Not an ‘iPhone maker’, Apple is turning into an ‘advertising company’ because it doesn’t want to let Meta and Google ‘eat alone’

Apple has always been known as a technology company specializing in hardware with many high-end phone, tablet or laptop models. But the Wired, Apple also has a “dark side” that most iPhone owners don’t know: advertising. This is also the area that Apple is focusing on developing and expanding to assert its position in the advertising field.

Apple has been selling ads inside Apple News and the App Store since 2016, but only recently has it shown its determination to “penetrate” advertising – a field long dominated by Google, Meta and Amazon.

In June, Apple caught customers’ attention by allowing them to buy ads right on the front page of the App Store. By August, Apple’s job postings also showed that it was building a self-service platform for businesses through a number of products. This month, Apple also stepped up advertising on Apple TV +, but how it will be shown is still a question mark.

The move means Apple users will start to see more ads, after Apple announced direct competition with competitors in the same industry as Google and Meta.

“ People are still letting Google and Facebook take their money with advertising posts. Apple wants to be a part of that , too,” said Michael Cusumano, a professor at the MIT Sloan School of Management.

The lack of changes in the new iPhone lines and slowing sales forced Apple to turn to alternative revenue streams. The decision to expand into the news, video streaming and healthcare businesses is said to have “scratched the right itch” for Apple, according to The Wired.

According to Professor Cusumano, Apple may have been partly inspired by the success of Amazon when the retailer adopted the advertising business. Specifically, the advertising revenue of the giant Amazon has increased more than 10 times since 2016, reaching $31 billion by 2021. According to Insider Intelligence, a market research firm, Apple estimates that Apple’s revenue $4 billion per year from advertising.

However, Apple’s focus on the advertising business can upset the most loyal customers because they “break” the tradition between Apple and consumers. Previously, Apple CEO Tim Cook still considered that the business model based on advertising was a form of privacy invasion.

Apple’s advertising ambitions caught the eye of antitrust authorities, especially after the company announced its app tracking transparency (ATT) feature. According to The Wired, German regulators are in the process of investigating ATT, claiming that Apple’s personalized ads do not follow established rules.

Apple spokesman Shane Bauer declined to answer Wired’s questions about the change in the company’s business, the role of advertising, and whether ATT is involved in the expansion.

“ User data belongs to the user, and it is up to them to decide whether to share this data with anyone. ATT’s rules apply to all developers, including Apple, and the company “never tracks users ,” asserts Shane Bauer.

However, this does not mean that Apple’s current advertising revenue will not continue to increase. According to Peter Newman, chief forecasting officer at Insider Intelligence, this is bound to become a big part of Apple’s business.

“ They want to make themselves less dependent on selling pure hardware ,” says Peter Newman.

However, no matter how much Apple’s advertising business expands and how much room for growth, Apple still has a hard time compared to Google’s search engine or Meta’s billion-user social network.

“ You can see Apple is becoming something on par with Microsoft, but still significantly behind Google and Meta. That means advertising revenue will only stay in the tens instead of hundreds of billions of dollars. Microsoft’s advertising revenue is about 10 billion USD/year; while Google, the world’s leading digital advertising platform, raked in nearly $210 billion last year. Meta ranked second with $115 billion in revenue ,” said Newman.

Investment bank Evercore ISI estimates Apple’s advertising business will be worth $30 billion by 2026. That’s roughly equal to iPad sales in 2021.

Currently, Apple is increasing recruitment to develop new business areas. As of September, Apple has about 250 employees working on advertising platforms, according to a Financial Times analysis of LinkedIn data. However, when it is said that it is “intervening” too much in digital advertising, Apple will be very sensitive because this could affect what the company has been trying to pursue since its inception.

Still, according to Reinhold Kesler, a researcher at the University of Zurich in Switzerland, ATT is helping Apple. This feature caused some app developers to shift their business model from free to paid, sometimes including in-app billing. This certainly benefits Apple because it has cut fees by 30% for such payments.

According to Professor Cusumano, Apple’s biggest challenge right now may be balancing its former reputation with getting data from digital advertising businesses.

“ Apple is not an ecosystem like Google. Maintaining differentiation and increasing ad revenue can be difficult at the same time. Apple users are very loyal, but if the company ignores what they have built before to focus on advertising, I don’t know if they can ignore Apple ,” Cusumano said.

By: The Wired