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Apple launched iOS 16.1 and iPadOS 16.1 to the general public final week, with an extended checklist of latest options, fixes, and high-priority zero-day safety updates. The updates additionally included the most recent model of SKAdNetwork, Apple’s advert providers framework for the App Store, and placing ads exterior of the “Search” tab, the place they’d been relegated beforehand. Other modifications included new App Store guidelines that give Apple a minimize of NFT gross sales and of purchases made to spice up posts inside social media apps.
Whatever the supposed results of those new ad-related updates have been imagined to be, indications from Apple’s third-party app builders, bloggers, and customers indicated the tip end result was a flood of irrelevant and obnoxious adverts, very often for crypto-related scams and playing. This included fairly just a few situations the place these adverts weren’t simply annoying however inappropriate—subsequent to apps for youths’ video games or apps for playing dependancy restoration.
We contacted Apple to see whether or not it has something to share about its advert rollout, and the corporate instructed us (and different shops) that it had “paused adverts associated to playing and some different classes on App Store product pages.” In the quick time period, probably the most egregious drawback has been addressed, and in any case, “playing apps marketed subsequent to playing dependancy restoration apps” appeared like a results of unexpected circumstances relatively than one thing that Apple supposed to occur.
But regardless of the supposed impact, the outcry dropped at thoughts one thing I’ve been frightened about for some time now: the rise of Apple’s Services division, and why it makes me fear about the place the corporate is headed.
Where Apple makes its cash
Apple nonetheless makes the overwhelming majority of its cash from the identical factor it all the time has: the sale of {hardware}. Apple has all the time had lesser money-making enterprises effervescent alongside subsequent to its {hardware} enterprise—the iTunes shops for music and video, gross sales for Mac OS X and professional apps like Final Cut or Logic Pro, and .Mac/MobileMe/iCloud subscriptions all introduced in some cash. But these have been largely aspect hustles or providers made to create a halo impact for Apple {hardware}.
This is one cause why I’ve been a bit extra comfy inviting Apple’s merchandise into my residence, in comparison with Google’s, or Amazon’s, or Facebook’s Meta’s, or (to a lesser extent) Microsoft’s. It’s about the place every of these firms makes its cash. If the merchandise haven’t any up-front price, and a lot of the firm’s income is coming from adverts or other forms of targeting-derived, tracking-derived merchandise, because the saying goes, “you’re the product.”
It is perhaps pollyanna-ish of me to base buying selections on this intestine feeling, however so long as Apple was making most of its cash from {hardware} gross sales, I might no less than inform myself that the interior and exterior pressures on the corporate would incentivize a continued give attention to good {hardware} working good software program, relatively than chasing click-through charges and consumer engagement. As Apple started to play up its give attention to privateness to attract a stronger distinction between itself and Google, it appeared much more probably that Apple would resist the urge to tuck adverts and pushy notifications into all of its apps.
But issues have shifted, and proceed to shift, on Apple’s monetary stories. Compare Apple’s non-hardware income a decade in the past to what it’s now: in 2012, software program, providers, and gross sales of music and different media amounted to about $12 billion of the $156.5 billion Apple earned that 12 months, or 7.7 %. In 2022, that has climbed to $78.1 billion out of $394.3 billion, or almost 20 %.
This improve has been regular, and providers progress has constantly outpaced the expansion of Apple’s {hardware} enterprise for the previous couple of years; even in 2022, a comparatively gradual 12 months for Services progress, its income elevated almost $10 billion (14.2 %) 12 months over 12 months, whereas all of Apple’s merchandise mixed grew by $18.8 billion (6.3 %).
Services aren’t precisely consuming the corporate’s {hardware} enterprise alive, however at this level it is larger, by income, than the Mac and the iPad put collectively. And though progress has slowed considerably by means of 2022, there’s nonetheless probably extra progress potential there than there’s in {hardware}, since your pool of potential subscribers contains individuals who aren’t Apple {hardware} house owners.