iPhone 13 Pro
Source: Apple Inc.
Apple may expand its advertising beyond its own apps on the iPhone in an effort to increase revenue, according to Bloomberg.
The company currently generates about $4 billion in annual revenue from its ad business, but wants to grow the segment to “double digits,” according to the report.
Apple already shows ads in some apps, such as Apple News and Stocks. It also recently announced plans to expand ads in the App Store. Bloomberg said the company is considering ways to add advertising to Apple Maps, for example, which has so far stood out from its competitor, Google Maps, by not showing ads. The report said it is “likely” that Apple will also insert ads into podcast and book stores.
An Apple spokesperson was not immediately available to comment on the report.
Meanwhile, Apple has targeted other companies that advertise to iPhone users.
Last year, Apple released an update for iPhones with a new pop-up asking users if they wanted to allow apps on their phones to target the user for ads. The privacy feature, called App Tracking Transparency, has changed the mechanics behind the scenes of many mobile ads, especially those that confirm whether a purchase or download was made.
It’s clear that most iPhone users were turned off, and the feature has presented major challenges for companies ranging from Snap to Facebook to Peloton.
The new ads could help Apple extract more value from iPhone users.
Analysts at Needham wrote in an Aug. 3 note that they believe Apple’s next big revenue stream is advertising.
“AAPL has best-in-class user data,” they said. “By creating a DSP (demand platform), AAPL can control how and where its data is used, and can prevent data leakage outside its Walled Garden.”
Analysts also said they believe Apple is in the early stages of building a new mobile advertising platform. They said they have seen a “noticeable increase” in the company’s recruitment efforts for its ad platform and that was very visible at the Cannes Lions advertising festival in June.
In Apple’s most recent earnings call, CEO Tim Cook and CFO Luca Maestri said the company’s ad business experienced some difficulties related to Covid, but Cook said it is a “great” tool discovery for app developers who want to promote their apps.
Bernstein analysts said Apple’s services business, driven primarily by advertising and the App Store, has seen a slowing growth rate for four consecutive quarters as the App Store has undergone a shift in consumer spending.
However, they said they expect Apple’s ad business to grow due to higher ad loads in the App Store.
“Overall, we believe at least 20% growth for Apple’s overall advertising segment is possible over the next few years,” they said.
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