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Apple's Place in the Social Networking Scene

By Walaika Haskins MacNewsWorld ECT News Network
Dec 25, 2007 4:00 AM PT

In the online world, it seems teens and young adults reign supreme. The 18- to 24-year-old demographic can make or break a company seeking to grab that proverbial tiger by the tail.

Apple's Place in the Social Networking Scene

However, as the success of iTunes and social networking sites such as MySpace and Facebook have shown, companies wishing to create a compelling environment can do so by bringing the youngsters music and a place to congregate.

"The target demographic for most social networking is youth, which is also a key demographic for music," Greg Sterling, principal analyst at Sterling Market Intelligence, told MacNewsWorld. "Consequently, there's a natural fit and overlap there."

In August, Apple unleashed a set of widgets that social networkers could embed in their profile pages, using them to show off the tunes, shows, movies and podcasts that had most recently rocked their world. It would appear that the leader of the music download world meant to take a decent stab at the social networking scene.

Was My iTunes the company's first step down a path that would eventually lead to a full-fledged social network? Is Apple in the midst of creating a place where users can extol the virtues of their favorite bands and musicians found on iTunes and link to other users?

"Music and musical interests will be a component of many if not most social media sites directed at younger people," Sterling continued. "And music sites will have social features -- as most sites do these days."

If that is the case, then it may not be a stretch to think that Apple would attempt to take the lead in this trend.

My Tunes, Your Tunes

The convergence of social networking sites and music is a growing trend in the online world. MySpace and Facebook, for instance, both offer their members embedded Web applications that not only show off their musical tastes but also allow them to broadcast their latest favorite to anyone who visits their profile.

Other standalone desktop applications, such as uPlayMe, a free download currently in beta, finds and connects its users to other members listening to or watching the same media. Users who have begun receiving their digital entertainment matchmaking results can then chat with their new friends using uPlayMe's instant messaging client.

The mobile phone community can even get in on social networking action on the go with services specifically designed for them. One such service, Phling, connects users to all the music, podcasts and pictures stored on their PC and share that content with friends and the entire Phling network.

Sites such as MOG have taken the music and bumped it up from a simple component through which social networkers can find other like-minded individuals based on their musical preferences. The site also serves as a means for users to find new music via its custom filters and personalized suggestions.

Apple, Sterling noted, has always had "social media" features in iTunes. Users could share and rate playlists, see the popularity of various songs and playlists with other users and so on.

"[The widgets] are extensions of those basic rating and sharing features and "syndicate" iTunes beyond the iTunes destination site [and] software," he added.

A Follower?

The My iTunes widgets give users of the online music store a way to showcase their favorite artists, 4-and 5-star rated content, and their most recently purchased downloads. The self-updating widgets can be embedded in any flash-enabled Web page, social networking profile or blog. They can also be used with any standard RSS (Really Simple Syndication) or Atom feed readers by simply pasting the feed URL in the special section to view updated activity. The widgets do not, however, track non-iTunes content.

Far from a foray into the social networking world, the widgets are simply a way for Apple to expand the reach of the iTunes store to social networking sites, Susan Kevorkian, an IDC analyst, told MacNewsWorld.

"They are enabling people with profiles on these sites to show off what they are listening to and share their musical tastes with their real and virtual friends with the limitation that it is music that has been purchased on iTunes or reviews written about music on iTunes," she explained.

"It excludes music you haven't acquired from iTunes, including music you have ripped from your own CD collection. And is not a full look at a person's music collection," she added.

"It's a mirror of what others are doing and the 'widgetization of the Web' more generally," Sterling pointed out.

I Want to Be Like You

Apple, Sterling speculated, in all likelihood took note of sites including iLike, which bills itself as a "social music discovery service" that capitalizes on the popularity of iTunes. It's developed a sidebar and Facebook application that allows its more than 10 million registered users to discover and share their playlists, new music and concerts according to their musical tastes. The iLike Sidebar for iTunes recommends new music, creates automatic playlists and uses music to make connections with others.

"Sites such as iLike are piggybacking on the popularity of iTunes as the defacto online music standard/service. Apple is taking a page from that company's Facebook strategy. I'm sure the company noticed that iLike was initially one of the most popular 'applications' on Facebook," he explained.

"iTunes and Apple are following a trend rather than doing anything particularly innovative here," Sterling stated. "What's innovative for Apple in all of this is that it's basically a hardware (and software) company that is building out more Internet functionality, although the Apple site has been one of the most trafficked destinations online traditionally."

While the iPod maker has not exactly adopted a forceful strategy, Sterling acknowledged, it is evolving its social media or syndication and distribution strategy. Were Apple to more aggressively pursue the social networking space, the company could build more social networking features into iTunes at the profile level, Sterling said.

"It's been mostly about the music and they could make it more about the users than it has been," he concluded.

It's All Business

Even with over 2 billion downloads sold, Apple has not been on the cutting edge of this space because the company makes its money selling iPods, not songs, John Barrett, an analyst at Parks Associates, told MacNewsWorld.

"Why would it want to?" Barrett said. "They make their money on the iPod, not selling downloads. I have heard they make a very thin margin of off the music itself, but it is a loss leader of off the iPod, which makes a lot of margin."

If Apple could create a social network that would sell more iPods, it could be advantageous. However, music is a very social media. An iTunes site that offers features like ratings from people who download the songs could enhance the owner's experience. What it comes down to, though, is that overall, social networks are just not that profitable.

"A lot of networks are out there, but most of them aren't making money," Barrett explained. "The ones that are making money usually aren't making enough to cover their costs. Usually, there is this dynamic where you have to either have a massive scale and appeal to the brand advertisers or you have to have a very refined market niche."

If the best hope of making money off of a social networking site is advertising, he continued, then Apple could roll out ads to iTunes via promotion deals with the recording labels.

"But that is a hard road to go down. And if you're making nice margin of off the hardware, I can see how [social networking] would be on the back burner," he concluded.


This story was originally published on Sept. 25, 2007, and is brought to you today as part of our Best of ECT News series.


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