John Paczkowski

Recent Posts by John Paczkowski

Apple's Area 51: The Truth Is Out There

Scheduled to go live sometime this spring, Apple’s 505,000-square-foot North Carolina data center is, according to COO Tim Cook, intended to support iTunes and MobileMe. But we don’t yet know in what capacity, and Cook’s remark, which is at once unambiguous and utterly cryptic, leaves plenty of room for speculation. And theories about the potential capabilities of this new facility abound.

In a research note this week, Bernstein analyst Toni Sacconaghi reviewed a few of the more plausible ones, which run the gamut from the long-rumored iTunes streaming service to the back end for a natural language voice interface and navigation service for its iOS devices.

The first: an easy way of scaling the company’s iAd mobile advertising program. With its installed base of iOS devices likely to hit 200 million by the end of fiscal 2011, iAds could put quite a strain on Apple’s ad serving capabilities. Says Sacconaghi, “If iAd gets traction while serving interactive, multimedia ads then Apple’s underlying advertising platform will need to be significantly larger, and at a scale comparable to Google’s or Microsoft’s ad platforms.”

The second is a no-brainer and seems fairly likely to pan out given recent chatter about Apple’s MobileMe service going free come April: an overhauled verision of MobileMe that provides improved cloud-based synchronization of data and media, along with meaningful storage capacity.

The low-cost iTunes subscription service we’ve been hearing about for years now is the third. Again, this seems a completely plausible use for Apple’s new data center, and as Sacconaghi notes, the time may finally be right for the company to launch it. “In our meeting with Apple executives last month, VP of Internet Services Eddy Cue suggested that the reason that music subscription services had failed to receive traction with consumers was because they were too expensive, highlighting prevailing rates of up to $15/month,” he wrote. “We note that an annual subscription to Napster now costs $8/month, while the paid version – unlimited, higher-quality, ad-free – of music streaming from Pandora costs $3/month.” Add to that Apple’s 2010 acquisition of streaming music outfit Lala and the traction Spotify and Pandora have been gaining in the market recently and this seems a likely scenario as well.

Fourth on Sacconaghi’s list, an aggressively priced video streaming service. Given the popularity of Netflix’s iOS app among iPhone and iPad users, it might make sense for Apple to offer its own competing video subscription service. Or, it could simply acquire Netflix. It’s not like Apple doesn’t have the money to do it–even if Netflix’s market cap is north of $11 billion.

And finally there’s that voice interface and navigation service I mentioned earlier. This one might seem a stretch, but don’t dismiss it out of hand. Last April, Apple acquired Siri, developer of a virtual personal assistant supported by speech recognition, natural language processing and semantic Web search. And in 2009 it purchased PlaceBase, a mapping outfit that specialized in enhancing maps with private and public data sets. Put those two acquisitions together with a massive data center and Sacconaghi’s theory looks at least plausible.

“Apple could offer its own navigation service comparable to Google’s free and very popular voice-based navigation system on Android,” he writes. “The iOS device user-base could then potentially periodically upload anonymous information on routes travelled and speeds encountered, perhaps even in real-time, which would allow Apple to report back traffic conditions to its user-base.”

Sounds like a killer feature for the iPhone 5, doesn’t it?

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