A recently surfaced document sheds new light on how Google perceives Apple's potential to challenge the advertising industry, a space that Google has dominated for years. The report, titled "Operation Black Walnut," was created by Google strategists to explore how Apple might eventually build an ad business capable of reaching up to $30 billion. This document, which became public through Google's ongoing antitrust case, offers a detailed look at Apple's potential ad expansion and its possible impact on the market.

Historically, Apple has been reluctant to dive deeply into the advertising business. Its current efforts are mainly limited to advertising within its App Store search results. However, Google’s report speculates that Apple could eventually take a much larger slice of the advertising market, potentially running ads across third-party apps and even on the web via its Safari browser. This shift would mark a significant transformation in Apple’s business strategy, suggesting that the company could use its massive customer base and data access to build a robust advertising platform.

One of the key insights from the report is that while Apple may have the potential to build a $30 billion ad business, it may not be entirely motivated to pursue this opportunity aggressively. This is because Apple currently receives a significant amount of its ad-related income through a deal with Google. In this agreement, Google pays Apple upwards of $20 billion annually to make Google’s search engine the default on Apple devices. The report raises the possibility that Apple may be unwilling to risk this lucrative revenue stream, especially given that these payments could account for more than 15% of Apple's annual profits.

However, Google's report also considers the growing risks involved. There is the possibility that Apple’s reliance on Google’s payments could be disrupted by regulatory action. In August 2024, U.S. District Judge Amit P. Mehta ruled that Apple’s monopoly over search was illegal, leading to discussions about breaking up Google’s deals with Apple. If these payments were to be terminated or reduced, Apple could be forced to rethink its stance on developing its own advertising business.

The speculation in the "Black Walnut" report reflects Google’s awareness that Apple’s shift into the advertising business could have significant consequences. Apple has been quietly hiring talent from the advertising industry, including former Google employees, suggesting that the company may be seriously considering expanding its ad operations. Moreover, Apple’s recent moves into sports programming, such as its broadcast deals with Major League Baseball, could provide new avenues for ad revenue.

The "Operation Black Walnut" report, although speculative, is increasingly relevant in light of the potential changes in Apple’s relationship with Google. As government scrutiny of big tech continues, the long-standing partnership between the two companies could be upended, paving the way for Apple to pursue its own ad business with much greater intensity. Whether Apple will fully embrace the opportunity to create a $30 billion advertising empire remains to be seen, but the stakes are higher than ever.

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