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Why Did Apple Ban Parler, And Should Investors Care?

Apple has followed Google’s example and banned social media service Parler from the App Store. Here is why the Cupertino company made the decision, and whether Apple investors should care.

Apple has officially banned Parler from its App Store. The app is described on Wikipedia as an “alt-tech microblogging and social networking service” popular among “Donald Trump supporters, conservatives, conspiracy theorists, and right-wing extremists”.

Apple’s ban, coupled with similarly restrictive moves by Google and Amazon, caused Parler to go offline on January 10. It is unclear if the social media network will ever see the light of day once again.

Today, I review the key reason that drove the Cupertino company to pull the trigger on the ban, and whether the recent developments might matter to Apple investors.

Guideline violations

In a letter sent to Parler’s management team, Apple explained that a violation of content guidelines led to the removal of the service from the App Store. These stemmed from the events of January 6, when the US Capitol was occupied by protestors.

In the Cupertino company’s own words:

“Apple requires apps with user generated content to effectively moderate to ensure objectionable, potentially harmful content is filtered out. Content that threatens the wellbeing of others or is intended to incite violence or other lawless acts has never been acceptable on the ‌App Store‌. [Parler] appears to continue to be used to plan and facilitate yet further illegal and dangerous activities […] in violation of Guideline 1.1 – Safety – Objectionable Content.”

Parler, which was founded in 2018 and supported financially by billionaire heiress Rebekah Mercer and conservative political commentator Dan Bongino, experienced a surge in usage after the US Presidential election, in November 2020.

Parler ranked #1 among free apps on the App Store, immediately before it was taken offline. The 281% overnight increase in downloads on January 8 shows how popular the social media service had become.

Should investors care?

Despite Parler’s increased popularity, the app’s removal from the App Store will likely have no impact on Apple’s financial performance or its stock price.

First, Parler was still a nascent, largely immaterial player in the social media space. Its 4 million daily active users pale in comparison to Facebook’s 1.8 billion, Twitter’s 187 million and even Snapchat’s 90 million reported in the third quarter of 2020.

Second, it is highly unlikely that Apple had been monetizing at all on Parler. Per the App Store guidelines, Apple earns its commissions primarily from paid apps and in-app purchases. It does not collect fees on advertising, which tends to be the preferred business model used by social media companies.

Therefore, and despite Apple’s stock price having declined further than the S&P 500 since Parler’s shutdown (likely a coincidence), I believe the recent ban to be largely immaterial to Apple shareholders.

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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)