Apple spokeswoman Shane Bauer declined to answer WIRED’s questions about how the company’s business has changed, the role of advertising in it, or whether AT&T has anything to do with its advertising programs. “Users’ data belongs to them, and they should decide whether to share their data and with whom,” Bauer said. AT&T’s rules apply equally to all developers, including Apple, and the company “never tracks users,” he said.
That doesn’t mean Apple’s existing ad revenue won’t continue to grow. “It’s definitely going to be a big part of their business,” said Peter Newman, director of forecasting at Insider Intelligence, which tracks Apple exclusively. “They want to drastically reduce their reliance on pure hardware sales.”
Monthly subscription services like Apple Music and Apple TV+ can easily accommodate ads, Newman noted. The company’s video streaming service is noteworthy, he said, because after Netflix introduced an ad-supported tier, Apple is now one of the only major video-streaming services without an ad-supported version. (In April, Apple signed a deal to place ads on Major League Baseball coverage through the streaming service, even though the ads are sold by MLB, not Apple).
How far Apple’s advertising business will grow is far from certain. Newman sees a lot of room for growth, but doesn’t see the company competing with the biggest digital advertising giants. “I can see Apple becoming something on the Microsoft level, maybe a bit bigger, but well behind the likes of Google and Meta,” he said. That would mean tens of billions instead of hundreds of billions in ad revenue. Microsoft says its advertising revenue is about $10 billion a year; Google, the world’s largest digital advertising platform, made nearly $210 billion last year, with Meta in second place with $115 billion.
While Apple’s devices and services offer a lot of potential ad inventory, they don’t offer the scale or lucrative opportunities that Google’s search engine, Meta’s billions of social app users, or Amazon’s universal store, Newman said. . Although if Apple has been rumored to be building its own Google search alternative, the project could lead to lucrative new advertising opportunities.
The company’s privacy promises could limit its progress in ad targeting. Investment bank Evercore ISI estimates that Apple’s advertising business will reach $30 billion by 2026. That’s roughly equivalent to 2021 iPad sales, or just under half of the company’s services revenue.
Apple is hiring a lot of people to pursue advertising fortunes. The ad tech engineering manager job ad cites the company’s “complex and growing need for a platform that helps deliver highly optimized ad content to consumers”. Apple had about 250 employees working on its advertising platform as of September, according to an analysis of LinkedIn data. Financial Timesjob listings indicate plans to nearly double that number.
Apple appears to be sensitive and is seen as intervening too much in digital advertising that could damage its brand or attract regulatory pressure. It paid for a study published in April by a Columbia Business School professor that poured cold water on the idea that AT&T could help it compete with internet advertising giants.
But Reinhold Kesler, a researcher at the University of Zurich in Switzerland, found that ATT helped Apple. The feature has led some app developers to switch their business model from free but with ads to a paid model, sometimes including in-app payments. That’s good for Apple, which takes a 30% cut of such payments, although some companies are understood to have negotiated better rates.
MIT’s Kusumano said Apple’s biggest challenge may be balancing its previous reputation for privacy with the data scraping created by its digital advertising business. “Apple is a well-manicured walled garden, not an ad-intensive ecosystem like Google,” he said. Maintaining this distinction while increasing ad revenue can be tricky. “Apple users are very loyal and tolerant,” Kessler said. “But if they push this to match their predictions, I’d wonder if users can ignore it.”