Analysis: Apple Search Ads now account for 58% of iOS app installs from an ad click, up from 17% a year ago; Apple to earn $5B from its ads business in FY 2021

Financial Times 2021-10-18 Patrick McGee

Context & Ripple Effects

The App Store was already a high-value commercial channel: iOS store revenue was reported to be materially ahead of Google Play in 2015, while later analysis described sustained growth in user app spending. Apple's ad business now captures a much larger share of paid app-acquisition traffic inside that channel.

The reported shift foreshadows Apple's later plan to add more App Store search ad opportunities, extending monetization from app transactions into the route developers use to reach prospective installers.

First-order effects

Apple gains a meaningful advertising revenue stream alongside App Store transactions, with Search Ads responsible for 58% of iOS installs attributed to an ad click.
App developers seeking paid iOS acquisition face a channel in which Apple controls both app discovery and the advertising inventory used to buy prominence.

Second-order effects

Developers competing for the same high-intent App Store searches are pushed toward bidding against one another for visibility, concentrating acquisition spending within Apple's marketplace.
The expansion makes Apple's already valuable storefront—where iOS App Store revenue outpaced Google Play—more economically important to developers as both a sales channel and a paid-discovery channel.

Third-order effects

If paid placement continues to take a larger role in app discovery, the App Store's operator gains more leverage over the terms on which developers access iOS demand, combining transaction fees with discovery monetization.
The pattern points toward platform distribution being priced not only through storefront economics but through ownership of the acquisition route itself.

The trend: Mobile app stores are evolving from transaction marketplaces into vertically integrated discovery-and-advertising channels controlled by the platform operator.

