Breaking Down Apple's (Potentially $30 Billion) Ad Ecosystem

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In this week’s MadTech Sketch, Ciaran O’Kane cuts to the core of Apple’s ad opportunities, and looks at how the tech giant can best grow its offering.

Apple is the bête noire of ad tech. Having spent the last three years skewering third-party advertising on iOS, it is unashamedly using Apple user data to build its own.

Its blatant faux-privacy campaign was the ultimate Machiavellian move: first, gut ad tech and ad-funded platforms’ ability to perform, under the guise of “user protection”'; then supplant the aforementioned with a more cuddlier, privacy-friendly option. Cha-ching.

Some analysts are guesstimating that Apple’s ad business is making around USD$5bn (~£4.2bn) per year - and could even could be as high as USD$30bn (~£25.2bn) in the next five years. 

These are not inconsiderate sums even for a company the size of Apple. But where is this USD$30bn (~£25.2bn) coming from?

In this week’s MadTech Sketch, I've scribbled out an overview of Apple’s ad business (both the current state of play and the potential opportunities).  

Apple’s core ad tech opportunities

The bulk of the estimated USD$5bn (~£4.2bn) revenue is coming from its search product. These are ads served inside its app store.  

This will be the cash cow as it rolls out new products and increases the frequency of advertising users are seeing on the app store.

I also think Apple will launch an ad network to run search ads across third-party apps on iOS. Given that FAN (Facebook Ad Network) was making close to USD$5bn (~£4.2bn), you could see Apple (with user data and iron-tight attribution) easily breezing past this, gobbling up a lot of direct response spend.

Another opportunity is in Apple News. Much of the sales is outsourced. That is likely to come in-house with Apple’s ad network team selling into agencies.

The last and arguably one of the biggest opportunities is TV. Apple has just signed a multi-year deal with MLS, which it intends to monetise via ads. Add to that the rumour that it is also launching an ad supported tier for Apple TV, and suddenly you have a scaled pool of data-driven TV inventory. Its TV ad network is ready to go to market, enabling it to take a chunk of TV spend.

Does Apple need to pair?

The one problem with all this is ad tech infrastructure. It doesn’t have any. Now, Apple might not like us - but we are the backbone of the digital advertising economy. We execute. We segment. We measure.  

I don’t think it can build this infrastructure so I am pretty sure it will go shopping. A sell-side solution with ad server and programmatic add-ons would be top of the shopping list. Or maybe a DSP to plug in all its video and CTV opportunities.

The one caveat here is Apple’s inability to execute on scaling an ad business. It has been here before and royally messed it up.  

If it drags its feet on strategy or fails to build (or, more importantly, buy) the necessary ad tech, Apple will fall flat on its flabby USD$2tn (~£1.68tn) backside.

What do you think of Ciaran's vision for Apple's ad ecosystem? Let us know by joining the discussion on LinkedIn.