Apple's iAd Not Game-Changing, but Will Move Market

Developers to Get 60% of Ad Revenue Sold for Apps

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NEW YORK (AdAge.com) -- Apple unveiled its take on mobile advertising -- the iAd -- which looks a lot like the kind of rich media units we've begun to see on many mobile ad networks.

Steve Jobs introduced iAd at its developer's conference in Cupertino today.
Steve Jobs introduced iAd at its developer's conference in Cupertino today. Credit: Engadget
The biggest difference: iAds are built for HTML5, another blow for Adobe's Flash, which is the standard for rich media ads elsewhere on the web and on mobile devices. A version of the OS and the ad unit for the iPad will be available next fall.

Apple showed off the new units at its developer's conference in Cupertino, Calif., where Mr. Jobs also rolled out the latest operating system for the iPhone, which will allow the use of multiple applications simultaneously, a feature that will, ironically, allow users to dive into an advertising experience without leaving the application they are using.

Apple acquired mobile ad network Quattro Wireless in January; the iAd will come pre-installed in the new iPhone OS 4.0 coming out this summer, meaning it'll be the default for newly developed apps. Mr. Jobs showed off in-app ads that could include video, games, store finders and customizers.

Mobile ads 'suck'
While Mr. Jobs seemed to present the iAd functionality as brand-new -- "We think most of this mobile advertising really sucks," he said -- the truth is mobile rich media has been around for months. And even though Apple is angling to spotlight its own rich media mobile offering, competitors such as AdMob and Medialets couldn't be happier with Mr. Jobs' announcement.

"It's awesome -- Steve just did a big commercial for mobile advertising," said Jason Spero, VP and general manager of AdMob. "Though, with one or two exceptions, I didn't see anything that advanced that, the technology or state of the art of iPhone advertising."

And Google execs have a reason to be happy about the iAd. Google is in the process of acquiring AdMob in a $750 million deal announced in November and they're hoping Apple's hard charge into mobile advertising, and its control of the iPhone platform, will make its deal to acquire AdMob more palatable to regulators.

Others in the nascent mobile ad space lauded Apple's move and said it would help build the market for mobile advertising.

Building a mobile market
"Apple is going to spend a lot of money promoting mobile rich media," said Eric Litman, chairman-CEO of Medialets, which provides rich media mobile ads for both iPhone and Android. "They are going to move the needle in this space as nobody ever has."

Mr. Jobs estimated that with users spending an average of 30 minutes per day in apps, serving one ad every three minutes would mean about 1 billion ad impressions per day on iPhones.

"There's a couple companies that have innovative ad units, but they just haven't had the scale or power," said Nihal Mehta, CEO of local-search and networking app Buzzd. "But none of these guys have 200,000 developers behind them that are going to roll out billions of impressions the day after its release."

Apple also unveiled its revenue-sharing model with developers -- they'll get 60% of ad revenue, while Apple will handle all sales and inventory. When Apple announced its acquisition of Quattro Wireless for $275 million in January, the move was seen as a way to serve the developer community whose apps have sold iPhones.

With two giants competing, the mobile ad market is set to get a lot of attention in the coming year.

AdMob had $31 million gross revenue in 2009 and 11% market share, according to market research firm IDC. Added to Google's existing mobile ad business, which is primarily mobile search, the acquisition would make Google the mobile ad leader with 21% market share. The deal is getting scrutiny from the Federal Trade Commission, which has solicited a letter from Google's competitors and is expected to challenge the deal.

By comparison, Apple's Quattro had $20 million in gross revenue for 2009 and 7% market share, according to IDC.

The iAd announcement came after details on iPhone's newest operating system, 4.0. The new operating system, which will be available to iPhone users this summer, will now include multitasking. Developers will now be able to build new functionality like background audio, voice over IP, background location and push notifications.

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