The fundamental problem here is that Apple’s revenues and culture come from selling excellent pay-to-use hardware, and the App Store’s revenues come from selling garbage pay-to-win games. So the advertising in iOS apps looks like the trashy “Crazy Eddie” hucksterism that it is, rather than Apple’s vision of tasteful ads for Porsche and Sonos. There’s a permanent disconnect that will prevent Apple from ever being the premier seller of ads on iOS.
Apple is trying to get more revenue from services, etc.
That can’t continue growing selling more iPhones, at least beyond single digit growth.
As much as I like getting a new iPhone every year, I think most of the world isn’t nearly as excited. That’s going to hurt revenues, and the stock at some point.
The distinct ASP bump since the launch of the X says the new shiny is still selling to the punters just fine. Maybe total sales are flattening off, but there's no sign yet that Apple are having trouble generating interest in premium hardware. That day may come too, but it's been predicted as a near certainty any year now for almost a decade. Those betting against Apple staying on top of their various markets have not fared well over the last 20 years.
Yea the new shiny is still selling but I think apple acknowledges that new shiny phones sales will start to resemble the PC market they disrupted . And Apple doesn’t want to be in that position and is actively trying to disrupt the Smartphone (Apple Watch, AirPods and the HomePod ). Since Apple is a second mover I’m probably going to guess we are going to get a stand-alone mixed reality device soon. Also AirPods will get smarter and Apple watches will connect to more things .
If you compare Apple’s PE ratio to the S&P 500 and tech companies in particular, you’ll find that the market is already expecting relatively low growth.
Capital has not become cheaper. On the contrary, interest rates are on the way up.
But I don't think it's growth expectations that are driving stock prices either. It feels more like investors shudder at the thought of owning any of the alternatives to US blue chips.
It also doesn’t help they want to be the privacy heroes while advertisers want tracking and targeting. It’s quite difficult to compete and they don’t have a unique selling point.
iAd failed, in part, because Apple refused to provide customer details to advertisers.
>Advertisers Not Thrilled With Apple’s Practice Of Protecting Its Users’ Data... rather than offering a cookie-based ad-tracking and targeting mechanism, it essentially requires partners to tell it what kind of audience it needs to reach, and then trust that Apple will handle the rest.
>what it doesn’t do is hand over the keys to all that data and let advertisers plug into it directly with their own data-mining and targeting software. That’s not standard for the ad industry and that’s likely the reason a few Madison Avenue feathers are ruffled over their approach.
>However, given recent revelations, advertising models that respect user privacy need to make a comeback.
How will they? The companies that sell ad space have every incentive to attract advertisers, which means selling data. The advertisers have every incentive to collect data. Users can't easily selectively avoid nosy ads, even if they use an adblocker. Most users don't know how advertising works and don't even realize there's a problem. All the people with power are on one side.
In short, Apple might start buying ad spots in some of its iOS apps to promote other iOS apps.
On one hand, if there’s a chance that a small-time app maker’s product gets promoted in bigger apps without the developer having to pay, that would help App Store as the platform facilitating sustainable businesses—something it’s currently not entirely successful at.
On the other hand, though they seem to be treading carefully, depending on how it gets implemented it could damage end user’s experience. With ads on my phone I feel a little bit as if I bought a drink at a coffeeshop and yet have to listen to commercials while there.
Treading carefully? The current App Store search ads are mostly useful for tricking newbies into downloading the wrong app, and all of Apple's music apps keep nagging me to try Apple Music. If anything, I hope their new model will be a little more subtle.
I meant Apple treading carefully in this new project (as the article mentions, they apparently reached to just a handful of major developers first and aren’t rushing something out). I agree that currently the App Store ads are almost never useful, although I appreciate that they aren’t creepy—for example, Apple doesn’t seem to try to ultra-target you through contents of your messages, like Google ads do with Gmail and Instagram does with Facebook posts.
What I envision could ideally happen is (1) Apple working out a way to place ads unobtrusively, possibly with an option to turn them off, and (2) them reinvesting a bit of their huge reserves into promotion for wider variety of apps whose developers wouldn’t otherwise advertise.
This could reduce App Store’s popularity gap, improving discoverability of original, lesser known but quality apps. By helping developers create an OK business on the platform without necessarily making it into the category’s Top 10, in longer term Apple is investing into user experience: more stability makes the platform more attractive to quality developers.
This is how a "good company" starts turning into a "terrible company" by selling its soul to keep increasing shareholder value indefinitely.
Eventually the company, even one like Apple that has more money than it could ever need for the next 2 decades (unless it decides to build an orbital ring for or some enormously expensive project for launching rockets orders of magnitude cheaper into space), starts chasing new paths that make it lose its ethic and its fanbase's trust.
This is the problem with the Valley "growth company" model, there is no concept of how to just ... stop at a certain size and run a sustainable business. The compensation primarily remains focused on getting cashed out by Wall Street, a speculative venue that is fundamentally uninterested in sustainable business models. At some point a company Apple's size can only force revenue growth by becoming fully anti-competitive - buying out competition to obtain unlimited pricing power, and then regulatory capture to make it impossible to compete with them.
> This is the problem with the Valley "growth company" model
It's not just Silicon Valley, it's the whole world. To quote the german chancellor Merkel, everyone needs "Wachstum, Wachstum, Wachstum" (growth, growth, growth). So far it worked somehow but I'm not sure that is the best strategy.
I asked some big wig about this and his response was basically, population is always growing plus inflation.
Guess when looked at through that lease it makes some sense, overall agree with your sentiment. That said, with a giant pile of cash and top notch talent, it probably makes sense for Apple to find new avenues of growth.
It’s especially hard for tech companies because we are a long ways from software automating everything it can.
If I could like this comment ten times I would. You start stuffing your earnings report with little extra revenues and then all of the sudden you forgot about your original customer while someone else moves in.
Then comes the part where you try to hold your customers captive or ditch any “good company” barriers preventing larger revenue. Interesting with Apple because of thier cash position,this could occur over a long timeline (assuming this is whats happening).
I wanted to comment but couldn’t find the right words. You said exactly what I was thinking. It is hard to reconcile this endless growth model when a company like Apple has billions upon billions in cash. It really makes me realize that the world is just an insatiable monster that will never have enough of anything.
And suddenly it becomes clear why they care so much about blocking advertising cookies in the browser - in order to drive programmatic ad revenue towards the apps where the device specific advertising ID is available.
Will have to hear the implementation details. But, this sounds like a conflicted and hypocritical path, that runs counter to user privacy if Apple starts tracking consumer behavior while helping the user stay from the prying eyes of Google.
They’re chasing old industries and business models. Google has solved monetizing search already. Innovate. Do something else. Instead of trying to monetize every facet of your platform.
Even if this comment isn’t what Apple should do, it’s a very salient point and worth considering doing at least some analysis to see which approach is better when making this decision for yourself. Thanks, will incorporate into my list of stuff to look into when shipping new product.
