Why Apple could be 2023's most impactful advertising player

The prediction: Principal analyst Andrew Lipsman believes that Apple could be one of the two most consequential advertising companies for the rest of this decade, particularly in the US.

Shrewdly kneecapping the competition: Apple implemented its AppTrackingTransparency (ATT) changes last year with its iOS 14.5 update, providing users with more clarity around how apps tracked their behavior and giving them the opportunity to opt-out of tracking.

• “The vast majority of users opted out, leading to significant ‘signal loss’—a reduction in the amount of web browsing and ecommerce behavior that powered Meta’s ad targeting and measurement mechanism,” explains Lipsman.
• Perhaps the purest representation of Apple's strategy at work can be found in Meta’s mobile app install business, which pays app providers to target the right users and drive app downloads. Apple’s changes disrupted this business, pushing advertising away from Meta and in the direction of—wait for it—Apple. In one fell swoop, Apple just took a huge bite out of Meta’s ad business.
• Meta is feeling the effects beyond mobile app installs: Advertisers of all sizes are having a harder time reaching the most valuable audiences and proving return on ad spend (ROAS). Those budgets are now migrating into other channels that can better show results.

Measurement mastery: Apple has the measurement apparatus to shift major media budgets. While it has kneecapped others' ability to target and measure performance, Apple has “full visibility into what happens on iOS and can provide that measurement—and measurement drives ad dollars,” notes Lipsman.

• Measurement is arguably the single most important factor that’s driven the growth of digital ad spending since its early days; as Lipsman notes, Google was the first to unlock big budgets, largely on account of the tight closed-loop measurement for search ads. Facebook followed suit during the social ad era, and now Amazon is replicating that model in retail media.
• “Apple owns the measurement backbone for all of iOS,” said Lipsman. “It has full visibility into audiences, how they browse, and what they buy.” The company has hung its hat on privacy, Lipsman notes, so he doesn’t see it leveraging personalized ads the same way Meta, Google, and Amazon have done. Apple’s approach is likely to involve broader audience segmentation, but by being able to prove performance on the back-end–and theoretically with a lot more transaction data–it’s going to have a formidable apparatus.

Pushing further into ads: Apple is beginning to experiment with advertising in streaming TV, and that’s one of the most promising areas of digital advertising right now.

• Lipsman notes Apple acquired the rights to Major League Baseball and Major League Soccer games and will become a bigger player in the acquisition of major TV sports rights in the near future. Apple TV+ also made a major leap this year, releasing several hit series like “Bad Sisters'' and “Severance,” and winning an Academy Award for Best Picture with “CODA.” If Apple wants an ad-supported model for Apple TV+, the potential is there.

• Apple is reportedly building a demand-side platform (DSP). While this effort may be designed for enabling ad buys exclusively across Apple’s growing footprint of inventory—as opposed to across the open web—it signals more full-funnel ambitions and suggests the intention to bring a lot more inventory online.

Looking further ahead: Apple will probably launch a search engine at some point, Lipsman predicts, which would obviously have huge implications for Google. Think about how easily it could replace Google as the default search engine.

• “Google is a lot more vulnerable than it seems,” said Lipsman, noting perceptions that the quality of its search results has “meaningfully deteriorated” in recent years. “There are more ads and fewer organic results, which seem to be of worse quality.”
• If Apple could clear that quality hurdle with organic search results, with the benefit of being able to maintain a more modest ad load, it’s reasonable to think it could take market share from Google.