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Apple's $4B ad business at odds with internal culture and values

Apple's search ads on an iPhone 11 Pro

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Apple has big plans to expand its home-grown advertising business. However, it could be a struggle both in dealing with a privacy-focused public image and from its own engineers.

While small compared to behemoths such as Google's advertising empire, Apple's own advertising isn't a small project for the company, with it earning billions from ads served in the App Store and other areas.

However, while Apple has ambitions to grow its ad business in the coming years, potentially hitting $6 billion by 2025, it has to also deal with a fundamental struggle. Advertising is viewed as an anti-privacy industry, whereas Apple is decidedly on the side of privacy being a human right.

This is not just an external image struggle, but one that's also internal. Engineers working on Apple's ad technology have signaled that, though Apple wants to get its ad sales bigger, the engineers don't want it to swell too big.

At least seven people who work with or on the ad team told The Information of apathy among Apple's employees over the ad business. Two said that some engineers took to internal chatrooms over it, expressing fears Apple could be going too far and potentially harming the iPhone's premium experience.

Externally, after years of proclaiming to consumers that it cares about privacy and railing against firms that rely on advertising for revenue, Apple is also seeing critics argue that the ad business isn't going right at all for the company.

"They can't alienate users by essentially taking advantage of everything they have built their brand on such as privacy, protecting your data and protecting your identity," said market research firm Insider Intelligence's director of forecasting Peter Newman.

Apple has also come under fire for displaying gambling app ads next to kids applications and gambling addiction recovery apps in the App Store.

Shac Ron, a former Apple engineer, tweeted they were "glad to see Apple getting raked for ads in the OS." Describing the effort as "disgusting and shameful," Ron added "I hope they will realize how offensive these are but realistically I doubt it."

Boosts from initiatives such as App Tracking Transparency has some analysts claiming Apple's ad business could rake in $30 billion by 2026, in quite ambitious predictions.

Internally, one person familiar with the ad business says Apple doesn't have the same ambitions for its ad arm as Meta or Google, and it doesn't plan to build a vast ad network beyond its ecosystem. Executives are allegedly pleased with revenue growth based on existing ad sports, and apparently don't plan to significantly increase the number of ad spots users could encounter on devices.

The focus on privacy for the company does add some limitations to the effort though. The ad products team is effectively isolated from other departments, so the ad team cannot get developer details from other teams, information that is more easily shared internally in organizations like Google.

The ad salespeople are also sometimes asked to do "uncomfortable" things, the report sources claim, such as being encouraged to pitch to clients to bid for keywords that were less relevant to their apps but were inexpensive due to there being few other bidders. Salespeople claim managers said the aim was to increase prices for those inexpensive keywords, which helped the team reach end-of-quarter revenue targets.

An Apple spokesperson told the report that no recommendations to developers comes at their expense, that developers have control over what they bid on, and that developers only pay per tap or installation, rather than impressions.

When asked about supposed complaints from algorithm engineers over the lack of personal data to better train machine learning models for ad targeting, as well as a difficulty in retaining technical talent for the team, the spokesperson disputed the claims. Engineers were said to be energized by opportunities to innovate on privacy-preserving methods and approaches for advertising.