Apple has started the process of building its own empire. The company's timing is right as the iPhone privacy crackdown weakens the top ad-supported rivals. There has been a broader downturn in the online ad market. So, Apple's brilliant move to limit how the apps track user behavior has been a big blow to competitors like Meta. Interestingly, users have open-heartedly accepted this change.
Why It Matters?
Apple has been boasting of privacy and security
advantages for its products for years. It claims to be better than alternatives
like Microsoft's Windows and Google's Android. The rollout of Ad expansion by
Apple and privacy changes has led to criticism and might even grab the
attention of antitrust regulators in the future.
Apple's Plans
Apple plans to expand the ad business by
placing the ads on the user devices directly. It would mean the appearance of
ads on Apple's own apps on iPads and iPhones of the users. The list includes
but is not limited to Apple Maps.
Reorganization Has Begun
Apple has reportedly started to recognize the
services team responsible for making money from soft products like apps, media,
etc. This is a smart move, given there has been a slump in its hardware sales.
The Moneymaker
Last quarter, the tech giant made US$ 19.6
billion from services like Apple Music, iCloud, the App Store, Apple News,
Apple Pay, Apple TV+, and advertising. It represented about 25% of the
quarterly revenue.
Though Apple hasn't revealed how much of the
services revenue comes from advertising, it is estimated that it earns about
US$ 4 billion annually in ad revenue. It has also been estimated that the ad
business of the brand might reach US$ 6 billion by 2025.
The Boom
Apple's ad business started to grow rapidly
after the company changed its app tracking policies. It allowed iPhone users to
opt-out of being tracked easily across other apps present on their phones. The
changes were not great for companies that rely heavily on that user data. They
had problems efficiently targeting people with online ads. The changes were
particularly hard for companies like Snapchat and Meta that depend on that data
to enhance their advertising offerings.
Meta even started a lobbying campaign against
the changes initiated by Apple and argued that the changes make it harder for
small business owners to find customers. The company's executives even shared
that they would lose about US$ 10 million in ad revenue a year due to those
changes.
Being Smart
The biggest source of ad revenue for Apple is
search advertising. Data has shown that Apple's privacy changes have shifted
ads promoting app downloads from Snapchat and Meta to Apple.
An analytics firm has also said that in the
first half of 2022, Apple's in-house search ads were responsible for about 50%
of iPhone app downloads that resulted from clicks on ads. It rose from about
20% in April 2021 before the company rolled out the privacy changes.
Luckily, regulators haven't paid too much
attention to the issue as the biggest reluctance to these changes is from Meta,
a company with several of its own competition issues.
Sources:
https://www.axios.com/2022/08/21/apple-advertising-privacy-tracking-iphone
https://heromag.net/how-apple-pushed-it
https://dailynewser.com/mobile/how-apple-pushed-its-ad-vantage