Apple’s Acquisition Arithmetic: What the Purchase of DataTiger Means for Apple and ‘Ads’

Last Thursday 14th February 2019 Bloomberg reported that Apple is now in control of Operatedata Ltd – the UK based startup, home to the DataTiger brand. The company says its technology can “individually optimise marketing flows for your customers in real time across all channels”. The CEO of DataTiger Philipp Mohr positions the company as the future of CRM. Now, it is the future of Apple’s CRM.

DataTiger is one of five acquisitions Apple has made over the past year, the remainders of which are: Pullstring, Shazam, Texture and Akonia Holographics.

Services, content, brands: what is an ad anyway?

Apple products and services are free of ads from third parties with the notable exception of the App Store (where placement is sold), which is expected to generate revenues of $2 billion by 2020. As Apple builds up a vast repertoire of content to assist a successful pivot into services, it will need a second-to-none personalisation tool to communicate relevant content effectively to its own userbase.

Apple’s yet to be unveiled paid-for news subscription service is already being touted as the ‘Netflix of News’. This mantle is less about notions of premium content and instead related to Netflix’s renowned personalisation capabilities, based on its ‘taste communities’ framework, of which there are a reported 2000.

These taste communities allow Netflix to – uncontroversially – personalise users’ content feeds. However, when Netflix began testing unskippable ads for other Netflix content in between episodes of a show a user was already watching, there was an immediate social media backlash. The degree to which a consumer perceives an ad as an interruption is mediated by the amount of financial investment the consumer has made in the digital proposition. Whereas on free services (e.g. YouTube and Instagram), people are more tolerant of ads since their only investment is time.

Contrast this with Amazon Studios’s plans for increased brand integration into TV show production – unlocking potential to leverage Amazon’s e-commerce business within digital TV content. This is Amazon’s version of Instagram’s amplified social e-commerce capabilities: content as a shop window, where the window is also the checkout.

Combined, these examples illustrate the increasingly complex way that users define, seek out and eschew ‘ads’. Even when not paid for by third party advertisers (like in the Netflix example) per se and containing potentially highly-relevant information, ‘ads’ that interrupt content experiences run the risk of backlash (as in the Netflix example).

Conversely, when users enjoy content in already explicit commercial contexts, they may not only approve of short-form ‘ads’ that link them to relevant purchase, but seek out entire series worth of content produced in partnership with a selection of brand partners (as in the Instagram and Amazon Studios examples).

The question of where Apple’s (almost) ad-free philosophy will sit in this shifting landscape remains.

Ad-free Apple: do consumers care?

Apple bundled content will be facing tough competition from three (incumbent) behemoths of content: Disney (Disney+, ESPN+ and 30% Hulu stake); AT&T (Warner Media i.e. HBO, CNN, Warner Bros, 10% Hulu stake) and Comcast (NBCUniversal, Sky and 30% Hulu stake).

Adding Amazon Prime Video to this mix, Apple and Netflix are the only two content providers without ads or next-gen branded content. In one sense this amplifies rumours of a possible Netflix acquisition (and a possible DAZN acquisition – a sports SVOD services also ad-free). In another sense it begs the question of whether, in light of such fierce competition over the quality of the content itself, consumers will care enough that Apple distribution will be ad-free to warrant them paying for another service altogether (25% of video subscribers already pay for two or more video services). What Apple does have in its favour is the power of the ecosystem: for those consumers that already have Apple TV, iPhone and Apple Watch, an Apple video service will be a seamless addition.

Finally, in light of Apple’s purchase of DataTiger, it must pay special attention to the Netflix ‘ad’ for Netflix Original content example. Consumers are highly sensitive to messaging within paid-for ecosystems – even when the relevance of that message is delivered with the specificity that technology like DataTiger’s can faciliate. The App Store is so far the one part of Apple’s ecosystem where it could experiment further with its own ‘ads’ and third party ads.

Services: in search of a rabbit in a hat

News of the DataTiger acquisition came in the same week that Apple announced an event taking place on March 25th, expected to be the launch of its news and video subscription service. Pressure is mounting on the world’s most valuable company to generate a long-awaited (and arguably needed) master stroke.

Bloomberg reported that Hollywood stars Jennifer Anniston, Jennifer Garner, Reese Witherspoon and JJ Abrams have been invited to the event. Such a guest list is oddly reminiscent of Tidal’s ill-fated launch – lining up ‘Hollywood royalty’ at a time when each year the Oscars looks more out of touch. Then again, Apple is competing with Disney, Universal, HBO and Warner Bros. All in all, it’s a sage reminder of how difficult those ‘at the top’ can find it to practice true innovation, rather than cautious hedge betting.

(For a view on how Apple could provide a 'Safe Harbour For Creatives', see MIDiA's video practice director Tim Mulligan's blog from 19.02.19).

Apple’s business is still overwhelmingly rooted in hardware. What this point of view arguably doesn’t acknowledge sufficiently is that Apple’s execution in video will have impacts on overall brand affinity and, as such, iPhone sales. People didn’t only flock to the iPhone because they thought it was the best phone, they flocked to it because it was Apple.