Ads on Maps shows Apple ‘not afraid to scorch the earth’ to grow revenue
With ad units coming to some of Apple’s most-used apps next year, experts ponder what the ad buying platform will look like and whether its core audience will accept the interruption.
Managing the transition from ad-free to ad-supported experiences is tricky, even for giants like Apple / Apple
Apple brings in an estimated $4bn a year from advertising revenue, but its ambition is to scale that up to achieve greater revenue stability. As such, ads are set to show in its Maps app from early next year, in addition to select spots in the App Store’s ’Today’ tab and at the bottom of app listings.
Mike Woosley, chief operating officer at data management platform Lotame, says: “Apple is diversifying its revenue streams to smooth out economic shocks, and its services segment – where it hides its advertising business – has grown 12% this year.“ He likens its emphasis on advertising in the face of hardware saturation to Netflix’s ongoing pivot to an ad-supported version of its streaming service as paid subscriptions reached saturation.
“And if Apple wants growth in advertising, it’s not afraid to scorch the earth to get it,“ he says. “When it was ready to get serious about ad revenue, it locked down its device-related advertising ID, stripping developers of the ability to identify users across sessions and domains, leaving Apple as the sole king of identity on its phones.“
To date, Apple has been more selective than the majority of its competitors when it comes to advertising on its owned and operated platforms. Google has long included ad slots in some of its own tools, with Google Maps offering paid-for results at a local level. By contrast, Apple has focused on providing more streamlined products and making the ad-free nature of its services part and parcel of its appeal to users.
Paul Dimmock, head of demand EMEA at Alkimi Exchange, explains that even though it has long derided advertising, this is not Apple’s first attempt to make ads a core part of its appeal to brands: “iAds, which launched in 2014, was essentially a programmatic network of Apple inventory only. This lasted two years, being closed down in 2016 due to a lack of demand.
“Based on that failure, I would expect that a new Apple buying platform would activate across its owned and operated properties, as well as third parties, as this would – in theory – better justify the inevitable significant costs of building adtech from scratch.”
But while consumers are habituated to ads across those other platforms, it remains to be seen whether Apple’s core audience will accept the introduction of ads into services that have previously been ad-free. Dr Paul Hayton, the founder and chief technology officer of mobile DSP Dataseat, which is part of Verve Group, says that Apple tends to avoid intrusive ads that interrupt the user experience, “so we’re unlikely to see a promotion for something irrelevant like a mobile game in its maps app“.
He goes on: “I expect ads to be highly targeted and entirely based on the search a user makes and the location they’re in when using the app. For example, a search for directions in a seaside town like Poole might prompt an ad for a business that does fishing trips. This format won’t come as a surprise to consumers who’ve been accustomed to Google Maps since 2016. If Apple can present ads in a seamless and relevant way as it does for its search ads within the App Store, users will be unlikely to be put off by them and, in many cases, will probably not even notice that they’re ads.”
Reports suggest that Apple will include Google Search-like results in its Maps app, rather than banner ads, and that it is aiming to broaden its ad network to include its books and podcast apps, in which publishers could pay to appear higher in search results. As Dimmock argues, the likelihood is that Apple will emulate Amazon’s recent approaches to its DSP, offering buyers the ability to buy programmatically both on and off its platform. This allows it greater control over the ecosystem on its own services, while also making a play to increase market share elsewhere.
Ultimately, though, the transition from ad-free to ad-laden experiences is tough to navigate, even for a company with as large a market share for smartphones as Apple. Nailing the user experience will determine whether Apple’s ad ambitions will come to pass.