Large Questions Loom on News of Apple's Acquisition of Beats

I wrote a piece yesterday after news broke that Apple is near closing on a deal that would make them owners of Beats for a bit of spare change, $3.2 billion. I highlighted a few reasons why this doesn't seem to add up, and those are still valid.

Reports seem to be hinting more and more strongly that this is legit, but it still isn't quite settling right for me. In one camp, you've got those that believe the headphones are the primary driver for the deal (Ben Thompson for one). In another (perhaps larger) camp, you've got those that think it is for the music streaming service.

Both of these are valid thoughts, but both have major hurdles. It would make sense that the purchase is likely to be for both products, if it is real at all, otherwise they'd spin off (or not sell) the other half I would think. Tough to say for sure.


If the deal is primarily for the headphones, the biggest problem I see is the brand. The Beats brand is valuable as a brand. People know it, people love it, and people are willing to spend a lot of money on it despite the obviously inferior sound quality. They sound "good enough" (audiophiles disagree) and look good enough that people want them. They've become an icon. You don't have that without the Beats brand, and when was the last time Apple sold their own product with any hint of any other brand on it? There is just no way you will see something like this happening...


How valuable would Beats be without the brand? If they wanted headphone technology, why not purchase Sennheiser or someone like them?

Music Streaming

So what if this deal is for the music streaming? iTunes Radio isn't exactly sweeping the industry by storm like iTunes did, so that might make sense, right? Well, maybe. The biggest concern is that the content rights that Beats managed to get that Apple hasn't managed to obtain for themselves aren't transferable (most likely) in the event of an acquisition. Add to that the fact that Beats Music only has around 200,000 subscribers, and you've got a much harder time justifying a $3.2 billion deal.

Video Leak

This morning, a video was posted on Facebook by Dre himself that "confirmed the deal" was happening. That makes this all seem more like a joke than anything as Apple doesn't usually stand for that kind of thing. If the deal was happening, I'd think such a slip up could certainly jeopardize it.

Closing Thoughts

I stand by my prior conclusion, despite the fact that online news sources seem to be more convinced by the minute that this is imminent. If this deal is real, there's a major piece we're all missing. Otherwise, I just don't see the value in it for Apple.

Contemplating Facebook's Strategy Based on Acquisitions

Facebook has been making waves lately, tidal waves in fact. After $19 billion for WhatsApp and $2 billion for Oculus, some are left scratching their head and asking some very good questions. Why? How are these related?

I think the answer is simpler than many have offered. I believe it boils down to Facebook wanting to stay relevant long term, no matter what technology or platform enables it.


Messaging is a (or the?) primary means of communicating for billions of people, and Facebook Messenger was largely a flop. In a sense, messaging is the simplest highly private social network; you share very specific things with very specific people. I firmly believe that messaging with reign supreme as a top, if not the top, use of mobile phones for the foreseeable future.


Virtual reality (VR) has been attempted repeatedly for decades. The idea is usually focused on gaming, but I suspect it will eventually grow beyond that. Technology is finally getting to a point where it is nearly ready for the masses, previously it has been more of a cool demo. There is little doubt that VR will play a role in technology for many years to come, and many believe it'll be a common household technology in the not-to-distant future.

Facebook isn't Your Regular Tech Company

Facebook is run by a forward looking CEO that has zero interest in becoming a "normal" technology company. Legacy tech companies move surprisingly slowly when growing, expanding into new markets, or acquiring companies. Zuckerberg is running a new type of technology company. Move faster, innovate more quickly, and skate to where the puck is going rather than where it has been before anyone else does. 

Parts of this remind me of Apple, but even Apple seems to have more of a sluggish corporate feel. Facebook was happy to cannibalize Messenger because it knows WhatsApp was better. Facebook isn't operating with the baggage of a bunch of executives that have been in the industry for long careers and are applying that knowledge to each decision. They move quickly and with a sense of how vastly different the technology landscape is today compared to just a few years ago, and how fast it is changing.

Keep Up

This isn't to say that Facebook's methods will yield the results they hope, but it is a very fast-paced and aggressive approach. It sends the message "I dare you to keep up" to the other major tech companies out there. Only time will tell if they can keep up, if they even want to keep up, or if Facebook's fast-paced trajectory is even headed in the right direction.

WhatsApp: Pay-For-Content is Alive and Well

Apple has made a strong business on trusting that consumers are willing to pay good money for great products. This WhatsApp deal demonstrates the exact same thing. People are willing to spend what they consider to be a fair amount of money for a great product with a great user experience. Obviously some people don't call Apple's prices "fair," but that's a topic for another time.

This $19B WhatsApp deal makes me extremely happy (and I don't use WhatsApp or Facebook) if only for the reason of demonstrating that a customer experience focused product still has tremendous value. We don't need free products with ad support to make the world spin.

On Rumors of Apple Buying Telsa

There has been no shortage of speculation since news broke that Apple's M&A representative spoke with Elon Musk about acquiring the increasingly famous auto maker. Josh Ong has made a great case for why it might make sense, so I won't duplicate that.

The whole issue has some red flags that stand out to me as pretty major reasons an acquisition wouldn't happen.

  1. The auto industry is a low margin industry, especially on the low end. Tesla is not yet competing in the lower end market, so their margins are likely much closer to Apple's than Hyundai's, but Tesla has plans to expand into the $30,000 arena where there is simply no way to have Apple-like margins.
  2. The whole situation seems Google-y. Apple's wheelhouse is making beautiful and simple computing devices. An entry into the auto industry, despite Jobs' reported desire to do so, is un-Apple-like. With that being said, the auto industry is so slow to adopt new technology that it would be quite easy to disrupt.
  3. Setting aside the magnitude of the purchase being vastly beyond anything Apple has purchased before, the fact that they couldn't make this purchase quietly is worth mentioning. Apple tries to keep those as quiet as they can, this one would be making headlines around the world.