Discussion

@patrickmcgee_ Patrick McGee on x
Chart of the Day: @Apple's advertising business has more than tripled its market share in the six months after it introduced privacy changes to iPhones that obstructed rivals, including @Facebook and @Google, from targeting ads at consumers. *A Thread* https://twitter.com/...
@modestproposal1 Modest Proposal on x
What a picture https://twitter.com/...
@competitionprof Nicolas Petit on x
Young enough to recall a time when some said online advertisement competition is weak. https://twitter.com/...
@ypsingh0199 Yashpreet Singh on x
This was predicted by ad exes when apple introduced the ad policy for third party platfroms. Wait till 2-3 more years when apple becomes one of the top ad platfrom. Do say then apple is an advertising company!!😑 https://www.techmeme.com/...
@carnage4life Dare Obasanjo on x
Despite pointing out how blatantly Apple was tilting the iOS ads playing field in their favor I'm still stunned at how quickly they changed the ad industry dynamics in 6 months. This is the most obviously anticompetitive act I've ever seen which many in tech media praised. Fail! …
@carnage4life Dare Obasanjo on x
Apple's “privacy” changes have tripled the market share of their advertising business as they've made ads on iOS less relevant thus forcing advertisers to flock to App Store search ads. They stand to make $5B this year and now own 58% of app install ads. https://www.ft.com/...
@benthompson Ben Thompson on x
Remembering every so-called competition expert who praised Apple's ATT changes, while accusing people like me raising the red flag about how blatantly anticompetitive it was of being paid shills for Facebook. Fun times. https://twitter.com/...
@saracamden Sara Camden on x
From the minor leagues to winning the World Series - great reporting on how Apple's ‘privacy’ posturing this year has given them a major windfall in advertising (you don't say?!) by @PatrickMcGee_ & contributions by @alexdbauer https://twitter.com/...
@patrickmcgee_ Patrick McGee on x
Search Ads now drives 58% of all iOS app installations that can be tied back to paid ads, according to @Branch, whose basket of data comprises 250 major apps including BuzzFeed, Instacart, Strava and Starbucks. That's more than three times its 17% share a year ago https://twitter…
@neiltwitz Neil Shah on x
As I have said, with the scale Apple has & kicks out opportunities for likes of Google & Facebook to monetise in the Apple eco, @Apple alone can generate tens of billions of dollars in advertising revenue every quarter w/o compromising #privacy. Gr8 piece from @PatrickMcGee_ http…
@psantloki Prasant Lokinendi on x
Apple heavily leveraged their brand alignment with privacy to build yet another multibillion dollar vertical as part of its continued shift into a services company that's less dependent on hardware margins & purchasing frequency alone Unparalleled strategy tbh https://twitter.com…
@carlbfrey Carl Benedikt Frey on x
Apple's advertising business has tripled (!!!) its market share in the 6 months after it introduced privacy changes to iPhones. https://www.ft.com/... https://twitter.com/...
@jason_kint Jason Kint on x
Facebook is absolutely desperate to get a national regulator to open up a case against apple and somehow reverse apple's improvements to privacy that restrict surveillance advertising. They will absolutely be using this misleading report to influence France and US regulators. /7
@jason_kint Jason Kint on x
[Apple's privacy changes create windfall for its own advertising business] This is an entirely misleading headline. Any decently informed reader would read it as apple has tripled its market share of the mobile app ads business. It's not. ht @MarietjeSchaake /1
@thomasbcn @thomasbcn on x
I agree with @eric_seufert to say the FT charts about ASA marketshare is being *vastly* misinterpreted, as many industry insider reported in private. I already had to justify to a CMO why we aren't spending 50+% of our mix on ASA 😰 https://mobiledevmemo.com/... https://twitter.co…
@eric_seufert Eric Seufert on x
This is a common misconception: that ATT only applies to app installs. ATT applies to all of mobile advertising. This graph only depicts app install spend (ASA only traffics in app installs), but ad spend is down considerably for the mobile web. https://twitter.com/...
@carnage4life Dare Obasanjo on x
@jason_kint ... Apple making performance based advertising less relevant will have positive effects on alternatives as advertisers chase ROI. This is why Apple's search ads are going gang busters. I'm not surprised some name brand publishers are also benefiting. It's still a bank…
@carnage4life Dare Obasanjo on x
@GavinSBaker Apple's behavior with the App Store is so blatant I expect it to be used in economics textbooks for future generations when all's said and done.
@ballmatthew Matthew Ball on x
And this is before Apple launches its own search engine... https://twitter.com/...
@carnage4life Dare Obasanjo on x
A key lesson big tech companies learned from Microsoft's antitrust suit is you don't talk about how your anticompetitive changes will crush the competition even internally. Google & Apple mastered the ability to put a user-centric spin on every move that favored them over others
@rasmus_kleis Rasmus Kleis Nielsen on x
“Apple's advertising business has more than tripled its market share in the six months after it introduced privacy changes to iPhones that obstructed rivals [from] targeting ads [will] earn $5bn from its advertising business this fiscal year”, $20bn in 3y https://giftarticle.ft.c…
@benedictevans Benedict Evans on x
Apple revenue from App Store commissions is more than the entire music industry makes from digital music Amazon's profits from its ad business might be bigger than AWS this year More people use Snapchat than play console games
@jason_kint Jason Kint on x
@eric_seufert Since adtech, VC, surveillance bros seem to get taken at their word on market effects, I'll just lob in here mobile advertising $ for premium pubs was up 70% last quarter vs prior year. But y'all keep extrapolating based on narrow proxies. @Carnage4Life @matthewstol…
@mattyglesias Matthew Yglesias on x
@benthompson Obviously Apple doesn't do things for abstract altruistic purposes, but isn't taking the top two players in the digital ad space down a couple of pegs a pro-competitive move anyway?
@antoniogm @antoniogm on x
