Apple’s Next Billion Dollar Opportunity

When you think of Apple (AAPL), key people and products come to mind. Steve Jobs, iPhones, and MacBooks. And while these certainly represent Apple, they only scratch the surface of what the company is today and what it plans to become.

From iCloud to Apple Podcasts and Apple TV+, this tech giant is much more than its flagship products — like the iPhone 14 Pro, whose launch recently triggered servers in China to crash after loyal customers placed two million orders in the first 24 hours of availability.

The tech giant is continuously innovating and recently released a powerful tool for small businesses. If all plays out as planned, this new channel could bring in billions of additional ad revenue.

What’s Apple Business Connect?

As Apple says, “Business Connect puts your business on the map.” This set of tools makes it easy for customers to find businesses using Apple Maps, Wallet, Messages, and other in-device apps. Apple Maps showcases unique place cards, where businesses can easily add their logo, update photos, and so forth. These custom-created cards may include directions, contact information, and built-in calls-to-action.

Depending on what businesses offer, customers can get a glimpse of their offerings, including:

  • view a menu,
  • book a reservation,
  • buy tickets,
  • chat with a representative, or
  • order online with a single tap.

As customers visit these place cards, data is collected and shared via insights to help businesses optimize their reach. 

How Will Apple Make Money?

Apple Business Connect is currently free to businesses, offering them value at no charge. If Apple can show businesses how valuable this suite of tools is, it could charge for more specialized options down the road.

By helping companies to stand out in Apple apps and boost their conversion rates, Apple could charge a premium for select services. However, that is not what investors are interested in — it’s the potential multi-billion dollar opportunity that comes with advertising in Maps.

The billion dollar market estimate stems from the success seen by Google Maps. Alphabet introduced ads in Google Maps in 2019. By 2020, Brian Nowak, a Morgan Stanley analyst, estimated this under-monetized product could be worth $11 billion by 2023. Today, the app is used by more than one billion people around the globe each month.

While Google is a digital advertising leader, Apple Maps may not be far behind. When Google announced it hit one billion users in 2015, Apple said its users were using its mapping services over three times more often. However, recent data shows that this gap has likely closed.

Apple Is Creating and Launching New Features

Apple is innovating to gain an edge over Google in certain areas, which is why it is releasing new features. These include EV routing, cycling directions, and 3D details. In Business Connect, enterprises can now take advantage of a new feature that showcases offers and incentives, ranging from seasonal menus to available discounts.

Apple Maps may give the company additional opportunities to branch out in ways beyond Business Connect, for example augmented reality and the long-rumored Apple iCar. The more the company improves the app, the larger the network effects, a key moat.

If Apple can show how its users interact with the businesses leveraging Apple Business Connect and how those engagements translate to sales, the opportunity could be eye-popping. This new product could lay the groundwork for a profitable advertising segment, driving growth and revenue for years to come.

There Are Many Reasons to Invest in Apple

If you were to base Apple’s investment potential solely on Apple Business Connect, you might be more inclined to buy Alphabet shares — which isn’t a bad idea, regardless. However, the long-term investment potential of either Apple or Alphabet is promising because of how diversified their revenue channels are.

Apple’s Q1 2023 earnings report showcased revenue of $117.2 billion. Although this figure is down 5% year-over-year, the company has been able to navigate a challenging environment. The tech titan set an all-time revenue record of $20.8 billion across its Services business. Even in the current macroeconomic environment, this segment saw double-digit growth.

Apple continues to focus on the long-term. Based on its wide moat, the company is well-positioned moving forward. Plus, Apple pays a modest, growing dividend, which is fairly uncommon among growth stocks. While the yield is just 0.60%, it has increased annually and will likely rise in the coming years.

Should You Buy AAPL Shares Today?

Shares of AAPL are down by almost double digit percentages over the past year. However, they’re up over around 20% year-to-date. Over a long-term time horizon, the prospects for Apple are compelling.

As one data point, consider Warren Buffett’s confidence in Apple. The tech giant is Berkshire’s largest holding, representing over 40% of its portfolio. While there are many reasons for this, Apple is an iconic brand with a loyal following. It is also an innovation leader with plenty of room to grow.

If you plan to buy and hold your shares for years or decades, now is a great time to buy. Apple is well-priced, especially considering its ability to generate tons of cash and its future growth potential.