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Google (NASDAQ:GOOG) is known for its main search advertising business. The company also makes money through the search and content ad partnerships of its AdSense business.
Apple (NASDAQ:AAPL), which competes with Amazon?s (NASDAQ:AMZN) Kindle, is expected to launch iBookstore alongside its tablet PC, the iPad, in April 2010. iPad owners will be able to download books to their iPad through iBookstore, an application which will be available on Apple’s iTunes store. We estimate that iTunes & iPhones Apps constitute about 6% of the $267 Trefis price estimate for Apple’s stock.
We expect Apple to generate ebook revenue of $400 million in 2010 by selling around 48 million ebooks at an average price of $8. You can access our full forecasts and rationale for AAPL here:
You can also modify our forecasts through the links above to see how Apple?s stock would be impacted if the number of iPads and eBooks sales were to grow faster than what we forecast.
For additional analysis and forecasts, here is our complete model for AAPL.
A starting point for estimating Apple’s potential ebook sales is Amazon. Foner Books, a book publishing company, estimates that Amazon sells 60,000 ebooks per week. We expect Amazon to sell 1.2 million Kindles in 2010; this would mean about 2 ebooks sold per Kindle per month or 24 ebooks sold per Kindle per year.
Since iPad users will not necessarily be as devoted ebook readers compared to Kindle owners, we estimate a ebook ratio for iPad of 1 ebook per month for each iPad sold. We have estimated that Apple will sell around 4 million iPads in 2010 (see our analysis here) which implies 48 million ebooks sold through the iTunes store in 2010.
Apple (NASDAQ:AAPL) is in talks with five major book publishers – Penguin, Simon & Schuster, HarperCollins, Macmillan, and Hachette – to make their books available for download through the iTunes store.
Apple is looking to create a variety of price points for ebooks – $14.99, $12.99, $9.99 and $4.99. New books that are available in bookstores as hardcovers are likely to be priced at the higher range; however, we believe that the majority of books will be priced lower and estimate the average ebook pricing through Apple will be around $8 for 2010. We also expect eBooks pricing to decline to around $6.7 by the end of Trefis forecast period.
Google (NASDAQ:GOOG) recently acquired DocVerse, a technology startup that makes it easy for people to edit Microsoft Office files online. Microsoft’s (NASDAQ:MSFT) Office software dominates the enterprise productivity software market with share of around 95%.
We believe that DocVerse will make it easier for users of Office products like Word, Excel and PowerPoint to transition to Google Apps. We expect that Microsoft will lose share in the productivity software market going forward due in part to increasing competition from Google Apps.
Below we explain the significance of Microsoft Office to Microsoft?s stock and Google Apps to Google?s stock, as well as how Google threatens Microsoft?s dominance in the productivity software market.