Mark Gurman: Apple set to pour on the ads

"Now the only question is whether the customers of Apple—a champion of privacy and clean interfaces—are ready to live with a lot more ads."

From Gurman's Sunday Power On column, mailed to Bloomberg Technology subscribers:

Several months ago, Apple’s advertising teams gained a foothold within the company’s services organization. The ad group’s vice president in charge, Todd Teresi, started to again report directly to services chief Eddy Cue instead of deputy services head Peter Stern. (Teresi reported to Cue in the days of Apple's in-app iAd network, which shut down in 2016.)

The ads business also was called out during Apple’s most recent earnings call, though not in a positive way. Chief Executive Officer Tim Cook and Chief Financial Officer Luca Maestri said the operation saw some Covid-related headwinds.

Still, Cook sounded committed to the business, calling it a “great” discovery tool for app developers. That’s more than Cook said about many of the company’s key initiatives during the call, including AirPods, augmented reality, artificial intelligence, health and fitness services, or the Apple Card.

Inside the ads group, Teresi has talked up expanding the business significantly. It’s generating about $4 billion in revenue annually, and he wants to increase that to the double digits. That means Apple needs to crank up its efforts.

I believe that the iPhone maker will eventually expand search ads to Maps. It also will likely add them to digital storefronts like Apple Books and Apple Podcasts. And TV+ could generate more advertising with multiple tiers (just as Netflix Inc., Walt Disney Co. and Warner Bros. Discovery Inc. are doing with their streaming services)...

Now the only question is whether the customers of Apple—a champion of privacy and clean interfaces—are ready to live with a lot more ads.

My take: To triple Apple's ad revenue -- right after kneecapping Meta and the rest -- might be a bad look for Tim Cook.

8 Comments

  1. Steven Philips said:
    I suspect that for some people it will be a “bad look” no matter when it appears.
    For me, it totally depends on how it’s implemented.
    As me old pappy used to say, “Don’t borrow trouble”.
    Besides, it’s Grrrrrman.

    4
    August 14, 2022
  2. Gregg Thurman said:
    Will the ads interrupt the programming ala FreeVee, or will the ads be placed just ahead of programming ala STARZ? That’s a huge distinction. For the few movies I watch on FreeVee the ads are very annoying. On STARZ, no where nearly as much.

    In either case I have opted out of being tracked.

    What’s the big deal? Haters will hate, cheap shot, click baiters will take cheap shots, no matter what Apple does.

    2
    August 14, 2022
  3. Alessandro Luethi said:
    Ads can be useful!

    0
    August 15, 2022
    • David Emery said:
      >Ads can be useful

      For whom? Advertisers, certainly. Ad hosting companies, yes. But not for me! If I’m looking for something, then in a internet search I’d accept ads. Otherwise, I do NOT WANT THEM cluttering up what I’m trying to read.

      3
      August 15, 2022
  4. Bart Yee said:
    If Apple can increase ad revenue by 35% annually, especially as install base, economy and services grow, it can achieve >$10B in about 3 years or end FY2025 or 2026 depending on when we start the clock. That’s a big jump, but not undoable.

    Since Apple does not break out services revenue by segment explicitly, analysts and research firms are left to guess and estimate the contributions from Search, Internal Ads, App Store, subscriptions, AppleCare+, etc. In turn, this flies under the radar for most all users not involved heavily as investors (unlike us here at PED) and most of Wall Street “until” it becomes a big deal like at $8B-$10B contribution.

    By that time, AR/VR, the iPhone 17, maybe a Foldable iPhone & iPad, and an Apple Car (CarPlay expansion), and further Health initiatives will swamp Services news despite bringing in ~$100B annual revenue by end of FY2025 if it simply grows by 10% annually from my projected FY2022 year end total of $75.3B. Ads will be important but only 10-15% of the total services revenue and a small piece of Apple’s overall revenue.

    0
    August 15, 2022
  5. David Emery said:
    Uh, NO. I’m sick of ads, and I pay the $ to avoid them within the Apple ecosystem. Apple should Do The Right Thing and not fall into the trap of “advertising dollars help our bottom line.” I’d MUCH RATHER forego the stock appreciation to keep the ads out of my face.

    (And if Apple News.app is any example, this will be A Really Bad Thing. I stopped using News because the ads were so ‘in-my-face’.)

    0
    August 15, 2022
  6. Robert Stack said:
    I’m with you on this one David. If I’m paying for Apple TV and Apple News I do not want to see ads. OTOH, I’m OK with a “free” version of such services that are instead ad-supported. The free versions would, eg, allow people to discover shows like Ted Lasso, and then they would have a choice to continue with the free version (with ads) or pay the $5/month to enjoy the same content without ads.

    2
    August 15, 2022
  7. Hap Allen said:
    Execution matters. But generally speaking, I find advertising intrusive and abusive, i.e. it’s simply bad manners.

    The execs who produce TV commercials must be quite cynical people, realizing that their carpet bombing works. (Repetition is a killer.)

    And yet, we prosper from a consumer economy. In particular, those of us here. Go figure.

    0
    August 15, 2022

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