Google’s Speculation on Apple’s Advertising Ambitions ⇥ businessinsider.com

Peter Kafka, Business Insider:

Titled “Operation Black Walnut,” the 2022 report appears to have been assembled by Google strategists to try to imagine what kind of ad business Apple might eventually build out one day.

Apple’s current ad business is mostly confined to selling ads on its App Store search results page. But the report’s authors speculate that Apple could eventually start selling ads that run on other people’s apps and eventually on the web via its Safari browser. It might eventually become a $30 billion business, they guesstimate.

The iPhone continues to be Apple’s big moneymaker but, right after it is a big bucket labelled “Services”. Some of that is thanks to monthly recurring charges for iCloud, media streaming, video games, news, and fitness stuff. That is what probably comes to mind when you head “Apple Services”. But there are a few more things in that bucket: AppleCare, payments, advertising, and the App Store. Those last two categories are looking less solid than they once did.

Included in “advertising” is the revenue sharing agreement between Apple and Google, which is probably going to take a $20 billion per year haircut. That is about 20% of Apple’s entire annual “Services” revenue, and 16% of its total profits for 2024. Also, regulators are chipping away at the company’s lock on its cut of in-app payments.

The Google document is speculative and external to Apple, so it does not represent Apple’s actual strategy. This is what Google, an advertising company, thinks Apple could do if it wanted to really commit to selling ads. Does losing its Google revenue share tip Apple’s hand? I sure hope not, but I am not the person trying to figure out whether to take a massive financial hit for users’ trust and enjoyment. If Apple has good taste, I hope it will make the right call.