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Apple Inc. vs Facebook Inc: Who Can Revolutionize Mobile News?

By Leo Sun - Jun 17, 2015 at 7:00PM

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Why are Apple and Facebook trying to lure news publishers into their walled gardens?

Apple (AAPL 0.11%) recently announced News, a free newsreader which lets publishers integrate their stories into a native iOS 9 app. The app has a Flipboard-like interface, and publishers can format articles to resemble the ones on their websites. Several major publishers -- including the New York Times (NYT 1.63%), BuzzFeed, Atlantic Media's Quartz, and Disney's ESPN -- will provide content for the app when it arrives this fall.

Apple News on iOS 9. Source: Apple

Yet Apple isn't the only tech giant which wants to gather news in a single app. Facebook (FB 1.41%) recently announced Instant Articles, which lets publishers publish articles directly within its News Feed. Facebook claims that those optimized articles will load faster than external articles. Many of the publishers that are partnered with Apple, including The New York Times and Buzzfeed, are also signed on with Facebook.

Will this new trend of app-centered news publishing change how mobile news is viewed? Or is the market too fragmented to be conquered?

Apple vs. Facebook: By the numbers
Apple has two core strengths when it comes to tethering users to new apps. Its iPhones account for 18% of all smartphones worldwide, according to IDC, while 83% of all iOS devices have been updated to iOS 8. That unified hardware and software ecosystem enables it to roll out new apps very quickly.

Facebook is the world's largest social network, with 1.44 million monthly active users as of last quarter, and 1.25 billion of those users visit Facebook on mobile devices. Having that many regular visitors makes it a streamlined and focused platform for both advertisers and news publishers. As a result, Facebook's mobile app generated more display ad revenue than Google's mobile display ads last year.

Facebook's Instant Articles. Source: Facebook

Apple and Facebook are offering publishers the same deals. Publishers can sell their own display ads within their apps and retain 100% of the revenue. However, Apple and Facebook will also sell ads within the app, retaining 30% of the revenue and giving the remaining 70% to publishing partners. Both platforms will "suggest" more stories to read, based on previously read articles.

Apple vs. Facebook: Overlapping ambitions
Launching a dedicated news app can help Apple reduce the time iOS users spend using Google (GOOG -0.08%) (GOOGL -0.16%) services like Search and News. That complements Apple's recent moves to carve Google services out of the iOS ecosystem. It's already dumped Google for Microsoft (MSFT 1.12%) Bing as the default search for Siri and Spotlight, blocked Google Maps on CarPlay, and will enable developers to make ad-blocking extensions for mobile Safari in iOS 9.

Apple's News app would also boost revenue at its tiny ad business, iAd, which houses its in-app and iTunes Radio ads. According to eMarketer, iAd likely only generated $487 million in revenue last year, which would account for just 0.3% of Apple's top line. By comparison, Facebook, the world's second largest Internet advertising company after Google, reported $11.5 billion in ad revenues last year.

For Facebook, a rising dependence on social networks for news represents a golden opportunity for the company and its news publishing partners. According to Pew Research Center's report from last September, 50% of Americans have shared or reposted news stories, images, or videos on social networks. 30% of Americans relied on Facebook for news, compared to just 8% who depended on Twitter (TWTR 3.91%).

Google's comparable app, Google Play Newsstand. Source: Google

Like Apple, Facebook is also shoring up its defenses against Google. The more time users spend within Facebook's walled ecosystem -- which includes its own hosted videos, Messenger, and apps and sites linked via single sign-ons -- the less time they'll likely spend on Google services.

Potential pitfalls
Apple and Facebook are respectively 800-pound gorillas in smartphones and social networks, but that doesn't guarantee the success of their news publishing efforts.

One of the biggest obstacles is market fragmentation. There are already over 1,000 "news reader" apps in Apple's App Store, as well as over 23,000 other "news" related apps. Popular ones include Flipboard, Feedly, Newsify, Google News, and Smart News. News channels and publishers like CNN, the New York Times, and Buzzfeed also have their own apps.

It could be tough for Apple or Facebook to win over people who used to getting their mobile news from those apps. Other social rivals -- like Snapchat's Discover, LinkedIn's Pulse, and Twitter -- are also pulling users in various directions.

Who has the better strategy?
In my opinion, Facebook's strategy makes more sense than Apple's because it's passive. Users simply need to keep using Facebook, sharing articles, and relying on the site for news updates. Publishers within Facebook get faster loading articles, and both parties generate ad revenues.

While Apple has a solid track record with hardware sales, it has a spottier record with first-party apps. Apple Health and Apple Pay, for example, haven't really revolutionized health tracking or mobile payments yet. Therefore, it's unclear if iOS users will even bother installing its News app when it arrives.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$140.52 (0.11%) $0.16
Microsoft Corporation Stock Quote
Microsoft Corporation
$262.52 (1.12%) $2.90
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,116.10 (-0.16%) $-3.30
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$183.83 (1.41%) $2.55
The Walt Disney Company Stock Quote
The Walt Disney Company
$103.26 (1.64%) $1.67
The New York Times Company Stock Quote
The New York Times Company
$33.08 (1.63%) $0.53
LinkedIn Corporation Stock Quote
LinkedIn Corporation
Twitter, Inc. Stock Quote
Twitter, Inc.
$37.16 (3.91%) $1.40
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,116.79 (-0.08%) $-1.73

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