At this year's autumn iPhone 16 launch event, Apple AI (Apple Intelligence) became the highlight of the whole event.

The Apple AI feature is set to be rolled out starting in October, marking a new era for Apple's voice assistant Siri. How to monetize AI in the future is crucial for Apple.

On September 27, Bank of America Merrill Lynch released research reports stating that there are multiple ways for Apple AI to generate profits:

1) By downloading AI applications from the Apple App Store (Apple will receive a standard 30% share of the download revenue);

2) Subscription-based platform for Apple Intelligence itself;

3) Siri integration.

Bank of America Merrill Lynch points out that the first two methods have been widely analyzed and undoubtedly will bring Apple significant revenue opportunities. What is often overlooked is the monetization potential of Siri integration, which is expected to become increasingly significant over time.

The statement indicates that Apple's AI will give Siri and applications a deeper integration capability, and this capability will bring Apple approximately $3 billion in potential revenue starting in 2026, and this revenue could reach nearly $50 billion over the next decade.

Specifically, Apple will use Siri as a virtual assistant to perform tasks for users, such as booking a ride, ordering food, or scheduling meetings. Although Siri can already perform these relatively basic tasks, with AI, Siri will be able to accomplish complex multi-step tasks (such as booking an Uber or ordering food).

This raises a question: which app or platform will Siri recommend to users? According to Bank of America, whoever pays more money to Apple will be recommended first to Siri or users.

This auction-based platform concept is similar to Google's advertising strategy, where companies can pay to have their business ranked at the top of search results. This will also bring Apple a new way of monetization based on advertising, such as Apple historically not generating App Store revenue from physical services like Uber.

New monetization method: Siri integration, recommended based on who pays more.

Based on the existing large user base, Apple's AI will open up new profit avenues for the company.

Bank of America Merrill Lynch believes that deep integration of Siri will give Apple more control. The interaction between users and smartphones will shift from choosing applications to letting Siri decide which application is the 'best choice.' This will open an opportunity for applications to compete for user business.

For example, a user may say, 'Siri, help me find a ride home,' and multiple ride-hailing companies may bid to compete for this order. This auction-based platform concept is similar to Google's advertising strategy, where companies can pay to have their business ranked at the top of search results.

At this time, Apple can create an 'auction' mechanism, where ride-hailing platforms compete for user priority recommendations. Apple can charge a certain percentage of the order amount to platforms like Uber as the cost for their priority display. This auction process is one of the pillars of Apple's AI profit strategy.

What is the profit potential?

Bank of America Merrill Lynch predicts that Siri will first integrate 'tasks' including the food, travel, and business industries. For example, ordering food through Siri, booking rides, flights, or hotel accommodations through Siri, etc. Apple's AI will have these capabilities in 2026 and start applying them. By then, Siri will be mature enough to handle tasks users present.

Apple's TAM (Total Addressable Market, the total target market for a product or service) in these industries will depend on two major factors: 1) the percentage of revenue completed through mobile devices; 2) the proportion of users using iOS devices. According to IDC data, in 2023, Apple/iOS smartphones have a market share of approximately 20.1% globally, and 42.6% in the USA. Companies like Uber, Lyft, and food delivery platform DoorDash generate almost all their revenue through mobile devices.

Bank of America forecasts that Siri integration will potentially bring Apple approximately $3 billion in revenue starting from 2026, and this revenue could approach $50 billion over the next decade.

By 2036, Apple will obtain about 9% of industry revenue from Uber, Lyft, DoorDash, hotels, and the aviation industry.

For example, the bank estimates that by offering integrated services, by 2036, Apple could acquire about $15 billion from Uber's total order value.

Bank of America Merrill Lynch continues to be bullish on Apple based on the long-term hardware, services, and profit margin growth trends, maintaining a "buy" rating on Apple.