Selling ads in Apple News
Toward the end of 2016, Apple (AAPL) tapped Comcast’s (CMCSA) NBCUniversal to be the exclusive seller of advertising space in its Apple News app in the US (SPY). Apple and NBCU agreed to share the revenue generated after giving a portion of it to Apple News publishers.
The partnership with NBCU to sell commercial space in Apple News was viewed as Apple bringing on board an industry insider and expert to steer its advertising business so it could maximize its opportunities in the digital advertising industry.
Music recognition app that sells ads
If Apple wants to expand its advertising business, then Shazam Entertainment, the startup it recently agreed to acquire, might be an important asset. Shazam provides music recognition service through its namesake app that boasts more than 20 million daily users worldwide.
One of the ways Shazam generates revenue is through advertising, where users are shown commercials while they identify songs playing nearby. Shazam is estimated to have generated $54 million in revenue in 2016, and the bulk of that came from advertising sales.
$575.8 billion in digital advertising market
Therefore, with the acquisition of Shazam, Apple is not only getting a business that already generates revenues but one that could also bolster its fortunes in the digital advertising industry. Business intelligence firm eMarketer forecasts that brands worldwide will spend $375.8 billion on digital advertising by 2021, up from $191.9 billion in 2016.
Facebook (FB) and Alphabet’s (GOOGL) Google have a tight grip on the digital advertising market. The acquisition of Shazam could help Apple to increase its position against Facebook and Google to drive growth in its advertising business.