Apple's advertising push provides risks but 'big potential rewards,' Barclays says
ymgerman

Apple (NASDAQ:AAPL) has continued to increase its advertising-related revenue in recent years, an initiative that investment firm Barclays said provides some risk but also "big potential rewards."
Analyst Tim Long, who rates Apple (AAPL) equal weight with a per-share price target of $145, noted that the TAC (traffic acquisition costs) and advertising portion of the company's Services business is the second-largest contributor to revenue, accounting for roughly 28% of overall Services revenue. 
While it may only account for a small fraction of the company's overall revenues (believed to be in the mid-single-digits), it could be worth as much as 12% of Apple's (AAPL) earnings per share, given the extremely high margins, estimated to be in the neighborhood of roughly 90%.
Long estimates that revenue related to TAC, which comes from Google (NASDAQ:GOOG) (NASDAQ:GOOGL) paying to be the default search engine on Safari is worth roughly $18B in 2023.
Advertising-related revenue is likely to be worth $7.5B in 2023, up from $5B in 2022 and is driven mostly by App Store ads, but could move to other apps such as Apple Maps, TV+ and others. Late last year, it was reported that Apple (AAPL) may start to introduce ads into several of its apps to boost ad-related revenue.
This is where both the controversy and reward start, Long noted. "On one hand, some regulators are looking to end the [Google] agreement, Europe and India already have no TAC for Android (not iOS), Google is pushing its own search app and has such a dominant position that default search may not matter," Long wrote in an investor note.
However, given the hype surrounding Microsoft's (NASDAQ:MSFT) new version of Bing, which includes technology from OpenAI's ChatGPT, Long believes it could force Google (GOOG) (GOOGL) to "re-up" its deal with Apple, perhaps at "higher rates." 
Long also suggested Apple (AAPL) could develop its own search product.
Apple (AAPL) shares were fractionally lower in premarket trading on Tuesday.
On Monday, it was reported that Apple (AAPL) had acquired WaveOne, a video startup that was working on artificial intelligence algorithms used to compress video.