The hardware giant intends to expand its advertising business in order to combat a drop in device sales.
Apple is best recognized as a hardware firm. With products like the iPhone and iPad, the company has done an amazing job of winning over customers and retaining them throughout the upgrade cycle. However, in anticipation of a potential slowdown in device sales, Apple aims to expand its advertising business to boost service income in addition to app and media subscription earnings.
Key Business Development Takeaways
Apple wants to expand the placement of advertisements within its own apps for the iPhone and iPad in order to expand its advertising business. Just one year after launching its ATT (App Tracking Transparency) program to let customers decide whether apps can follow them, the company has decided to take this action to boost ad income.
To date, advertising has only been allowed in the News and Stock applications and across the App store as display ads. The extension will bring advertisements to more of Apple's own apps for iPhones and iPads, possibly including TV+, Apple Maps, and stores like the App store.
The advertising teams at Apple are being reorganized within the company's services division, and Todd Teresi, the vice president of the ad group, will now report directly to Eddy Cue, the head of services. According to reports, Teresi stated his desire to see the company's advertising revenues reach double digits.
Apple reported making $19.6 billion in revenue from services like the App Store, Apple Music, iCloud, Apple News, Apple TV+, and Apple Pay during the most recent quarter. Up from just 13% in the same quarter five years ago, this now accounts for approximately a quarter of its revenue mix.
Apple does not disclose the percentage of its services revenue that comes from advertising, but according to a Bloomberg article, the corporation presently generates about $4 billion in ad revenue yearly. Compared to Google's 90% of annual sales, that accounts for about 1% of Apple's.
According to analysts, Apple's advertising revenue might total $6 billion by 2025. For instance, Snapchat made $4.1 billion in income last year while Twitter made $4.5 billion in advertising. Snapchat makes almost all of its money from advertisements.
App updates: Are they anti-competitive?
Competition claims that Apple's tracking limitations on its products have "stymied" third-party advertising on its platform.
The introduction of ATT, which was ostensibly a privacy-focused decision, made it harder for advertisers to target their ads. Although the feature has received largely positive feedback from users, major app developers like Meta and Snap assert that the changes have cost them billions of dollars.
In an effort to stop Apple's changes, Meta has launched a lobbying campaign, claiming that they make it more difficult for small businesses to reach clients. But in reality, according to Meta executives, Apple's actions will cost them $10 billion in ad revenue in 2022.
Apple's response is that it has long touted how much more private and secure its products are than comparable ones running Google's Android or Microsoft's Windows. Additionally, despite the possibility that antitrust regulators may object to Apple's ad expansion ambitions coming so soon after its ATT privacy improvements, its track record on privacy and the inherently sensible decision to allow customers choice have given it protection.
The question of whether Apple's users are willing to accept more advertising after being given a vision of privacy and uncluttered UI may be more pressing. According to Mark Gurman's article on Bloomberg, the iPhone is a high-end smartphone.
If you spent $1,000 or more to get one, do you want to feel as though Apple is trying to extort more money from you just to use its basic features?