Apple has been a major player in the advertising sphere since it created its iOS platform, but it truly made an impact in 2022 when it shifted its focus towards digital services and advertising. The tech giant launched numerous ad channels and placements, in addition to exploring the possibility of introducing ads to Apple TV+. This strategic move demonstrated Apple’s commitment to expanding its reach in the advertising industry.
Apple’s iPhone has historically been the company’s primary source of revenue, but in 2022 the Services category emerged as a significant contributor, particularly in terms of advertising revenue. Despite this shift, the iPhone remains a major source of income for Apple.
- During Q3, the iPhone continued to be a major source of revenue for Apple, generating $40.6 billion. The Services category, which includes offerings such as Apple Arcade, TV+, Music, Fitness+, and its advertising business, was the second-highest revenue generator for the company, bringing in $19.6 billion. This category has been a focus for expansion, with plans to increase streaming and advertising revenues.
- The App Store played a significant role in Apple’s advertising revenues, with the introduction of new ad placements on the home page and app recommendations on download pages.
- According to Insider in May, Apple is reportedly planning to prioritize streaming and advertising revenues within its Services category, which includes offerings such as Apple Arcade, TV+, Music, Fitness+, and its advertising business. This has led to speculation that Apple TV+ may eventually adopt an ad-supported model like other major streaming platforms.
Apple, with its large base of iOS users and strong brand, has the potential to make significant gains in the advertising industry by competing with Google and Amazon, which currently dominate search. This opportunity is particularly significant given that both Google and Amazon are currently facing increased regulatory scrutiny.
- Throughout the year, Google has faced antitrust issues in both the US and EU, leading to fines and a reduction of control over its advertising business. Apple has also experienced pressure, with a Bloomberg report suggesting that the company may soon allow access to third-party app stores on iOS.
- According to Insider Intelligence principal analyst Andrew Lipsman, search advertising presents both a significant opportunity and uncertainty for Apple. While the potential for success is high, the regulatory and antitrust concerns involved in taking on Google could be significant. Lipsman estimates that Apple could potentially capture 10% of Google’s nearly $150 billion search ad business, representing a $15 billion opportunity. However, he notes that this scenario is uncertain and would involve a declaration of war with Google.
Apple’s pursuit of a dominant position in the advertising industry has not gone unnoticed by consumers and competitors. There are concerns that the company may compromise its reputation for user experience by introducing too many ad placements, and companies affected by the AppTrackingTransparency (ATT) change may consider legal action. These challenges could potentially hinder Apple’s efforts in the advertising space.
- The increased use of advertisements on the iPhone represents a significant shift for Apple, which has traditionally prioritized aesthetics and user experience above all else. While advertisements may negatively impact these qualities, the potential for revenue growth is significant enough for the company to consider this approach. Many users find that advertisements detract from their overall experience, but the opportunity for revenue growth may be too great for Apple to ignore.
- Apple’s growing advertising revenue has attracted criticism from competitors. Meta has raised concerns through government channels, arguing that the increase in ad revenue suggests that the AppTrackingTransparency (ATT) policy is monopolistic.
Our take on things: Duh. Obviously this was always the plan (for apple to make themselves a major player in advertising) and the iOS 14 “privacy” features were always about knocking Facebook and Google down a peg. We’ll see what happens when Google decides to fight back. What if they block all google functionality from every device running on iOS? Strap in. 2023 could be interesting.