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Tech world chatter over the past few weeks (including ours) zeroed in on Apple’s back-to-back mapping acquisitions, what they mean, and who’s next?  After learning that mapping is a game won on data, Apple is buying it’s way out of the crater left by its mapping bomb, rather than spending the requisite years to build local data, a la Google.

Most pundits are right about the “what?”, but then the miss the point when it comes to the “why?”  Building Apple Maps into a more competitive app has been characterized by many as a play towards going deeper into ad monetization.  In other words a sort of local iAd can grow from local search queries and mapping impressions.

I don’t disagree that this will happen, but it will be secondary to Apple’s true play here: selling more iThings. Because Apple is a company that makes most of its margins from hardware sales (and healthy margins at that!), most moves it makes work towards making iphones and iPads more attractive consumer purchases.

This is parallel to Google: most things it does are to boost or protect it’s core search business where most revenues are derived. With Apple, if you look at the numbers, there is a far greater economic stake in the core revenue stream of selling iThings, than there would be in entering the competitive and challenged mobile local ad game.

The former has vaulted Apple to being one of the most valuable companies on earth with 2012 revenues of $156 billion, gross margins around 37 percent and cash reserves of $145 billion. The latter (local search) is where the company has almost no footing and where the market’s total annual revenues are about $14 billion, including mobile.

On that measure, the black eye Apple received from Mapgate hurt more in lost iPhone sales (and PR) than in lost opportunities around local query volume. Therefore, the efforts to reinforce it with a stronger data backbone are more about feature-driven consumer appeal, in order to repair the iPhone’s tarnished reputation by association.

This was the real reason for Tim Cook’s apology letter in the midst of Mapgate, and his suggested apps until he improves the product (and fires a bunch of people). Mapping is a core smartphone function and Tim Cook knows that app availability/volume is the lifeblood of the iPhone’s appeal — maybe second only to sleek industrial design.

iPhone sales are flattening as its matures (falling stock price reflects that). So diversified revenue in things like iAd will be important. But its core business, simple economics, and the increasingly competitive SamDroid, all point to the need for a better mapping engine to protect iOS’ attractiveness, and the sales of massively profitable iThings.

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