Apple entering the ad space is kind of like telling everyone cliff-diving isn’t safe, then launching a cliff-diving business with a sign reading “but it’s safe when we do it”.
To sum up a little from Part 1: Apple is officially advertising for a team to “drive the design of the most privacy-forward, sophisticated demand side platform possible”. The move comes after a crippling crackdown on user tracking, which has cost competitors like Facebook and Google billions in ad revenue.
It’s a cynical move, but it’s logical.
Apple commands a suite of devices, the Safari web browser, the iOS, Apple TV, iTunes… it’s a many-tentacled beast, and it’s primed to send its suckers into any number of new markets (Apple VR? The Apple Car?).
But physical offerings take a lot more R&D, manpower, and market testing. Ad revenue is much easier on the investor’s eye than new and risky inventions. It also tends to be recession proof.
The world turns on advertising. Richer data means higher advertising performance. Considering there are 1.2 billion iPhone users in the world, and most of them have cultivated their digital lives in the iCloud since the mid-2010s, this is truly a golden opportunity within a walled garden.
A golden Apple
It’s a walled garden because, unlike with other DSPs, Apple users’ data is not for sale. Apple will be the sole beneficiaries.
But no matter how rich the data yield, privacy is always at direct odds with profit. As a DSP, the more you know, the better.
Apple’s challenge is to maximise the data they can squeeze out of their users while maintaining its “privacy-forward” stance. In other words, they need to not piss off the brand evangelicals who have long enjoyed the ad-free interfaces and overall clean minimalism that underpins the entire brand. And who pay a premium over Android for the privilege.
To pull this off, Apple has to resist digging too deep. The key will be matching user intent to advertiser benefit.
If you’re in the market for something and you want to find it quickly, you will likely benefit from targeted advertising much more than you suffer. You may be happy to see relevant suggestions popping up in convenient places (and indeed many Apple users are opted-in to ad tracking for this very reason).
In the eyes of the advertiser, you’re a “hot lead”. You’re open to being advertised to, and that’s a win-win. The key is selling the right things to the right people at the right time. A highly sophisticated DSP facilitates that.
Outcookie-ing the competition
Apple’s “privacy-forward” angle has been an extremely slick PR move – likely in the works for years.
In what some are calling hypocrisy (and some are calling playing chess while everyone else is playing chequers), Apple has managed to besmirch the competition enough so when it steps in and does the exact same thing, it can claim moral superiority.
And it’s not just the Facebooks and Googles of the world who stand to lose.
The Trade Desk is a NASDAQ-listed DSP giant that won favour by making ad pricing transparent. It predicted the decline of traditional TV and the rise of on-demand TV. It captured early market share by partnering with streaming giants like Netflix, Roku, Sky Sports, and Discovery Plus, and is now “the largest aggregator of CTV ad impressions across every major content provider”.
TTD reaches 80 million households in the US. To underscore the scale of this statistic, there are about 124 million households in the US.
That means The Trade Desk can reach about two thirds of Americans. In theory, this kind of market permeation should make it extremely defensible.
TDD operates in a slightly different market than Apple, Google, and Facebook. They dominate in TV, not socials or search engines. But if Apple has designs on the wider AdTech space, there’s nothing to stop them competing directly and aggressively.
Streaming services also have weak spots that socials and search engines don’t. Markets are fragmented, making campaign planning difficult. It’s much more of a scattergun approach. Ad fraud can be a problem. And it’s much harder to measure engagement. Your ads may be running, but your viewer may be getting up to make a cuppa.
In the same programmatic advertising vein, Netflix is now considering ad-supported subscriptions. There’s lots of money to be made, and a surprising lack of resistance amongst streamers. Rather than join the tide of subscribers jumping ship, a study cited by Disney in their decision to offer an ad-supported plan suggested 83% of paying users said they’d accept ads in exchange for a lower fee.
Even 56% of Australians agree.
Ad-based monetisation is a well trodden path in streaming. Hulu led the charge, earning USD $2.1 billion in revenue between 2020 and 2021. Paramount followed with $822 million, and NBC’s Peacock with $279 million.
Apple tends not to do things by halves. If its expansion into AdTech doesn’t stop at the App Store, Apple TV could become a fearsome rival to the above.
We’ve heard of Big Tech stifling startups, but this is Big Tech stifling Big Tech. The advantage for Apple is that – unlike streaming services – it’s not hamstrung by data leakage and third-party concerns.
Steve Jobs once said: “the United States Government is a monopoly”. But however self-regulating Big Tech is blown up to be, Apple is not immune to the law. Nor is it immune to the antitrust lawsuits it has tried to foist on its competitors.
Apple has never had trouble doing things differently, except in this case, different means better. It won’t just be able to sing the ethics song, it will need to be ethical in its data yielding practices.
But when potential billions of profit are at stake, like expecting Eve not to eat the apple, this may be a tall order.