In today's Finshots we talk about Apple's foray into advertising

The Story

Apple is an ad company now. And its employees don’t like what’s happening!

See, like many other tech companies, Apple sells ads. Not as pervasively as the others, but it still does. For instance, in 2021, Facebook’s ad revenue was a whopping $115 billion. And Apple’s was a mere $4 billion.

But what if we told you that Apple multiplied this ad revenue by nearly 4 times over the previous year? And that in 2021, Apple’s ad revenue topped TikTok’s ad revenue!

It’s crazy!!!

But the folks in Apple’s ad team aren’t pleased. According to a recent investigation by The Information, they think ads will soon destroy the ‘premium’ factor that everyone’s come to associate with the iPhone ecosystem. After all, people don’t pay $1000 for a device to be bombarded with ads.

And Apple’s aware of this too. It knows that ad engines are antithetical to the privacy claims they keep making all the time. You can’t run ads unless you target users based on certain criteria — sift through their preferences and then feed them exactly the kind of ads that would push them to commit to a purchase.

So Apple has tried to sugarcoat things. At least internally. It doesn’t use typical ad terms such as ‘targeting’. Instead, it calls it ‘audience refinement’. When a company pushes ads to target a competitor’s brand name, it doesn’t call it “conquesting”. Instead, it uses the word “brand defence.”

In some ways, you could argue that Apple’s doing all this to make itself feel better about its burgeoning ad business.

But that’s not really going to matter to users who see these ads, no? They won’t care if they’re a part of ‘audience refinement’. They’ll only know that Apple’s not walking the talk. Imagine wanting to kill the intrusive ad businesses elsewhere, but…then replacing those ads with your own. It’s a bit hypocritical.

And if you don’t fully follow what’s happening here, let us explain.

Okay, remember when Apple introduced something called App Tracking Transparency (ATT) last year? If you opened the Facebook app on your iPhone, you would have received a prompt that said something like this — “Allow Facebook to track your activity across other companies’ apps and websites?”

Because that’s what advertising companies like Facebook did. They tracked you everywhere. If you visited an online sneaker shop to check out the latest drop, they’d know you were there. They then used this information to help brands like Nike and Adidas target the same users repeatedly.

But after Apple’s prompt, people kind of freaked out. 62% of iPhone users clicked, “No!”. They didn’t want to be tracked all the time.

And that pretty much was the death knell for Facebook and its ilk. Without effective tracking, a happily married individual could see a Tinder or Bumble ad. High-school teachers could be bombarded with ads about tech gadgets. And when companies realized it, they cut back on their advertising budgets. This year, Facebook could lose a massive $10 billion thanks to Apple’s ATT.

And you know this by now — all the advertising dollars are going to Apple. That’s why its revenues from ads have soared nearly 4 times!

Sure, people could argue that Apple’s intention with ATT was still privacy oriented. But come on, do you really think a massive conglomerate such as Apple didn’t really see the second-order effects here?

Maybe Apple really wanted to kill its competition.

Why?

Well, think about it. What does Apple really sell? Hardware. But it’s getting harder to sell iPhones and iPads. Smartphone sales are plateauing. After all, you can’t keep creating gadgets that are only slightly better each year and expect them to drive massive growth.

So, Apple needs a side hustle. It needs to drum up revenue. And the ad business is a money spinner.

But, how could Apple compete effectively against established players? Well, precisely by doing what it did last year — Hurt the competition.

And now that it has tasted success, it may want to show ads everywhere. On Apple Maps. On Apple Podcasts. On Apple TV. Every piece of Apple real estate actually. Because Apple wants to hit the $10 billion ad revenue mark. And it wants to do it ASAP.

What about privacy?

Well, that we don’t know. All we can say is that some people believe that Apple's lying about privacy. That they've found evidence which shows Apple's tracking you even when it says that it's not.

But if you wanted more proof that Apple’s deadly serious about growing its Ads business, well, look no further than its organisational structure. Because that’s one of the easiest ways in which you can judge the ambitions of a company. If a company is serious about something, they’ll put the right people to oversee it.

See, Apple clubs a lot of things under its Services Division — money it makes from Apple Music, the 30% cut it takes from apps selling stuff on its App store, the iCloud subscriptions etc. Basically, anything that is not hardware like the iPhone or the AirPods.

Now Ads are a part of services too. But, the person who headed the Ad business didn’t actually have direct access to the person who led the Services Division. There was someone in between. There was a hierarchy. But according to Bloomberg’s Mark Gurman, that’s changed. Now, the Services Head will pay direct and close attention to the Ad business. Ads are a priority!

Also, Apple doubled the number of folks in its Ads team after it introduced ATT. The team now has 250 members.

So yeah, pretty soon, Apple the hardware giant could become the advertising behemoth. The only question that remains is — will Apple eschew its principles of privacy to make more money?

Hopefully it doesn’t.

Until then…

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