📲 Apple's surprising ad play

Wednesday, April 28, 2021 by Robinhood Snacks | Disclosures
_When reality doesn't match the moodboard  [Kmatta via GettyImages]_

When reality doesn't match the moodboard [Kmatta via GettyImages]

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Hey Snackers,

A concerning headline: "Creation of first human-monkey embryos sparks concerns." Humonkey isn't bothered.

Microsoft and Google reported strong earnings yesterday after the market closed. Facebook and Apple are up today. About that...

Juicy
1. Apple's "sneaky" ad biz: how privacy changes could give it an edge over Google and FB

Quiet but deadly?... It's easy to overlook Apple's ad biz, when Google and Facebook take the spotlight. Apple doesn't have a search engine or social network to fill with protein powder ads — but it does sell ads in its App Store, and displays ads in the News and Stocks apps. App Store ads are expected to bring in $2B this year (a fraction of Apple's $275B annual sales). For reference: Google made $46B in ad revenue last quarter alone. Buuut...

  • Apple is making big privacy changes that could hurt competitors, while bolstering its own ads. Apple’s latest iOS update lets users decide whether to let apps track them for ads.
  • According to #PFWTM: Advertisers targeting iPhone users will get more detailed and timely data if they buy Apple’s ad space, than if they buy via third parties (like FB).
  • Apple's own ad biz won't be affected by the changes, since ads on its platforms can only target large groups, not individuals.

MiPhone, MiRule... These changes could hurt companies' precious ad-targeting, while giving Apple’s ad biz an edge. Apple has been getting heat for allegedly favoring itself on its platforms. Think: favoring its own apps on the App Store, and taking large cuts of purchases from non-Apple apps. Just last week, Apple and Google got grilled in a Senate hearing over their dominance of smartphone ecosystems. Still...

  • The ad changes could be hard to challenge: Apple says it's not favoring itself, but is motivated by user privacy concerns.
THE TAKEAWAY

Ads could be Apple’s competition-slayer... Not because it has a massive ad biz, but because it can influence the fortunes of its competitors' main money-driver: ads make up ~80% of Google's sales, and 98% of Facebook's. Apple doesn’t have to become an ad giant to reduce ad giants’ power. The privacy changes are already poised to hurt its competitors. Meanwhile, Apple reportedly plans to expand its own ad offerings. JPMorgan estimates its ad revenue could grow to $11B/year by 2025.

Mood

Sounds like a #pinner... Pinterest's earnings yesterday were a textbook lesson in "everything is relative." Quarterly sales were up a sweet 78% from a year earlier, with international revenue nearly 3X'ing — and its net loss shrank 85%. So far, so great. Monthly active users hit 478M (double Snap's), up 30% from 2020. Sounds awesome. The reaction: shares plunged 11% after earnings...

Always in a mood(board)... Despite the awesome numbers, investors were bummed and fixated on one thing: slowing user growth. That 30% user boost sounds great – but it was Pinterest's slowest growth in a year, and it missed expectations. Last year, people flocked to Pinterest to create inspo boards for postponed weddings and Tuscan-style dream kitchens. Now...

  • Pinterest warned that user growth is slowing in the US, its most valuable market by far (Americans spend a lot, so advertisers pay more for US ads).
  • Pinterest said engagement is falling as the US economy reopens. People are eager to spend more time off-screen (white sand beach IRL).
THE TAKEAWAY

Blame the "DPF Effect"... "Demand Pulled Forward." Thanks to the pandemic boom, user growth that Pinterest should've experienced last quarter actually happened in 2020. Netflix also blamed the “Covid-19 pull-forward” effect for its big subscriber miss last quarter: it added less than 4M subs, compared to nearly 16M in the first quarter of 2020 (aka: peak lockdown). We can expect the DPF Effect to hit other coronaconomy thrivers, too.

What else we’re Snackin’
  • Windows: Microsoft posted its best quarterly sales growth since 2018, partly thanks to PC sales from the WFH/school-from-home life.
  • Yougle: Google's sales soared an expectation-smashing 34% last quarter... largely thanks to pandemic YouTube-binging.
  • Venti: Starbucks' US sales bounced back to pre-pandemic levels, but investors are worried about international growth.
  • Revenge: Consumers' confidence in the US economy jumped for the fourth-straight month, approaching pre-pandemic levels.
  • Taxing: The Biden admin wants to make (much) stricter IRS enforcement a centerpiece of its spending plan. Aaaand: taxes are due May 17.
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Wednesday
  • Earnings expected from Apple, Facebook, Spotify, Shopify, and Boeing
  • US Interest Rate Decision

Authors of this Snacks own shares of: Apple, Microsoft, Snap, Starbucks, and Google

ID: 1624800