About a week ago, Apple launched it’s Search Ads platform into existence and there are many app publishers who are trying different tactics to use this medium to their advantage. You can read about some of these here:
Once the dust settles, you might want to ask yourslef what is Apple’s master plan for this? Why is Apple doing it? Here are my thoughts on this subject.
Search Ads aren’t enough for Apple
Apple’s revenue is well over $200B. When they go after a new revenue stream they ask themselves – is this channel going to be meaningful for us. If the channel has the potential of being at least 5% of their total revenue or in other words $10B/year they might consider it. If it’s lower, it might not be worth the efforts and risks. For example, the app-store revenue for Apple were $6B in 2015 but it’s growing fast and are likely to reach $15B in a few years. App-store search ads can’t deliver these revenue volumes on their own. There is simply not enough supply.
Apple is looking at the mobile ad spend forcasts
Some of you might have seen this report by eMarketer forcasting $195B in mobile ad spending by 2019.
Everything we have seen until now tells us that this forecast is going to come true. Apple is 75% percent ahead of Google when it comes to App Store revenues but it knows that it’s far behind when it comes to advertising. The Apple ad-network – iAd was shut down as of June 30th 2016 after failing to become a major monetization channel for apps but Apple didn’t give up hope. Their mistake was that they didn’t understand the importance of consistent demand. They were fucosing on bringing big brand campaigns which is important in order to drive eCPMs up and stay competative but without consistent demand, publishers remove your SDK in favor of other SDKs. Apple learned from this mistake.
When Google launched their search ads product Apple were watching and they realized that Google did a sloppy job this time. Unlike Adwords, the Google Play search ads are not available as a market to the public but are instead offered as a managed service through Google account managers. Apple saw this opportunity to create a more appealing open product that allows anyone to set up their own campaigns. They created high demand for it’s search ads and more importantly this time the demand will be consistent.
Apple’s next move is for the supply side
The revenue potential of search ads alone is limited as we mentioned before. The demand is huge but the supply is the problem. Following the moves of other tech giants can give you a hint as to what Apple’s next move might be:
- Google generated consistent demand with Adwords and then launched Adsense to improve supply
- Facebook generated consistent demand with Feed Ads and then launched Facebook Audience Network (FAN) to enhance supply.
It’s likely that Apple will try to do the same once they aggregate enough demand for their ad products. They have tons of data about their users so they can offer the same levels of demographic targeting offered by facebook in addition to leveraging search data to indicate interests of users. Since they are the platform owner, developers will trust their SDK and give them a shot again. This time the demand will be consistent and allow developers keep them as part of the monetization mix. It might take a year or even 2 years but eventually this has to be Apple’s plan.