Apple is gaining share in the ads world; Disney is contemplating an Amazon Prime like subscription

Apple is gaining share in the ads world

Per CNBC

According to a study published Tuesday by Appsumer, Apple is gaining momentum in digital ads, while Google and Facebook appear to be losing steam.

The research, based on an analysis of the online ad budgets of over 100 different consumer app companies, found that Apple’s ad business has benefited from the company’s major iOS privacy update in 2021, which made it more difficult for companies like Facebook to track users across the Internet.

In terms of overall app developer spend on online advertising, referred to as share of wallet, Google remains at the top, with 34%. Facebook is second at 28%, followed by Apple at 15%. Amazon wasn’t listed because it’s not a platform for developers.

“One of the things that’s quite interesting is the ATT measurement limitations that are kind of put on the wider network doesn’t exist in the same way for Apple,” Lais said. “So you could say Apple has slightly more visibility or an advantage across the other channels on iOS.”

As a shareholder, I am glad that the management team has found another sizable stream of income, especially one with a high margin like advertising. With more than 1.8 billion devices in its installed base which was reported in January 2022, the real estate on the App Store and some of Apple’s native apps is highly valuable to advertisers. Which developers or brands don’t want to talk to iOS customers known to be wealthier than Android counterparts? Financial Times reported that Apple’s ads business is expected to reach $30 billion in revenue and double its workforce by 2026. Given what advertising has done for Amazon so far, such expectation has some truth in it.

But the rise of Apple Ads also raise some concerns for me. First, ads are intrusive. Folks usually say that this is one of the main reasons why we can access free content on the Internet, but consumers won’t care. Some will annoyedly question why they still see sponsored content in some Apple native apps even though they are already subscribers. Personally, I wouldn’t enjoy that. As a result, if Apple decides to push the ads loads on their platform, they will need to be mindful of the user experience and carefully safeguard it.

In the same token, I am concerned about the impact that ads have on how users search for apps on iOS devices. Let’s say that you want to look for a meditation app on the App Store. Will the first results be the ones with the best user reviews and ranking? Or will they be supplanted by advertising apps? One of the criticisms leveled at Amazon is that they favor advertising merchants in their search results instead of giving shoppers what the actual best products are. I can see the same scenario is awaiting Apple.

Furthermore, the more Apple benefits from its ads business, the more likely it will have increasing scrutiny from lawmakers around the world. Critics of the company strongly argue that its privacy-centric initiatives like ATT are nothing other than schemes that are designed to enrich Apple and cripple competitors like Facebook. To be fair, I can see where skeptics are coming from. However, if you view this issue through the lens of direct customer relationship, Apple has every right to strengthen the relationship with its customers. It just happens that they manage to find a way to make money while doing so. Nonetheless, lawmakers do not always think critically and act reasonably. They have their own agendas to further, donating organizations to care for and voters to answer to. If there is enough outcry, there will be more hearings and regulations focused on the market power that Apple wields.

Knowing Apple, I don’t expect official figures on the size of its ads business any time soon. The media coverage of Apple; however, will surely have things to say about this ads business.

Disney is contemplating an Amazon Prime like subscription

Per WSJ

Walt Disney is exploring a membership program that could offer discounts or special perks to encourage customers to spend more on its streaming services, theme parks, resorts and merchandise, according to people familiar with the discussions.

The program would be somewhat akin to Amazon Prime, which offers advantages such as free shipping, discounts at Whole Foods and a complementary streaming video service for a monthly or annual fee, the people said. Internally, some executives have referred to Disney’s initiative as “Disney Prime,” although that won’t be the name of the program, one of the people said.

Disney already has a special program for superfans, the D23 Official Fan Club, which costs $99.99 to $129.99 a year and comes with access to exclusive events and merchandise. That program offered members a discounted three-year subscription to Disney+ in 2019. A new membership program would be different in that it would be targeted at more casual Disney fans and customers.

As an early step to better link Disney products and services, Disney is working to enable subscribers to its Disney+ streaming service to buy merchandise such as T-shirts, themed accessories and children’s costumes associated with some of its shows by scanning a QR code on the service that links to the Shop Disney website, people familiar with the plan said.

Barring any new details, I am very skeptical of this Disney Prime plan simply because Disney is very different from Amazon and I don’t believe the former can create the same magic as the latter did with their world-famous subscription. What makes people like Amazon Prime so much that they are willing to pay $140/year? It’s not Prime Video or Amazon Music credits. They are valuable in increasing Prime’s stickiness. The primary hook is the convenience in shopping experience (deliver and return), a gigantic variety of items to shop and special deals.

Unfortunately, Disney has no asset resembling Amazon’s eCommerce ecosystem. Disney Parks are so expensive that fans will not make regular visits. Plus, since they are only available in California and Florida, how would Disney convince customers from the rest of the country to visit regularly enough to pay for a subscription? Trips to Disney Resort, Hotels or Cruise are one-off purchases, rather than repeaters. The company already has paid plans for their media content in ESPN+, ESPN, Hulu and Disney+ and their merchandise is not something that customers will order regularly. Seriously, how many Avenger-themed shirts do you think you would order every year? Even if you planned to buy one of those shirts every 6 months, would you buy a monthly or yearly subscription just to have $5 off?

Furthermore, I don’t think Disney should or could build an eCommerce site like Amazon, either. It’s not in their circle of competence. It’s expensive and it’s extremely difficult. Any such attempt would destroy shareholder value and damage the company. And if they don’t have anything that can entice consumers to subscribe, especially when this plan is geared toward casual fans, how can Disney Prime succeed? To the company’s defense, they did say that Disney Prime was just one of the ideas on the table. I hope that they have better ideas because I struggle to see how this one will succeed.

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