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Apple wants to boost ad business as iPhone changes hurt Facebook

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Apple will expand its advertising business, according to two people familiar with its plans, as well as introducing new privacy rules for iPhones that will likely cripple ads from its competitors, including Facebook.

The iPhone maker is already selling search ads for its app store that developers can use to pay for the top result. When searching for “Twitter”, for example, the first result is currently TikTok.

Apple is now planning to add a second advertising slot, in the “Recommended” apps section on its App Store search page. This new slot will be rolled out by the end of the month, according to one of the people, 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 improve its own advertising business while shaking up the broader $ 350 billion digital advertising industry led by Facebook and Google.

Apple’s upcoming iOS 14.5 software update will prohibit apps and advertisers from collecting data about iPhone users without their express consent. Most users are expected to opt out of the pursuit, which will deal a serious blow to the way the mobile advertising industry works.

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

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

Apple has long wanted to be a big 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 its $ 750 million bid for AdMob.

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

When iAd launched, it had a minimum contract price of $ 1 million, but within a year it had cut the need in half. According to analysts at Bernstein, Apple was trying to maintain creative control over the ads and was reluctant to share user data with marketers. Two years later, Apple cut the minimum contract to just $ 50 and all work stopped in early 2016.

The market for online advertising is now booming with annual sales of 378 billion US dollars, according to the market research group Insider Intelligence.

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

Bernstein estimates that Apple currently makes around $ 2 billion a year from search ads on the App Store, with a margin of 80 percent. Apple also sells ads on its stock and news apps.

A second commercial in the App Store is likely to appeal to advertisers after the iPhone’s privacy changes have reduced the effectiveness of targeted advertising. However, according to Eric Seufert, a mobile advertising expert, there is more than just money at stake.

A decade ago, the App Store played a critical role in how consumers discovered new content. Seufert told tech site Stratechery earlier this year that Apple used to be a “kingmaker” – if featured, it could add a hundred million dollars to your company’s valuation.

He suggested that Apple now wants to regain that level of control. “If Apple cripples mobile advertising, the App Store will again be the primary discovery point for apps, and Apple decides how people use our iPhones, Apple decides which apps are the most popular,” he said.

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