Declare war on Google, Meta
Apple has been selling ads inside the app store and Apple News since 2016. But it's only in recent months that the tech company has begun to show its ambitions to get into the advertising business, which Google has denied. Meta and Amazon dominated for a long time.
In June, Apple expanded the advertising section for companies, allowing them to buy banner ads that appear on the main App Store page. Two months later, the company announced that it was building a separate platform for businesses to help them place ads on Apple products.
Until recently, it was reported that Apple was looking to invite media partners to buy ads on Apple TV+, but it was not clear how the company would do so, Wired said.
These moves show that Apple users will soon see ads inside apps and services. They are also a declaration of war against other competitors like Google and Meta in advertising.
“Users often let Google and Facebook take all their money with advertising tricks. Therefore, it is understandable that Apple steps in and wants to take a slice of this market," said Michael Cusumano, a professor at the MIT Sloan School of Management.
According to Wired , improvements in smartphones today tend to slow down and sales are not as optimistic as before. Therefore, manufacturers, including Apple, need to find new sources of revenue. The company has begun expanding its paid subscriptions into news, video, and health, demonstrating its ambitions to speed up its market.
Cusumano thinks Apple has been influenced by Amazon's success with advertising. The company has displayed billboards on search results in its products. As a result, Amazon's size has increased 10 times compared to 2016, reaching 31 billion in revenue in 2021 alone. Meanwhile, Apple only makes $4 billion a year thanks to advertising, according to the research firm. Market Insider Intelligence.
However, the bet on Apple's advertising field has made many loyal users express their attitudes. The display of introductory notices about paid services goes against Apple's previous commitment to users.
Until now, Apple users have been accustomed to paying a higher premium for its products in exchange for a premium and carefully curated experience. Talking about this, CEO Tim Cook once asserted that their ad-based business model does not infringe on user privacy, unlike Google or Meta.
Challenges surround Apple
Apple's advertising ambitions have also caught the eye of antitrust authorities, especially after the announcement of an "app tracking transparency" (ATT) feature. This change of Apple has greatly affected the advertising revenue of other technology companies.
Introduced in April 2021, ATT requires consent from iPhone users so the app can monitor activity to deliver relevant ads. This aggressive policy cost Facebook $10 billion in ad revenue, or 8.5% of the company's 2021 revenue. Meanwhile, Apple's personalized ads, displayed based on age and gender, are not restricted.
Talking about this issue, Apple's representative Shane Bauer said that ATT applies to all developers, including Apple, and asserts that they have never tracked users.
But in fact, Apple's advertising revenue is on the rise year after year. “This is an important part of their strategy. Apple wants to be less dependent on sales of hardware devices,” said Peter Newman, director of forecasting at Insider Intelligence. According to him, the monthly subscription plan on Apple Music and Apple TV+ will bring a large amount of advertising along with a video streaming service, competing with Netflix.
But the scale of this business is still a big question mark. Newman believes that Apple has a lot of potential to grow, but it will be difficult to compete with other giants. "I think Apple will be on par with Microsoft or more developed, but will be inferior to Google or Meta," the expert said.
According to him, Apple's devices and services have a lot of potential to expand advertising, but the scale and opportunities for profit are still not comparable to Apple's search engine or its billion-user social network. Meta.
In addition, Apple's previous privacy commitments are also a barrier that makes it difficult for the technology company to win big in the field of advertising. Therefore, the technology company has hired many new employees to find ways to optimize the advertising content on its platform. According to Wired , Apple fears that the focus on advertising will destroy the brand's image and cause alarm in the legislature.
Professor Cusumano of MIT said that Apple's biggest challenge is how to balance security features with advertising revenue. "Apple is a closed, not open, and advertising-intensive ecosystem like Google," he said.
