How Apple pushed its edge
Apple is beginning to build its own ad empire just as its crackdown on iPhone privacy weakens its major ad-funded rivals.
The big picture: Amid a broader downturn in the online advertising market, Apple’s decision to limit how apps track user behavior has hurt rivals like Meta, even as users have embraced it. .
Why is this important: Apple has long touted a privacy and security advantage for its products over alternatives like Google’s Android and Microsoft’s Windows. But the simultaneous rollout of Apple’s advertising expansion and privacy changes has drawn criticism and could draw the attention of antitrust regulators.
Driving the news: Apple plans to significantly expand its advertising business by placing more ads directly on users’ devices, Bloomberg reports.
- The expansion would include adding ads to more Apple apps on iPhone and iPad, including Apple Maps.
Between the lines: The company has reportedly started revamping its services team – the internal division responsible for making money from apps, media and other “soft” products – to cushion its business as growth slows in hardware sales .
By the numbers: Last quarter, Apple said it earned $19.6 billion from services including advertising, the App Store, Apple Music, iCloud, Apple News, Apple TV+ and Apple Pay, accounting for nearly 25% of its quarterly revenue.
- In the same quarter five years ago, services accounted for just 13% of Apple’s overall revenue.
- Apple doesn’t say how much of its services revenue comes from advertising, but a Bloomberg report suggests the company currently brings in around $4 billion a year in ad revenue.
- Analysts estimate that Apple’s ad business could reach $6 billion by 2025. By comparison, Snapchat, which makes almost all of its money from ads, brought in $4.1 billion in revenue last year. last year. Twitter made $4.5 billion in advertising last year.
Catch up fast: Apple’s advertising business began to explode following changes to its app tracking policies last year, which made it easier for iPhone users to opt out of being tracked in other apps on their phones.
- For businesses that rely heavily on this user data, the changes have made it much more difficult to effectively target people with online ads.
- The changes have also been devastating for companies like Meta and Snapchat that rely on this data to power their advertising offerings.
Meta bet a massive lobbying campaign against Apple’s changes, arguing they make it harder for small businesses to find customers.
- But the company has its own reasons for pushing back. Meta executives said they will lose $10 billion in ad revenue this year in response to Apple’s changes.
Between the lines: Apple started pushing privacy a long time ago, but it landed heavily on the selling point following Facebook’s numerous data leaks and privacy calamities, including the Cambridge Analytica scandal.
- This “narrative of private life”, some are arguing nowhelped him implement his anti-tracking plan without being portrayed as a corporate predator.
Be smart: Apple’s biggest source of advertising revenue is search advertising. Data shows that Apple’s privacy changes have significantly shifted ads that promote app downloads from companies like Meta and Snapchat to Apple.
- Analytics firm Branch found that in the first half of the year, Apple’s internal search ads were responsible for about 50% of iPhone app downloads resulting from ad clicks for the first half of this year, up from around 20% in April 2021. before the company rolled out its privacy changes.
And after: So far, regulators haven’t paid too much attention to the issue.
- That’s probably because the biggest voice currently mobilizing against Apple’s changes is Meta, which is dealing with its own plethora of competition issues.
Go further: Apple’s privacy changes are eating up rivals’ businesses