When Apple sets its mind on doing something, it doesn’t do it half-assed. Look at what Apple did with its Services unit. That division, which includes huge revenue generators like the App Store, Apple Pay, AppleCare, iTunes, iCloud, Apple Music, Apple TV+, and more, is the company’s second-largest business after the iPhone. It was only a few years ago that Apple brass, worried about declining iPhone shipments, figured out how to mint money by offering recurring subscriptions to active iPhone users.
Apple’s Services unit is its second largest business segment after “iPhone”
How fast is the Services unit growing? Back in 2017, the company embarked on a plan to double fiscal year Services revenue to $50 billion by 2020. Now, Apple just reported nearly $20 billion in gross for this division just for the fiscal third quarter of 2022. This is an $80 billion revenue rate for Services and before you know it, Apple might soon reap $50 billion each quarter from this business segment thanks to a possible new addition to its Services lineup.
Apple promotes iPhone privacy in 2019 across from the Consumer Electronics Show in Las Vegas
Apple supposedly wants to participate in what is known as “demand side platform” (DSP). This system allows companies to buy ads by having them search through sites and mobile apps based on the advertiser’s criteria. When it finds a place where it wants to advertise, bids are placed. Needham’s Martin said that this would fit right in with Apple’s history of having its products and services work together across the Apple ecosystem.
Apple can make plenty of money and still keep its word by building a demand side platform
But Apple is going to have to make sure that it doesn’t slip up and backtrack on the commitment to privacy that the company has been pushing. With 1.8 billion devices active and 1 billion unique users, Apple has an opportunity to tap into those numbers and generate revenue. The analyst states “Virtually all time spent by consumers on Apple devices is on mobile, therefore, we expect Apple to target the global mobile advertising market.”
Apple might feel the need to do something to bolster the Services unit now that there are cracks in the App Store with App Store net revenue showing just 1% annual growth in July. The data came from Sensor Tower and was mentioned in a report to clients by Morgan Stanley and was less than the annual growth for the month expected by the investment firm. According to Sensor Tower, App Store sales in June rose 14% year-over-year down from 18% in May and 21% in April.
Because the use of a DSP doesn’t require the collection of personal data, Apple could build this platform and continue to say that it doesn’t use iPhone users’ personal data to make money. All this platform does is give companies seeking to advertise on multiple platforms the opportunity to buy ad inventory from a single interface. This inventory includes website banner ads, mobile ads on apps and the mobile internet, and video ads that run in-stream.
