Social media platforms have a common enemy — The Big Apple who’s expanding its ad business

Apple (NASDAQ:AAPL) — now making up 7.3% of the S&P 500, the highest for any company since 1980 — is testing concepts from electric vehicles to virtual reality in search of its next growth engine. Exciting, but Apple’s developments may involve something a little more vanilla…

Hey Siri, how’s the supply chain doing?

Supply chains were a big headache for retailers, including Apple — who expected a $4-8B hit to quarterly sales from these issues. But Apple isn’t like the others, and the actual impact was less than forecasted.

Can’t say the same for the rest of the smartphone market — with global smartphone sales falling 9% in the June quarter.

• The weak: Android phone makers led the decline, and Xiaomi, Oppo, and Vivo phone shipments were all down 20%+.
• The strong: iPhones — which make up ~50% of Apple’s sales — are flat year over year.

Despite the slowing market, Apple asked suppliers to produce 90M+ units this year, on par with last year — expecting customers to continue splurging on quality. Still, iPhone sales are slowing, and to achieve a 10% growth, Apple needs ~$40B of sales elsewhere…

Think different big

Apple’s long-held motto, “Think Different,” has guided the company to become the most profitable globally. But “different” may not be enough — Apple needs to think big. How’s this for big thinking…

• Metaverse: Apple is expected to launch its $3,000 AR/VR headset as early as this year.
• Auto: Apple has long been rumored to be building their own car — recently hiring an ex-Lamborghini exec while announcing new CarPlay updates.

But Apple’s latest move looks more realistic… Last year, their iOS update limited consumer tracking — hurting other ad businesses. Meta, close your eyes; you won’t like Apple’s next move.

Investors: Apple blows up other ad businesses…

… And expands their own. Smart move.

• Apple makes ~$4B from ads through its app store, news and stocks app and search (~1% of its total business).
• In comparison, Amazon built a $31B ad business (~7% of sales) in 10 years.

Now, Apple wants to accelerate that growth. Apple is reportedly building its own demand-side ad platform — which could make it easier to advertise across their massive product ecosystem (i.e., devices, app-store and apps) and 1.8B active iPhone users. With Apple, it’s all hush-hush, and these plans aren’t confirmed.

BofA Global Research analysts estimated that Apple’s ad business could rake in $20B in sales by 2026 (~5% of sales). While EVs and VR make for great headlines, boring old ads could be the real moneymaker for Apple.