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One analyst says Apple isn’t taking advantage of advertising opportunities. He sees the company making $20 billion a year in advertising by 2025.
dream time
apple
Decided to crash the ad party.
As several Apple (ticker: AAPL) news sites covered last week, the company recently posted a job posting for “Senior Product Manager for Demand-Side Platforms.” A “demand-side platform” allows ad buyers to purchase inventory from multiple ad exchanges from a single interface using automated bidding, also known as programmatic. Platforms receive a small slice of each dollar deployed.There are a lot of these DSPs.
meta platform
(META) has Meta Ads Manager.
alphabet
(GOOGL) has Google Ad Manager.
Amazon.co.jp
(AMZN) offers Amazon DSP. And some are unaffiliated.
Apple said the new hire “will serve Apple’s mission to drive the design of the most privacy-friendly and sophisticated demand-side platform possible, and to design products that grow the business and deliver an experience that exceeds customer expectations.” Innovate some of the most sensitive strategic plans.” The project will target ads that appear on various Apple services, according to the job posting. What’s unclear is whether Apple will eventually try to target the wider world of advertising across apps and websites.
Apple declined to comment on the post or other elements of its advertising strategy.
This all looks a little nerve-wracking. Apple’s decision to adopt a policy called App Tracking Transparency has made it much more difficult for Meta’s Facebook and Alphabet’s YouTube to target and identify advertising campaigns. Apple has taken the position that consumer privacy is its top priority, requiring iPhone users to opt-in when apps request to track how they move around her web. . Most people say no.
Changes to our policy are based on Meta, YouTube, and
snap
(snap). Earlier this year, Meta said Apple’s policy changes would reduce its advertising revenue by about $10 billion this year. Meta claims Apple’s approach isn’t good for small businesses, but that message is subverted by Apple’s compelling privacy endorsement.
Apple’s talk of building its own advertising business now should confuse Meta and other advertising companies.
But let’s be clear, Apple didn’t avoid advertising. In fact, the company’s income statement includes a contribution from advertising, but it’s hidden in the service line of the report. It said the biggest contributors to the 12% growth in services revenue for the period were increased revenue from advertising, cloud services and AppleCare.
Evercore ISI analyst Amit Daryanani, who wrote about Apple’s new job openings in a research report last week, said the iPhone maker added two new ways in late July for developers to promote their products on the App Store. pointing out. One is basically the home page of the site[Today]It allows you to place ads on tabs. The other allows you to display ads promoting “apps you might like” on individual app product pages.
I recently wrote about Apple’s need to find big new markets to fuel its growth. Advertising can be part of the answer.
Daryanani believes that advertising revenue from Apple’s App Store alone could reach $7.1 billion by 2025. I am writing.
Daryanani estimates that Apple’s advertising business will generate $4 billion in revenue this year. That’s just 0.2% of the $600 billion online advertising market. He believes Apple could reach his 2.25% share of the digital ad market by 2025, generating $20 billion in annual ad revenue.
Needham analyst Laura Martin is also bullish about Apple’s advertising potential. In a note last week, she noted significant growth in her Amazon advertising business. It consists solely of advertising within the core e-commerce platform. Martin expects Amazon’s advertising business to reach $37 billion this year, up from $4 billion five years ago. And she said Apple’s profits from advertising will almost certainly grow faster than its revenues, as advertising revenues typically come in at 70% to 80% gross margins. We believe it will target the mobile advertising market. eMarketer estimates he will grow to $452 billion in 2022 and nearly $680 billion in 2026.
Apple’s challenge is balancing access to data on iPhones with its publicized commitment to privacy. Martin believes Apple can build an advertising platform that effectively prevents personal information from being leaked to third parties. But until it comes up with an actual plan, questions remain.
Despite concerns about the economic slowdown and its impact on marketing budgets, interest in advertising is picking up again.
netflix
(NFLX), which once vowed not to run ads on its platform, has promised to offer an ad-supported subscription level in early 2023.
And some recent data points show that there is still plenty of demand for ads that can attract customers.
Yelp
(YELP) shares surged Friday after reporting an unexpected surge in demand for advertising in the local market, especially for home repair and contract service providers.
Either way, Apple isn’t worried about its advertising prospects this year. I’m thinking about opportunities in 5, 10, 20 years. I don’t know what the world will look like in 2042, but I can say this. There are still many ads.
write destination Eric J. Savitz eric.savitz@barrons.com
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