Apple, Siri and the customer insight play

Apple, Siri and the customer insight play

Siri isn't a voice control system. Nobody uses those, and Apple wants something everybody will use. First, they value user experience, second they value differentiation from other platforms, and third, certain business models are predicated on having very large user bases. That's where the revenue streams become complex and the profit becomes really interesting.

Let's say iPhone 4S has Siri and it looks cool and it makes people want to buy it. Apple, being well managed and having good hardware margins, makes money on the sale. Then people start using Siri and feeding it incredible amounts of demographic and behavioral data. Apple, being smart, can use all that demographic and behavioral data to develop a high level of customer insight, allowing them to make better and better selling products and services.

But there's more. If Apple chooses to adopt a Google-style business model, they can aggregate and anonymize that data and sell it to advertisers and marketers. That turns the customers into products, something they tried -- and have thus far failed -- to do with iAds in apps. Siri moves it to the OS level and while it won't display ads, it will collect data that can be fed back into iAds, or other advertising and marketing platforms.

Google already pays Apple to be the default search engine on iOS for that very reason -- to sell ads against search results. The App Store, however, reduced the amount of searches being conducted on mobile. (As Apple has proudly announced during their events -- unlike desktop, people aren't spending their time in search, they're spending it in apps.) That started to cut out Google but didn't cut in Apple.

Siri cuts in Apple. Queries issued through Siri go to Apple's servers. Apple gets the data on who's issuing them, when, where, and in relation to what else. Without building a search engine of their own, Apple steals away what makes search so valuable. And because they're doing much more than search, they can monetize against much more than just search results.

But there's yet more. Because Apple becomes the intermediary -- the walled gate -- between their customers and the internet, traditional internet services lose all visibility into their customers. They don't see iOS users running queries, they see Apple running queries on behalf of iOS users. Tons and tons of them. That loss of visibility means internet services lose the very customer insight Apple has gained -- they lose the ability to make better and better selling products, and to monetize individual users.

Apple has already done this with the App Store and iOS subscriptions. App Store developers often don't know who their end users are, and traditional print media was livid when Apple made the sharing of demographic data opt-in for end users. Sure, account logins can mitigate this somewhat but often make for a worse user experience and there's no guarantee end users will make accounts for every app that wants them. (Just like not everyone sends in the warranty card for that printer they just bought at Best Buy or Staples.)

With Siri, that extends Apple's intermediation to internet services as well. So, increasingly, if companies want to get customer insight back, it will become easier to just go to Apple and get it -- meaning buy it. To the best of my knowledge Apple doesn't offer that now for App Store developers and they may never offer it for internet services tied to Siri, but it's a business model they could choose to explore. It turns the partners and suppliers into customers, and again opens the door to yet another entirely new business.

But there's even more. With Apple as intermediary, they don't just get the customer insight for one service, they get them for every service that goes through their system. That includes both complementary and competing services. If visibility into your own users is valuable, how valuable is visibility into your competitors' users, and their demographics and behavior?

To make it more tangible, Coke has no idea who buys a can of their tasty beverage at the local QuickyMart. But QuickyMart does, with ever-increasing granularity. And if they choose to, and they know how to derive proper customer insight from it, they can use it to better stock their shelves and increase their profits. And they can sell it to advertisers who want to reach their customers. And they can sell it to Coke, who wants to better understand the end consumer to improve their own profitability. And they can sell it to Doritos who wants to be bought alongside Coke, and they can sell it to Pepsi who wants those customers to buy their tasty beverage instead.

Again, Apple may never choose to get into this type of business, or like iAds they may not do it well, or they may get into some or all of it in a very different way. Customer insight, however, opens the door to an increasingly important and valuable revenue source, and Siri opens the door to customer insight.

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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Apple, Siri and the customer insight play


This begs the question...why is putting an intermediary in the relationship between the supplier of a product and the custom of the product a good thing? Ever?

if by custom you you mean customer well often the supplier lacks the money to create or run distribution channels.
Like you may be able to make a Coffee pot but it's a lot easier to sell it at Target were millions of consumers come daily then to try to talk to millions of people on your own or build your own stores to sell you coffee pot.

I sure hope that Apple doesn't turn it's iOS in a gigantic iAd system. Ads tend to get annoying and that is why a premium is payed. That is why I buy most apps even if to try them out.
If Siri is the reason and a valid reason to update and BUY Apple's product then I sure hope my personal data, usage and info don't go anywhere past APPLE.

but there's even more... if you call within the next 15 minutes we'll send you two siris for the price of one.. =)

I sure did on 5by5. It was quite interesting and related to what this article was talking. Seems like all the major platforms are like major data-mining repositories. Hopefully Apple, Google, MS, Facebook, etc. "don't be evil" with all that info.

an interesting post.
Google generates an enormous percentage of their revenue from ads.
But also android as a mobile phone platform is growing and has a larger share then ios does on phones so should google have interest in monetizing voice searches and commands it clearly already has a platform and a ton of customers already using google products like gmail, search, and voice search and voice commands.
also people very much use voice commands. Now whether they use it for the same stuff siri can do i don't know. but i know plenty of people that use it.

Very interesting info. Easy to understand for someone who is just getting interested in how companies are collecting data on consumers. Thanks Rene.

Sorry to break it to ya, buddy. But unless you live in a secluded cave and stay away from society, you've been the product of a company in one way or another your whole life.

