Apple (NASDAQ: AAPL) issued a press release this morning to preview new features coming to iOS 11.3, which will come out later this spring. The new version of Apple's mobile operating system will add minor things like additional Animoji and a new way to assess battery heath. The company is also expanding the Health app's functionality, allowing users to store more health records locally on their devices, while expanding the augmented reality (AR) capabilities delivered through ARKit.
However, there are two other aspects of the announcement that have important financial and strategic implications for Apple's business. Both were announced previously, but are now about to ship.
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Facebook (NASDAQ: FB) has pinned its messaging monetization hopes on the idea of connecting consumers to businesses, allowing those companies to deliver customer service and support directly through text-based conversations, with enterprises paying for the service. That includes both of the social network's messaging services, Messenger and WhatsApp. WhatsApp Business launched just this week.
Apple detailed Business Chat last summer at WWDC 2017. It represents a direct threat to Facebook's aspirations, and will be included as a beta in iOS 11.3. Apple has already started recruiting companies to participate, including Hilton and Lowe's, among others, as well as integrating with several prominent customer service platforms on the backend like LivePerson and salesforce.com, among others.
Unlike Facebook, which hopes that it can automate many of these interactions with chatbots, Apple's approach, at least initially, will focus on human-to-human interactions. Apple has not publicly detailed pricing, but charging enterprises for Business Chat would help the Mac maker's ongoing expansion in the enterprise while growing its services business.
HomeKit software authentication
iOS 11.3 will also bring software authentication to HomeKit devices. This may seem like a subtle new feature, but it's actually incredibly important. Historically, HomeKit had relied on hardware authentication, which needed a specialized authentication chip and other onerous hardware requirements.
That added a bevy of costs and logistic considerations, which had the unintended effect of stifling the HomeKit ecosystem right out of the gate. If you've ever wondered why the number of HomeKit-compatible smart-home devices has been underwhelming, even three years after the smart-home protocol was released, this is a big reason.
Just like Business Chat, HomeKit software authentication was announced last summer, but is now officially making its way to consumers. The number of HomeKit-compatible smart-home products has soared since last summer as third-party manufacturers jumped on board, relieved by the relaxed requirements.
In no uncertain terms, Apple has fallen behind in the smart-home market, an opening that Amazon.com has fully taken advantage of with Echo and Alexa, as Amazon has always utilized software authentication. With HomePod now launching in just over two weeks, the importance of HomeKit software authentication can't be overstated, as Apple desperately needs to grow the HomeKit ecosystem if it hopes to ever catch up to the e-commerce giant.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple and Facebook. The Motley Fool owns shares of and recommends AMZN, Apple, and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends LPSN, LOW, and CRM. The Motley Fool has a disclosure policy.