It appears another great Worldwide Developers Conference is in the books for Apple (NASDAQ:AAPL), with something for all participants. Starting from the keynote, investors and users were introduced to a new mobile (iOS 9) and desktop (OS X El Capitan) operating system, along with a redesigned and rebranded Apple Music app. For developers, the announcement that Apple's programming language, Swift, was going open source elicited an enthusiastic response.
Somewhat lost in the discussion are the effects of Apple's newest moves on other businesses. And that makes sense since the connection between Apple and its users is direct and tangible whereas relationships between Apple's ecosystem and other businesses is decidedly less so. But just because a relationship is less direct doesn't mean it's less important.
And when it comes to iOS 9, it's quite possible Apple dealt a huge blow to advertisers by simply adding a native content ad blocking extension into the mobile version of its browser, Safari. And by advertisers, I'm casting a wide net and including the entire advertising monetization chain, and that includes Google (NASDAQ:GOOG) (NASDAQ:GOOGL).
Advertisers, websites, and apps
For most online content, the broad monetization model is rather straight forward, although the nuances can be complicated. Keeping this high level, websites create content in the hopes of attracting visitors, and then try to monetize that content by banner, native, or rich media ads or via accumulating an email list. Eventually, the website wants you to click on a delivered ad via some format. As you can see, any issues with ad delivery could hurt advertisers top and bottom lines, as each visitor is inherently less valuable, especially on the banner/display ad front.
For these content providers, mobile already presents unique challenges as traditionally the per-click rates are generally more lucrative for desktop, but mobile use is expanding on both a usage and ad-spend basis as advertisers are following eyeballs. Earlier this year, research firm eMarketer found that mobile ad-spend will eclipse desktop ad spend in the United States in 2016.
The easy answer for lower ad rates has been, naturally, to increase the ad load. But now Apple is putting a crimp in that idea. And it isn't as if Apple is a niche player on a browser market share basis. In March, analytics firm StatCounter found Apple's Safari commanded 55% of all U.S. mobile traffic. And although both eMarketer's and StatCounter's figures are U.S. specific, this could be a worldwide problem as Apple continues to grow market share in developed and developing markets.
Google's mobile ad share is enormous
To be fair to Apple, this is a good idea to root out bad actors. On some apps and websites it feels like a digital recreation of "The Lady, or the Tiger," where you're unsure if your click will land on the desired article (the proverbial lady) or a multiple redirect, eventually landing in the app store on a game like "Clash of Clans" (the tiger). But Google gets hit in the process as well.
Specifically, The New York Times reported Goldman Sachs calculated Google collected more in mobile search revenues from iOS than it did from its own mobile operating system, Android, in 2014. And the results weren't close. Goldman estimates Apple provided nearly $9 billion while Android-based devices chipped in $3 billion.
And while it is important to note that not all of Google's search revenues will be affected by this change, the figures still show how important Apple is to Google's top line as the aforementioned $9 billion figure is roughly 13.6% of Google's revenue haul during that period. It will be interesting how Google and content providers respond to Apple's moves -- I'm expecting more native ads.