Apple should kill its advertising business

Tim cook eddy cue iPhone 6APTim Cook and Eddy Cue

For the past month, Apple CEO Tim Cook has been chatting with a number of publications.

During each of the interviews, Cook makes a point of emphasising Apple’s strict privacy standards. It’s his way of contrasting Apple with Google, Facebook, and Amazon, which use consumer information to sell products.

“Apple has a very straightforward business model,” Cook told The Telegraph. “We make money if you buy one of these [pointing at an iPhone]. That’s our product. You [the consumer] are not our product. We design our products such that we keep a very minimal level of information on our customers.”

He added, “We don’t make money selling your information to somebody else. We don’t think you want that. We don’t want to do that. It’s not in our values system to do that. Could we make a lot of money doing that? Of course. But life isn’t about money, life is about doing the right thing. This has been a core value of our company for a long time.”

These are strong words, but they create a big problem for one of Apple’s business units — iAd, Apple’s mobile advertising business.

Apple will be using data and personal information to sell advertising with iAd,
Amir Efrati at The Information reports.

“Soon Apple will let third party ad tech firms help advertisers target specific consumers by matching phone number, emails and other data, similar to what Facebook offers, executives say,” writes Efrati. Apple is also opening up iAd to automated ad buying which relies on targeting.

This would seem to directly contradict what Tim Cook said about Apple’s business model.

Like most Apple products, iAd started out with great hype. In 2010, Steve Jobs said, “Most mobile advertising sucks,” and then introduced iAd, which he hoped would be a beautiful new form of mobile advertising.

iAd was built to retain developers. At the time, Android was gaining traction. Google had a strong ad business. If Google was able to offer better ad-based monetization of free Android apps, it might be able to lure developers off Apple’s mobile platform, iOS, to Android.

It turned out to be a foolish concern. Developers have stuck with iOS, and it monetizes better than Android — free, or paid apps.

It’s good for Apple that it was a non-issue because iAd never really caught on. Today, eMarketer estimates it has 2.6% of the ad market, generating $US487 million in annual revenue.

In 2014, Apple generated $US183 billion in revenue. So, iAd is 0.3% of Apple’s revenue.

For 0.3% of Apple’s revenue, Apple’s ad business cuts against what Tim Cook calls one of his company’s “core values”. That makes no sense. Apple should shut down iAd.

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