The One Thing That Apple Is Missing

I guess you can teach an old dog some new media tricks.

Apple's (Nasdaq: AAPL  ) iTunes is about to become the Cupertino giant's springboard to social networking, as its new Ping feature transforms Apple's digital marketplace into a social discovery website.

Hearing Steve Jobs discuss Ping yesterday makes it seem like a slam-dunk.

Artists will be able to post status updates and interact with fans on their iTunes artist pages. Since Apple is the country's largest music retailer, it would seem nuts for any musical artist not to play along.

Viral juices also flow for the fans, who can post bio profiles and connect with either old Facebook buddies or new friends with similar musical tastes.

This is where things begin heating up for Apple -- in terms of monetization -- but it's also where it's missing the boat.

More hooks than a Black Eyed Peas or 3Oh!3 song, but no bait
As Ping connections grow, iTunes users will be able to see what their friends are streaming, buying, and even reviewing. Music charts will be customized to feature what like-minded souls are listening to through iTunes. They'll know what concerts their friends are going to and be able to purchase tickets accordingly. Users can preview 30-second samples of songs being reviewed or purchased and buy them if they like what they hear.

This sounds like a winning move all the way around. Apple will sell more music, and that's good news for not just Apple. Hungry major labels will benefit from an uptick in high-margin digital music purchases. Folks will spend more time on iTunes, at the expense of Pandora and probably even Facebook. Concert attendance should get a boost by going social, and that's great news for Live Nation (NYSE: LYV  ) .

However, the one thing that's missing in all of this is the financial incentive to participate.

Sure, no one is paid to post on Facebook or tweet on Twitter. But it doesn't make virtual door prizes any less attractive.

Whenever I buy movie tickets online, I get prodded to contribute a movie review. Why? I get asked to submit dining critiques after an OpenTable (Nasdaq: OPEN  ) seating. Check, please! What's in it for me? I've been shopping on Amazon.com (Nasdaq: AMZN  ) for nearly 15 years, but I have only bothered to post a couple of product reviews in that time. What's the point? I'm all for helping my fellow online users, but I can better utilize that time -- and my thoughts -- for a chance to get paid for my thoughts elsewhere.

Before you brand me a self-centered punk, ask yourself why I should help out Apple, OpenTable, and Amazon.com before helping out myself? They're not charities. They're using free content provided by ego-stroking souls -- many who fail to realize the value of their own words -- to pad their own bottom lines.

It doesn't have to be that way.

See, as a member of Amazon's affiliate marketing program, it makes more sense to publish my review elsewhere -- linking to the product through a commission-generating hyperlink. Why kick in with a movie or restaurant review when I can just blog about it through Google's (Nasdaq: GOOG  ) Blogger, having Google populate the entry with relevant ads from its contextual marketing AdSense program?

Isn't that what's missing from Ping? Participants will have their opinions resting right next to preview and buy buttons. Why shouldn't Apple let them in on a piece of the action. It doesn't have to be much. We know Apple kicks the majority of iTunes revenue back to the content creators. However, I think folks would be posting reviews, actively listening, and promoting their Ping pages pretty heavily if there were a financial reward. Heck, Apple can even pay them in iTunes dollars. Keep it in the family, you know.

Social music without the earplugs
"I want Sirius XM to make the most of its audience by launching dynamic and sticky online destinations," I wrote two years ago, also hoping for Sirius XM Radio (Nasdaq: SIRI  ) to roll out an App Store program that finally launched last summer. "Shouldn't each of its genre-specific music channels be the catalyst for a social network? Aren't there more outlets to market its original content?"

Sirius XM didn't take my free advice, but it seems as if Apple is positioning itself well to master the space. It's a pity, because this would have been a real game changer if Sirius XM had monetized its Web presence accordingly.

Apple can't be too cocky here. One of Jobs' rallying points is that there are 160 million active iTunes users in 23 different countries. Even the slimmest of fractions latching on to Ping will make it a contender.

However, I keep thinking back to Yahoo!. Three years ago, then-executive Sue Decker referred to Yahoo!'s 250 million Yahoo! Mail accounts as a "dormant social network" worth tapping into. It made perfect sense at the time, given the popularity and constant contact of Yahoo!'s market-leading free email platform. Well, Yahoo! has gone through more than a few stabs at social networking -- and largely missed.

Apple can't just assume that Lady Gaga will be enough to get the network effect rolling, though I'll admit it's a good start. Sooner or later, Apple may have to resort to financial incentives that make sense -- before a smarter, hungrier upstart beats it to the final verse.

Will Ping be a hit for Apple? Share your thoughts in the comment box below.

Google is a Motley Fool Inside Value choice. Google and OpenTable are Motley Fool Rule Breakers recommendations. Apple and Amazon.com are Motley Fool Stock Advisor picks. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Longtime Fool contributor Rick Munarriz thinks that virtual carrots are better than not having virtual carrots. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 02, 2010, at 11:17 AM, Thompr97 wrote:

    The thing that you say is missing from Ping is missing from every other internet forum (be it social, commercial, etc) too. You even pointed that out. Your idea may be novel, but it is new and untried. Good for you. Maybe it would work.

    Your headline would have been more accurate if it had simply been, "Here's a new idea for Apple". Instead you picked a headline that makes it seem like an oversight or failure on Apple's part. I can think of only one reason: trolling for hits.

    Thompson

  • Report this Comment On September 02, 2010, at 3:06 PM, lh100 wrote:

    I simply don't get it.

    Facebook couldn't just put that up themselves? I just feel like Apple keeps pushing doors with their closed ecosystem and forcing on everybody else to adopt their stuff. That makes sense as a company, but for a consumer it is annoying.

    As an investor, it's insane to see how Apple is using one platform to eat up the next big thing. They started from music, and now going to movies, tv shows and now social networks. The key point on there strategy is this however, and i think that's where Apple will succeed : you can only buy music on Itunes(IF you buy it of course). Thus, their power on attracting people is rather strong.

    If Facebook(or Google for that matter..) wants to leverage it's 500 millions members, they should do the same : maximize the use of their social network by allowing purchasing, viewing(free) videos, etc.

    Google could do it with youtube too : there are millions of people doing videos, but having an account is only useful for subscribing, commenting on videos or posting videos yourself. Why not leverage it and make it the next real social network? Google buying facebook would make sense if anything i said made sense..

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