Over the past year, Apple (NASDAQ:AAPL) has been taking greater control of its marketing destiny by building an internal ad team. There have been tensions between Apple and its longtime ad agency TBWA\Chiat\Day, as recent marketing campaigns have failed to resonate with consumers.
Ad Age now reports that Apple is aggressively hiring to beef up its internal ad talent, and eventually hopes to grow this division to 1,000 employees. Compare that with the 600 headcount that Apple was reportedly targeting previously.
Google also uses an internal ad team, but its headcount is only around 100. The ambitious size of Apple's purported ad would be comparable to standalone third-party ad agencies.
In the pursuit of creativity, Apple now pits TBWA\Chiat\Day against its internal pitches. While having third-party agencies compete against each other is common in the industry, making agencies compete with internal divisions is not standard. That's created some additional tensions with ad executives who view Apple's new approach as "disrespectful."
Advertising is key to maintaining brand value. Apple's premium lifestyle brand allows it much greater pricing power than its rivals, and subsequently contributes to greater gross margin.
In this segment of Tech Teardown, Erin Kennedy discusses Apple's advertising shift with Evan Niu, CFA.
(Relevant segment starts at 6:48.)
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Erin Kennedy and Evan Niu, CFA, own shares of Apple. The Motley Fool recommends and owns shares of Apple and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.