How Apple Is Bolstering Its Advertising Strategy With iOS 9

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Although Apple (NASDAQ:AAPL) is the gatekeeper to perhaps the most affluent base of mobile device users, the company’s proprietary advertising platform, iAd, remains a laggard in the mobile advertising space. The platform, which allows developers to embed ads into iPhone and iPad applications, accounted for just about 2.5% of U.S. mobile advertising market in 2013, according to eMarketer. That said, Apple has been revamping iAd over the last year or so, opening it up to leading demand-side platforms and improving its retargeting capabilities. Now, the company appears to have made some tweaks to its mobile software ecosystem, unveiled during its Worldwide Developer Conference, that could potentially help the fledgling ad service scale up (related: How Apple Is Revamping Its iAd Platform). In this note, we take a look at three software-related improvements announced at WWDC that could benefit the iAd platform (related: Key Takeaways From The WWDC And Their Impact On Apple’s Strategy).

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1) Allowing Third-Party Ad Blockers On iOS 9 

Apple will finally allow third-party Ad blockers on its iPhones and iPads, with the latest version of its mobile operating system, iOS 9. Ad blocking software typically runs on a web browser and prevents ads on most web pages from loading. Ad blocking software has been moving into the mainstream over the last few years. According to a 2014 report from PageFair, ad block usage was up 70% year-over-year, with over 140 million people blocking ads worldwide. While Apple’s primary motive for allowing ad blockers on its iDevices is likely improving the web experience for its users, it could also help the iAd platform. [1]  iAds, which appear at the operating system level via applications, are unlikely to be blockable by third-party extensions available in the App Store. This could make the iAd platform more valuable to marketers who want exposure to Apple’s valuable user base.

2) Overhauling Search To Include App Content

Users are spending an increasing amount of time on mobile applications and away from desktop and mobile browsers. According to a report by comScore, U.S. users spent 52% of their digital media consumption time on mobile apps, while desktop and mobile browsers accounted for about 40% and 8%, respectively. [2] This is likely to be something that could work in iAd’s favor, being an app-focused advertising service. With iOS 9, Apple is overhauling the native Spotlight search on its devices, allowing users to search inside applications via deep-linking of applications. This could eventually make Spotlight the go-to search solution for many iDevice users, who would be directed towards the relevant apps. This could also potentially reduce the exposure of iDevice users to Google’s dominant web search and mobile advertising machine, while potentially helping Apple’s app-focused iAd business.

3) Advertising On Apple’s New Native News Application 

Apple also appears to be increasing its control over content on its iDevices with the launch of its native News application on iOS 9. News will combine articles from news outlets including the New York Times, ESPN and Condé Nast, presenting them in a unified format, much like a digital magazine. While publishers can sell their own advertisements on the news platform, keeping 100% of the revenue generated, they can also opt to leverage iAd and Apple’s increasingly robust ad targeting capabilities. Under this arrangement, content producers will pay Apple 30% of revenues, while retaining 70%. ((Apple’s News app in iOS 9 will have ads, Appadvice, June 2015))  As the list of participating news outlets increases, Apple should be able to get customers to spend more time on its News applications, while potentially selling more ads.

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Notes:
  1. A blow for mobile advertising: The next version of Safari will let users block ads on iPhones and iPads, Niemanlab, June 2015 []
  2. The U.S. Mobile App Report, comScore, August 2014 []