Topsy acquisition points way to Apple’s TV-led future
The deal that really caught my eye this week was Apple’s buyout of the 'social analytics' firm Topsy Labs on Tuesday. Apple paid $200m for the company – which collects data from Twitter that potentially provides insights into social media users' viewing habits - and it raised a lot of eyebrows.
Andrew Moss examines why Apple has bought Topsy
Now, $200m may be small change for a company like Apple, which is by all accounts sitting on a staggering cash reserve pile of $147bn, but the deal has left many pundits scratching their heads.
Why would the Cupertino giant do this? After all, Apple is a Twitter partner already, and hosts login and posting features for the social network on its iOS and OS X platforms. It seems a lot to pay for data that it probably already has access to.
It might be that Topsy has technology (read: patents) or engineers that it wants. Skills and tech come in very useful, and Apple has a long history of making acquisitions, incorporating the technology or human resources into its own teams, and quietly closing down the acquired company.
But I wonder whether it might be that Apple is thinking long-term, and that it has something really big it’s working on. This could be one of many things – it could be seeking to boost the relevancy and customer engagement capabilities of iTunes or the App Store; it could be seeking to improve and make more attractive the iAd platform (its in-app advertising facility) which has, of yet, failed to live up to its potential; it might even be trying to find a way to improve Siri’s search capabilities.
Whatever, with its head start in smartphones and tablets being eroded, and sales of iPods dropping off, Apple needs to push into new product categories and offer another game-changer to keep shareholders and the brand’s fanatical fans happy (the much-talked-about ‘iWatch' is unlikely to be that game-changer). Until (or even if) Apple makes some sort of announcement, we can’t really know, because the company is notoriously secretive.
But I’m wondering if the Topsy purchase might not be related to a move into TV. Over the past few years, there has been an enormous amount of speculation about Apple entering the TV market. There have been rumours about ultra-smart televisions, some sort of entertainment hub for the home, or even a service to rival Sky, Netflix or LoveFilm. Of course, you already can buy, rent or stream films and shows via iTunes or Apple TV, but there’s something bit disjointed, and very “un-Apple” about this experience.
What I think it may be working on is some sort of 'social TV' service, perhaps in conjunction with a piece of hardware. As Panasonic or Sony will tell you, there’s not much margin in selling TVs these days; even hyper-efficient giants like LG and Samsung only make an average of about 0.5 per cent on television set sales, so manufacturers need to find a way of adding value. Apple, which is one of the very few hardware manufacturers to make big margins on desktop and laptop computers, smartphones and tablets, would probably be better placed to do this than anyone, and an 'ultra-smart', 'hyper-social' television offering that responds to user sentiment, seems to me a pretty good way of achieving it.
As regular readers of this column may know, I am a big fan of data, and how it can be used to create more effective marketing communications. And I believe that data can also be used to improve the experience of television for the viewer and create more effective, less intrusive advertising for brands.
Topsy's strengths lie in its ability to run real-time analysis of enormous data sets (over 425bn tweets have been sent since Twitter began seven years ago) and conversations going on in social media networks like Twitter. Many TV viewers both here, in the US and elsewhere are also avid Twitter users. They will sit on the sofa watching a show, smartphone or tablet in hand, posting reactions to storylines or events as they unfold. For example, political debate shows such the BBC’s Newsnight or Question Time, or ITV talent shows like X Factor, and dramas like Dr Who, Homeland or Downton Abbey always prompt a huge amount of activity on Twitter. Producers know this, and keep a close eye on the twittersphere when their programmes are airing as it tells them more than ratings or reviews could ever do.
Reactions on Twitter can even help shape policy. A recent not-very-good Ben Elton-scripted comedy series, The Wright Way, was axed after not only universally bad reviews from critics, but also a torrent of abuse on Twitter. BBC commissioning editors learned very quickly that audiences disliked it as much as reviewers, and that it would be better to spend time and resources on something else.
And this is why I think Apple bought into Topsy. If you think about it, any Apple smart TV offering – most experts believe it will be next Autumn – will be considerably boosted by the data analysis supplied by Topsy.
If it made Topsy data available to advertisers they could serve up marketing based on real-time conversations, making ads feel more contextually relevant, “part of the conversation” and therefore – in theory at least – much more effective.
Topsy would also be an asset to content makers – networks, commissioning editors and studios – giving them not only priceless insight into what viewers think of their shows, but also allowing them to introduce social elements into their shows as they stream on Apple’s platform. And programmes could be promoted to individual viewers via a 'watch this' message on their Twitter feeds; or a more sophisticated, real time, version of Amazon’s recommendation algorithm could be developed.
The purchase could also help Apple improve its mobile services – Topsy should help Apple understand real-time trends that could help it deliver more relevant experiences for iPhone users.
As Apu Gupta, CEO of social data firm Curalate, pointed out earlier this week: “Apple could weave social into their devices and experiences in a way that will feel native to the device. It's all part of the fabric of this uber-connected world we live in.”
And I think this is where Apple’s long-term ambitions lie – a wired-up world with some sort of Apple TV in the home at its centre, with an iOS device for when you’re on the move.
The Topsy purchase was welcomed by many on Wall Street – and by those who say Apple needs to move beyond hardware. Topsy introduces opportunities in software beyond OS X and iOS, including the potential to boost search through the voice-activated assistant Siri. Topsy’s data could also improve the Apple App Store with better recommendations.
I rather suspect that Apple will be using its enormous cash pile to make more acquisitions of this type over the coming months as it moves towards a TV-centred future.
And of course, all of this demonstrates the importance of data in every aspect of marketing communications. Apple obviously has a growing interest in the data flowing through networks like Twitter, which is a refreshing notion. I’m really looking forward to seeing the outcome of this one.
Andrew Moss is a partner at Green Square, corporate finance advisors to the media and marketing sector.