I'm one of those Android users who makes regular use of voice actions in specific situations (while biking and driving). My guess is I'll make good use of Siri. However, Sandy is correct because I am "no one".

So you mean to tell me you aren't using Google/Bing/Ask Jeeves/Yahoo!/any other search engine?!? Never bought a magazine subscription? Hell, do you have a Facebook account???
You may not like the PHRASE consumer as product, but as Isaac65 said, like it or not it's what we are buddy.

He is saying if Apple decides to do this. They are not currently doing it or have plans to. Its basically a pollyanish article.

Heh. Uh huh.. We will see about that. I don't think you comprehend what Siri does or how it is different than keyword voice control.

I thought siri would run local, which is why it will only run on the 4s since it needs the processing power. But if it runs at apple's data centers as you say it should be able to run on bascially any apple hardware.

Yes, but there's the right way, the wrong way and the Apple way.
Apple has chosen the 4S as the preferred platform versus MacOSX, iPad or older iPhones. This is as accidental as getting a pellet of deuterium to go into fusion is.
You'll note that FaceTime rolled out first on the iPhone4, and that others got it not too much later. Here, I think, the story is that the phones are what MOST need an alternative input tool, and early adopters are most disposed to put up with quirks and limitations in order to play with new ideas. That also makes the iPhone4S a more personal relationship, while iPads are family and corporate devices, and Macs more production/stable.
While Apple sees big things for Siri, there'll necessarily be some BIG course corrections. Best not to mess with everything all at once.
Then there's the fact that Apple will have to sell a gazillion 4S phones before their data centers get maxed. Gives 'em time to figure out how people will use it.

How does looking out my window in Atlanta tell me what the weather is going to be like when I land in L.A. for a scheduled meeting? I imagine someone looking out their window in Miami in January and deciding to pack nothing but shorts for their trip to Minnesota.
You communicate your intentions to a machine every time you use a keyboard, touchscreen, hard buttons, etc. Why does adding voice make said communication annoying (assuming it is used in the appropriate situations)? I use voice input and expect voice output when I use my current Android device in a car and while riding my road bike. I plan to use SIRI in those contexts as well.

"As Apple has proudly announced during their events — unlike desktop, people aren’t spending their time in search, they’re spending it in apps."
Does that count the same if I spend my time in search in the Google app???

@cliqsquad " I pay a premium to be an Apple customer, not a product." says it best. When you get down to some of the basics of iOS vs Android this is a pretty important one. Siri is there to help me out, not line Apple with value information to sell to ad agencies. I trust Apple's use of my information and if Siri is able to give me better results I'm all for it, but I don't think they need to back end it by selling our inputs. However if that day comes, I'm pretty positive Apple will have an opt in function in settings that everyone will be aware of right from the start.

“So to summarize the whole SIRI thing. It's an annoying feature that no one will ever use. ”
Damned if I can figure out how your claim is a summary. While you may be a little imagination-limited in how you can use a new feature, you posted well after the iPhone 4S reviews hit the intertubes and you might have seen people saying instead, “not perfect but amazing anyway” or such.
(No harm in admitting you need a little help with new paradigms… I totally didn't grok VisiCalc when a co-worker breathlessly described it as what seemed a severely limited subset of FORTRAN.)
Maybe the most important thing for the Kontent Kreator Kings, dictating to Siri is better than keyboarding on a mobile device. The just-use-it integration is great in reminders etc. Perfect for most of those “Really?!?” scenarios that Microsoft highlighted for us.
PS: No, a silly backronym is not very interesting when you are trying to tell us the tool is not interesting to you. Can't figure out why you bother to post such drivel.

You made two claims: annoying and destined for disuse. No support for either.
You're annoyed? OK. Annoying to anybody else? That's not what a SINGLE review of it has said.
Nobody will use it? Not you, apparently. But Gruber, for instance, said he missed it within hours of giving his review unit back.
There's your rebuttal: you gave a fact-free couple of claims and there's already plenty of evidence that your little world is really different from others'.
I wouldn't know what to do with a 747 if you gave it to me, and I wouldn't have a place to put it. Likewise, you may not understand how to use Siri, but the indications are that MANY others will love it and clamor for Apple to expand it and put it on more machines and extend it to air travel.
So all the crap about using it to sell ads is just that. This is gonna be VERRY interesting. Just like the mouse that so many people sneered at.

Not necessarily. The term is an abbreviation of "inter-network", meaning a network (and an associated protocol) to connect between various networks. There can be (and actually, there are) internet networks, including large ones, completely isolated from the public one.

Shallow and ignorant analysis. You say:
"Queries issued through Siri go to Apple’s servers. Apple gets the data on who’s issuing them, when, where, and in relation to what else. Without building a search engine of their own, Apple steals away what makes search so valuable"
First, in order for Siri to be able to actually answer queries not directly derivable from one of the simple on-device apps (of the "when is my appt with John?"), it actually has to get the answer from a search engine. If they don't use an existing one, they'll have to build one (and the associated infrastructure, algorithms, operations etc.)
Second, in order to make sense of all the data they collect from Siri, Apple (or anyone else) would need to replicate the per-user analysis Google does for ad placement (and the same analysis is also used to provide search results -- It's been years since Google search results have been determined by PageRank alone.

imagine asking Siri a Chinese restaraunt in this area and it shows up the sponsored restaraunts in the area i.e. the restaraunts who paid Apple for promotion in such a search result

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