Apple Opens Up iTunes Radio Inventory to Automated Buying Through iAd

Advertisers Can Target Apple Listeners With Phone, Email Identifiers

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Rumors of iAd's demise have been greatly exaggerated.

Starting on Thursday, Apple is extending its mobile advertising network to iTunes Radio, its web streaming service that competes with Pandora, through programmatic ad buying. Previously, advertisers had to buy through Apple's lean iAd sales staff. The new feature also comes with updated targeting capabilities, using customer phone numbers and email addresses that can be cross-referenced anonymously against marketers' data.

It's a signal that, despite the dominance of Google and Facebook in digital advertising, Apple can, if it wants, wield influence in the market given the ubiquity of its devices.

Apple's move follows a series of quiet advancements for iAd, the service born in 2010 that has failed to live up to its hype. iAd took just 2.6% of the U.S. mobile advertising spend in 2014, significantly trailing Google and Facebook, according to eMarketer. Gene Munster, an influential company analyst, recently said Apple lost the race for mobile ad dollars to the web giants.

But Apple hasn't given up. Last April, Apple extended Workbench, its buying tool for iAd, to non-developers and added video ads. It brought iAd to 70 new countries in October. Then in November, introduced automation, partnering with several programmatic ad-tech firms. Now it's taking Workbench and automation to audio, a development that will surely attract attention from platforms like Pandora and Spotify, who are closely watching Apple's moves in the music space.

"This is a 100% owned and operated channel from Apple," said Tanuj Joshi, senior director of strategic media enablement with MediaMath, an iAd programmatic partner. "It gives us more unique data points and better scale."

Brands buying on iTunes Radio inventory can also tap Customer Match, Apple's newly beefed up ad-targeting product. It offers advertisers custom segmenting of Apple's users, based on its IDFA mobile identifier, the company's version of a cookie. For instance, if a financial services or mobile gaming app advertiser wanted to hit particular iTunes Radio listeners, they could do so through Workbench. Earlier, iAd buyers had to manually configure customer matching -- available through IDFA or slicing of the application program interface -- to achieve similar targeting with iAd. Now that's automated.

Privacy branding
As it pitches advertisers, Apple is stressing privacy controls as paramount. When a brand matches Apple's customer data with its own, Apple insists neither it nor the client can see which customer is matched. In recent months, Apple CEO Tim Cook has hammered home Apple's devotion to privacy, particularly as he positions it against rival Google.

"Brands care about trust, transparency and control," said Mr. Joshi. "Apple is adhering to all three of them very well."

Any iPhone, iPad or Mac user who opts out of ad-targeting on their device is exempt from the targeting feature, said the executives working with iAd. Apple does not disclose how many of its millions of customers opt out. It's a very small number, said an executive familiar with Apple.

Apple declined to comment.

Music ambition
When iTunes Radio first launched with advertisers, in September 2013, Apple aimed for premium and pricey, similar to its iAd approach. It worked only with big-spending marketers, like McDonald's and Pepsi, for deals that reached the tens of millions per ad buy. Brands expressed some frustration with the pricing.

By lowering the buying threshold, Apple is trying to gain a stronger foothold in the digital audio ad market, which eMarketer expects to grow 28% this year to $2.8 billion.

Apple does not disclose the number of iTunes Radio users, but its senior executives said the service had 40 million listeners last May, when Apple added another streaming platform, Beats Music, through its acquisition.

While audio remains a pittance of digital ad spend, industry insiders say its CPMs and appeal are growing. "Frankly, it's reached a certain size where it matters to big advertisers," said Alexis van de Wyer, CEO of Adswizz, an audio ad-tech company that has worked with iAd. Advertisers will be drawn to iTunes Radio largely through the reach and reputation of Apple, he added. "It's a really strong brand."

Apple also has the car dashboard at its fingertips. Carplay, its connected-vehicle platform, is now available with 40 different vehicle models, Mr. Cook said earlier this month. iAd buying is not currently integrated with Carplay.

Apple has not revealed the future for Beats Music, the paid streaming service that now sits within iTunes. Re/code reported Apple is negotiating with labels for a price below the industry standard of $10 a month for a music subscription service. Apple is expected to announce its plans in June, according to several analysts and executives.