Other signs emerging pointing to Apple’s interest in mobile advertising

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When Apple decides to do something, it doesn’t do it halfway. Look at what Apple has done with its Services unit. This division, which includes huge revenue generators like App Store, Apple Pay, AppleCare, iTunes, iCloud, Apple Music, Apple TV+, etc., is the company’s second largest business after iPhone. It was only a few years ago that Apple Brass, worried about declining iPhone shipments, figured out how to make money by offering recurring subscriptions to active iPhone users.

Apple’s Services unit is its second largest business segment after “iPhone”

How fast is the Services unit growing? In 2017, the company embarked on a plan to double fiscal year Services revenue to $50 billion by 2020. Now Apple has just reported nearly $20 billion gross for this division just for the third fiscal quarter of 2022. That’s $80 billion in revenue. for services and before you know it, Apple could soon rake in $50 billion every quarter from this business segment thanks to a possible new addition to its services lineup.

According SearchAlphathere are signs that Apple is set to develop its own mobile advertising platform which would be part of the Services unit. Laura Martin, an analyst at investment bank Needham & Co., points out that another tech giant, Amazon, has grown its ad business from $4 billion in 2018 to $37 billion this year. She said, “Apple is the biggest company on Earth. To grow, it needs to target the big global TAMs. [total addressable markets]like global digital advertising.”
The total addressable market is the revenue a product could achieve with 100% market share. The figure shows the potential size of a product or service. The analyst cites data from eMarketer predicting that the TAM for digital advertising will reach $600 billion this year. $450 billion of that will come from mobile advertising, which is the business Apple is reportedly looking to enter.

Apple supposedly wants to participate in what’s called the “demand-side platform” (DSP). This system allows businesses to buy ads by having them search sites and mobile apps based on the advertiser’s criteria. When he finds a place he wants to advertise, bids are placed. Needham’s Martin said it would fit perfectly with Apple’s history of making its products and services work together in the Apple ecosystem.

Martin adds that “if it builds a DSP, Apple (AAPL) can control how and where its data is used. And can prevent data leaks outside their “walled garden”. Apple recently posted an advertisement seeking a senior executive for its DSP. in its advertising platform activity. And the analyst added that Apple’s appearance at the Cannes Lions advertising festival in June was orchestrated by the company because it “wants to make marketers aware that it is in the business of advertising”.

Apple can make big bucks while keeping its word by building a demand-side platform

But Apple is going to have to make sure it doesn’t slip up and backtrack on the privacy pledge the company has been pushing. With 1.8 billion active devices and 1 billion unique users, Apple has the opportunity to leverage these numbers and generate revenue. The analyst says “Virtually all of the time consumers spend on Apple devices is on mobile, therefore, we expect Apple to target the global mobile advertising market.”

Apple might feel the need to do something to bolster the Services unit now that there are cracks in the App Store, with net App Store revenue posting just 1% annual growth in July. The data comes from Sensor Tower and was mentioned in a report to Morgan Stanley clients and was lower than the year-on-year growth for the month the investment firm expected. According to Sensor Tower, App Store sales in June were up 14% year-over-year, compared to 18% in May and 21% in April.

Because using a DSP does not require the collection of personal data, Apple could build this platform and still say it does not use personal data of iPhone users to make money . All this platform does is give businesses looking to advertise on multiple platforms the ability to purchase advertising inventory from a single interface. This inventory includes website banner ads, mobile in-app and mobile web ads, and streaming video ads.

It would appear from Martin’s comments that Apple is following Meta and offering to place ads only on sites, services, and apps that they control. This wouldn’t be new as Meta’s DSP restricts advertisers from buying space only on Facebook and Instagram.
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