“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Ben Dutter, SVP of strategy at Power Digital.
Apple’s advertising privacy policies (namely iOS 14) have rocked the digital advertising industry for the last year. But in the meantime, Apple’s ad business has seen plenty of growth.
Apple’s services business, including advertising, grew 24% year over year to $19.5B in Q1 of fiscal 2022. Bloomberg analysts estimate that advertising across the Apple ecosystem generates roughly $1B per quarter, and that slice is growing rapidly.
Some may view Apple’s recent moves as a means to protect their interests, but it is much more likely that the strategy is for Apple to build a moat around its own burgeoning ad business.
Apple’s advertising venture
From opening roles like a technical DSP manager to showcasing new ad placements, Apple is actively looking to expand their presence in advertising. And why wouldn’t it? Digital advertising is a multi-hundred-billion-dollar industry, dominated by Apple’s long-time rival: Google.
A key reason that consumers prefer Apple is that it automatically opts them out of invasive targeting, attribution and advertising. In fact, only about one in four users opt back in. But once users are hit with ads across native apps in iOS, Apple might lose the very trust it has worked so hard to build.
It’s one thing to have ads appear in a high-intent space – such as the current incarnation of Apple Search Ads. But it’s an entirely different ball game to have ads appear in content that Apple users perceive as “safe.”
And while early placements suggest that Apple’s new inventory only exists around the App Store (their Today Tab and You Might Also Like section), this is only the beginning. There’s no reason to build a demand side platform (DSP) if you only intend to have three placements.
The purpose of a DSP is to allow third parties to purchase advertising and targeting data programmatically. Apple knows that their arguably most valuable asset is a mountain of personal data – 1.8B active Apple devices’ worth, in fact.
A hard road from hardware
One thing Apple needs to keep in mind is that it is primarily a hardware business. And not just any hardware business, but a great equalizer among the classes. Regardless of income, most consumers in the US prefer to buy an iPhone.
Still, the company will inevitably face challenges as it looks to expand away from “luxury for everybody” hardware into software and ad tech. Google has decades of experience in digital marketing. While it didn’t innovate much in technology or placements, it has continued to gobble up market share, perfect the execution of its system and even delay its deprecation of cookies, a key component in its Google Ads ecosystem.
So what does all of this mean for the future of Apple ads? It has a long slog in the muck of litigation and regulation ahead of it, as well as a technological arms race.
I’m confident that Apple will sort these issues out and continue to expand – potentially creating its own “privacy-centric” search engine – and take Google head on.
Competition is healthy, and as Apple transitions from hardware into more recurring revenue software and advertising, Google and others will step up their game.
There are plenty of combatants in this arena (data collectors vs. consumers, Apple vs. Google, privacy vs. tracking, hardware vs. software) and the winners are yet to be determined. As marketers, we must remain aware, alert and agile for the battles to come.
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