Why Apple Is Killing Off its Advertising Business

January 13, 2016, 10:21 PM UTC
Apple Unveils New Software For iPhone And iPad
CUPERTINO, CA - APRIL 08: Apple CEO Steve Jobs announces iAd, part of the new iPhone OS4 software, during an Apple special event April 8, 2010 in Cupertino, California. Jobs announced the new iPhone OS4 software. (Photo by Justin Sullivan/Getty Images)
Photograph by Justin Sullivan — Getty Images

In 2010, Apple announced it would dive into the advertising business with iAd, it’s advertising unit that would enable high-quality ads into iPhone and iPad apps. It even spent $275 million to acquire Quattro Wireless and turn it into the foundation of iAd.

However, it looks like iAd as we know it is coming to an end, according to a new report from BuzzFeed, citing anonymous sources. Apple (AAPL) has reportedly decided to step away from the creation, sale, and management of ads, and is shifting to a more automated platform. It’s axing its entire ad sales force, which will be offered buyouts, possibly as early as this week, according to the report.

In its new form, iAd will let publishers sell through it directly and they’ll get to keep 100% of the revenue they make. That also likely means bad news for companies like Rubicon Project and MediaMath, which have been in charge of the programmatic, or automated, ad sales for iAd. Since the new iAd platform will be entirely automated, publishers will likely process it all through the new platform, according to the report.

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This reported shift in approach is hardly a surprise, however. Despite its early potential and buzz, iAd never really took off for Apple, largely because of the company’s tight controls over ad creatives, high prices (it eventually slashed minimum asking price and upped developers’ cuts, but alas), and refusal to share data with partners. And as Fortune‘s Erin Griffith noted in 2014, Apple’s own privacy policies, while effective at making it more difficult for its ad-based competitors, also sabotaged its own ad business.

One of the clearest examples—and harbinger of this week’s rumor—was Apple’s decision that year to make MAC addresses for iOS 8 private. MAC addresses, which are like IP addresses that are permanently assigned to a device, were used by retailers to track consumer activity while in their stores without their knowing, among other things. Apple’s new stance, in an age of increasing demand for consumer data: Not from our customers.

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