Apple wants to boost advertising activity because iPhone changes hurt Facebook

Apple will expand its advertising business, according to two people familiar with its plans, just as it introduces new privacy rules for iPhones that are likely to paralyze the ads of its rivals, including Facebook.

The iPhone maker already sells search ads for its App Store that allow developers to pay for the best result. For searches for “Twitter”, the first result is currently TikTok.

Apple now plans to add a second ad space in the “suggested” apps section of the App Store search page. This new slot will roll out towards the end of the month, according to one of the folks, and will allow advertisers to promote their apps across the network instead of responding to specific searches.

Apple declined to comment.

The expansion is the first concrete sign that Apple plans to expand its own advertising business while shaking up the broader $ 350 billion digital ad industry led by Facebook and Google.

Apple’s upcoming software update, iOS 14.5, will prohibit apps and advertisers from collecting data about iPhone users without their explicit consent. Most users are expected to refuse to be tracked, which will be a huge blow to the way the mobile ad industry works.

Apple has said the changes will improve the privacy of its users, but some critics have accused the company of boosting its own fledgling advertising business. Mark Zuckerberg, Facebook’s CEO, said, “Apple may say they are doing this to help people, but the moves are clearly following their competitive interests.”

The search page of the iPhone App Store, with the section “Suggested” © FT

Apple has long wanted to be a major player in mobile advertising. In 2010, it paid $ 275 million to acquire Quattro Wireless, a mobile advertising company, after it was beaten by Google in bidding for $ 750 million in AdMob.

In the same year, it launched iAd, a multi-year effort to build an advertising business.

At launch, iAd had a minimum contract price of $ 1 million, but the requirement was cut in half within a year. Apple tried to maintain creative control over ads and was reluctant to share user data with marketers, Bernstein analysts said. Two years later, Apple lowered the minimum contract to just $ 50 and the entire enterprise was shut down in early 2016.

Meanwhile, the online advertising market has exploded, with annual sales of $ 378 billion, according to market research group Insider Intelligence.

Google and Facebook are the two biggest players in the market, but Tim Cook, Apple’s CEO, has repeatedly attacked their business models as unsustainable because of the way they collect large amounts of data to target their ads.

Bernstein estimated that Apple currently makes about $ 2 billion a year from search ads in the App Store, by an 80 percent margin. Apple also sells ads in its stock and news apps.

A second ad space in the App Store is likely to appeal to advertisers after the iPhone’s privacy changes reduce the effectiveness of targeted ads. But according to mobile advertising expert Eric Seufert, more than just money is at stake.

Ten years ago, the App Store played a critical role in how consumers discover new content. Seufert told tech site Stratechery earlier this year that Apple used to be “king maker – if you got featured, your company valuation could increase by $ 100 million.”

He suggested that Apple now wants to regain this level of control. “When Apple paralyzes mobile ads, the App Store will become the main discovery point for apps again, and Apple decides how people use our iPhones, Apple decides which apps are the most popular,” he said.