iPhone 13 Pro
Source: Apple Inc.
The company currently generates about $4 billion in annual revenue from its ad business but wants to grow the segment into the “double digits,” according to the report.
Apple already shows ads in some apps, like Apple News and Stocks. It also recently announced plans to expand ads in the App Store. Bloomberg said the company is considering ways to add advertising to Apple Maps, for example, which so far has stood out from its competitor, Google Maps, by not showing ads. The report said it’s “likely” that Apple also inserts ads into the stores for Podcasts and Books, too.
An Apple spokesperson wasn’t immediately available to comment on the report.
Meanwhile, Apple has targeted other companies that push ads to iPhone users.
Last year, Apple released an update for iPhones with a new popup that asked users if they wanted to allow apps on their phones to target the user for ads. The privacy feature, called App Tracking Transparency, has upended the behind-the-scenes mechanics of many mobile ads, especially those that confirm whether a purchase or download was made.
The new ads could help Apple squeeze more value out of iPhone users.
Analysts from Needham wrote in an Aug. 3 note that they believe Apple’s next big revenue stream is in advertising.
“AAPL has best-in-class user data,” they said. “If it builds a DSP (demand side platform), AAPL can control how and where its data gets used, and can prevent data leakage outside their Walled Garden.”
The analysts also said they believe Apple is in the early stages of building a new mobile advertising platform. They said they have observed a “notable uptick” in the company’s recruiting efforts for its Ad Platform, and that it was highly visible at the Cannes Lions advertising festival in June.
In Apple’s most recent earnings call, CEO Tim Cook and CFO Luca Maestri said the company’s ads business experienced some Covid-related difficulties, but Cook said it is a “great” discovery tool for app developers who want to promote their apps.
Analysts from Bernstein said Apple’s Services business, which is principally driven by advertising and the App Store, has seen a decelerated growth rate for four consecutive quarters as the App Store has endured a shift in consumer spending.
However, they said they expect Apple’s ad business to grow because of higher ad loads in the App Store.
“Overall, we believe that at least 20% growth for Apple’s overall Advertising segment is attainable over the next few years,” they said.