Apple Inc.'s Internal Ad Ambitions Are Growing

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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  • Report this Comment On June 10, 2014, at 7:29 PM, UgolinoII wrote:

    That's created some additional tensions with ad executives who view Apple's new approach as "disrespectful."

    Whereas the in house team is labelling it as "innovative."

    ;)

  • Report this Comment On June 11, 2014, at 3:55 AM, mcbob wrote:

    It's disrespectful now to ensure that it's still worthwhile outsourcing work by comparing external offerings with your own company's? What, is it now compulsory to outsource ad work?

    Rather, I would say it's disrespectful of ad agencies to insist that Apple must use one of them. Arrogant even. If they want to keep the contract they must earn the right, after all, it's only one more competitor.

    Either they're worth the premium they charge, or they're not. Either way, it's not their decision.

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