As we've talked about more than once over here at Pull Request, Apple's hard stance on privacy is principled and disruptive...and also utterly in line with its advertising ambitions. https://twitter.com/...
@ipodthereforiam ElectricSheep on x
@benthompson The graph is percentage though, so we can't really know if Apple themselves benefited, could even be they lost money if the total amount of ad spending on iOS went down enough. Percentages in this case tell us barely anything.
@msuiche @msuiche on x
And some people really thought that Apple genuinely cared about Privacy & Security. https://twitter.com/...
@benthompson Ben Thompson on x
@iPodThereforIAm Yes, true. Apple's real gains will come as they roll out ad inventory to more and more products
@jason_kint Jason Kint on x
Apple literally restricted use of data by companies the user isn't even intending to interact. That data is the user's data who is being given choice. If anything, apple is the police in your analogy giving money back to the bank's customers. Screw Facebook's PR efforts here. htt…
@pwthornton Patrick Thornton on x
@PatrickMcGee_ ... Anything to kneecap the sociopaths at Facebook is good.
@carnage4life Dare Obasanjo on x
Facebook Derangement Syndrome is why most tech coverage has become worthless. Apple uses their App Store dominance to hijack the iOS ads industry under the guise of privacy. Industry experts like @eric_seufert point this out but coverage instead gloated about harm to Facebook. ht…
@carnage4life Dare Obasanjo on x
@jason_kint Apple defines tracking as Candy Crush sharing with Google that you bought an IAP which means Google may show you ads for Cookie Jam. Apple says both King & Google need your permission. Apple does the same thing since it owns the IAP system without the same dual permis…
@gavinsbaker Gavin Baker on x
1) US regulatory focus in megacap tech is hilariously misplaced. Broken record, but just so absurd. The “privacy” focus is the best PR jujitsu I've seen in a long time. “Apple offers detailed information to anyone signing up to its ads service” while rivals are now “blind.” https…
@alexcartaz @alexcartaz on x
if true, the regulatory solution would seem simple. apple has to play by the same rules it makes others play by. right? https://twitter.com/...
@eric_seufert Eric Seufert on x
Apple robbed the mob's bank https://www.ft.com/...
@repkenbuck Rep. Ken Buck on x
It appears Apple's privacy changes might be a front for growing their advertising business, and hurting their competitors. https://www.ft.com/...
@benthompson Ben Thompson on x
@mattyglesias Who is this top 2 you speak of, because as far as Google is concerned Apple is very happy to take their billions in exchange for giving them prime access to all users...
@benedictevans Benedict Evans on x
Privacy and completion are in fundamental conflict, exhibit one of ∞. Also - Apple's privacy positions might be sincerely held, but they also cost it nothing, and they can be spectacularly self-serving https://twitter.com/...
@benedictevans Benedict Evans on x
On the other hand, if you have several hundred million customers in China, you *do* need to choose whether to give the Chinese state access to their data. Guess what choice Apple made?
@benedictevans Benedict Evans on x
@benthompson @DenZhadanov It's funny how the people who shout loudest about ‘shills’ are actual lobbyists
@benedictevans Benedict Evans on x
If you don't have a search engine or a social network and mostly messed up your attempt at an ad business, it's a lot easier to say you won't try to work out what people are interested in. That's a choice Apple doesn't have to make...
@benedictevans Benedict Evans on x
“Apple doesn't track you” 🐂💩 https://twitter.com/...
@dkthomp Derek Thompson on x
Amazing chart. Part of the appeal of the *metaverse* is that Facebook etc want to build proprietary hardware that delivers their software, bc Apple is demonstrating how relying on other firms for distribution creates the potential for chokepoints. https://twitter.com/...
@carnage4life Dare Obasanjo on x
@matthewstoller Given that Apple's changes impact the entire iOS mobile ad market not just app installs, it's unclear what point you're trying to make.
@matthewstoller Matt Stoller on x
@Carnage4Life Just what you noted. Apple's changes are changing the whole ecosystem, and its market share increase is relatively small relative to that.
@drbarnard David Barnard on x
@benthompson @iPodThereforIAm Also, the graph is “iOS app installations that can be tied back to paid ads”, so all it really shows is that SKAdNetwork is a disaster. And it's debatable whether that was intentional or incompetence. I still lean more toward incompetence than greed.…
@matthewstoller Matt Stoller on x
Yes what Apple did was anti-competitive but the app promotion ad market is much smaller than the mobile ad market. https://twitter.com/...
@jason_kint Jason Kint on x
Pretty insane how this report is being shared and mobilized by the facebook and adtech influencer networks across twitter. I do also fortunately see hints of people questioning it, too - the savvy that understand why it threatens facebook are much stronger these days. https://twi…
@klarnaseb Sebastian Siemiatkowski on x
I wonder, how many senior execs of major companies are nervous about retweeting this? The potential repercussions it might have for our businesses? Rationally I don't believe Apple would ever care what I tweet. But the massive dependencies will make people nervous @PatrickMcGee_ …
@jason_kint Jason Kint on x
reality is facebook was negatively impacted by apple's improvements to privacy because they can no longer track users across apps. Facebook gets a majority of its data from when people use other company's services so it's a BFD. We'll find out how big at earnings next week. /3
@jason_kint Jason Kint on x
What it actually is. It's regarding share of ads *promoting apps* which is an enormously smaller market than ads that run on mobile apps. I would also point out it's from projection data from clickstreams from analytics companies who are also impacted. /2
@jason_kint Jason Kint on x
Hate to have to point this out, as I recall doing this with same reporter when Facebook was pushing its anti-apple narrative in q1 as facebook ultimately failed to stop apple's privacy improvements. I'll find it. Assuming same sources on this. /5

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