecedented for Facebook.  However, it is hard to see a direct link between these enhancements to Facebook and the company's bottom line; where the benefit will appear is likely through increases in the stickiness and usage rates for Facebook that translate into increased advertising revenue.

Another company specifically mentioned by CEO Tim Cook during the iPhone announcement is Open Table (NASDAQ: OPEN).  Among iOS 6's enhancements is the ability to make restaurant reservations using Siri.  Those reservations are made through Open Table, which immediately makes the company more visible and convenient for consumers.  While customer popularity won't actually make Open Table money on its own, increased customer usage of Open Table drives up the value of the company's offering to restaurants.  Restaurants that want to benefit from Siri's new functionality will sign up with Open Table, resulting in more revenue.

Finally, a third company that is more integrated into iOS 6 is Yelp (NYSE: YELP).  Just as Open Table received the gift of Siri integration, so too does Yelp.  Similar to Facebook and Open Table, this integration should translate into increased use of Yelp's reviews; this increased usage should translate into higher advertising revenues for Yelp.

Apple's decision to integrate Facebook, Open Table and Yelp into iOS 6 provides a major vote of confidence for each of these companies.  Open Table and Yelp in particular have felt pressure from competitive offerings (both real and perceived) in recent months.  

Battle Lines Being Drawn?

The rivalry between Apple's iOS and Google's (NASDAQ: GOOG) Android operating system has intensified in recent months as both companies try to gain market share in the rapidly growth smart phone and tablet markets.  What is of particular interest is the contrast in strategies between the companies.  Google is pushing Google+ as a social networking alternative to Facebook, plans to roll out a Zagat-branded reservation service that directly competes with Open Table and is bulking up the Google Places content (including integration of Zagat reviews) to challenge Yelp.  

While Google is developing its own web-based offerings internally that compete directly with Facebook, Open Table and Yelp, Apple has taken the approach of partnering with these established market leaders and making the user experience better by integrating the best of what each company has to offer.  It is starting to look like battle lines are being drawn; the battle hasn't become as nasty as to prevent Google apps on iOS or Facebook, Open Table and Yelp apps on Android, but each of these companies has clearly taken a side.  The contrast is interesting: Apple has restricted its iOS to only devices manufactured by Apple, but has partnered with the companies noted above for best-in-class content.  Conversely, Google has partnered with hardware manufacturers to promote Android devices branded by Samsung and Amazon.com, but has thus far been more interested in enhancing its own apps rather than partnering with existing content providers.  

Picking a Winner

If I had to pick a winner of all of the companies mentioned above, I'd stick with the easy choice: Apple.  Apple continues to offer the best mobile user experience, has the best apps and the iPhone 5 (with iOS 6) continues its track record of market leadership.  However, this market is so huge that there is room for more than one winner; in fact, I expect Google to outperform the market over the long haul as well.  As this translates to Facebook, Open Table and Yelp, the announcement that each will be embraced by Apple in iOS 6 is certainly a positive.  Each certainly has the potential to beat the market, but it will be important to monitor the ability of each to monetize their apps and fend off competition; risks to long term profitability and disruption from competitors is certainly higher with these content companies, so keep this in mind prior to purchasing shares.

BrewCrewFool owns shares of Google and Apple. The Motley Fool owns shares of Apple, Facebook, and Google and has the following options: short OCT 2012 $40.00 calls on OpenTable and long OCT 2012 $40.00 puts on OpenTable. Motley Fool newsletter services recommend Apple, Facebook, Google, and OpenTable. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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