Apple Wants To Triple Revenue From Advertising Division
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.
There’s nothing inherently bad about ads per se. Typically, any ‘damage’ done to the user experience of a product by showing ads is offset by a lower — or free — purchase price. That’s the balancing act at play; the user is compensated in exchange for having to consume advertising, thereby maintaining an overall equilibrium of customer satisfaction. For just one example, Google runs a widely successful suite of services, almost exclusively powered by an ad-supported monetisation model.
In the context of Apple, the same ideas apply. I don’t think anyone would complain if Apple launched an ad-supported tier of Apple TV+, or Apple Music, as long as it was proportionately cheaper than the ad-free tier. If anything, those tiers would likely be more popular than the existing offerings. After all, Spotify has huge market dominance in music streaming precisely because they offer a free ad-supported tier.
Where the tension is, is the expectation that Apple is going to insert more and more ads into the user experiences of its premium products, without any such compensation in return. All signs point to the fact that Apple is going to try and uphold its position as a premium company charging premium prices, whilst also sucking out more revenue apparently indiscriminately.
And that is a dangerous slippery slope that threatens the essence of Apple’s entire product lineup. It’s a risky venture. A big problem is that the feedback loop is not so sensitive; the increase in revenue is immediate but the observation of the cumulative negative impact felt by users is lagging. You can probably insert a few additional ads into iOS and get away with it. But overdo it, and then you start undermining the premium brand the company has carefully curated for so long, and then you start losing customers, maybe for good.