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Memo to Steve Jobs: the IAd Is No Miracle Worker

Why Apple Should Rethink Its Strategy in Deploying Mobile Ads Into the Marketplace

By Published on . 16

Kathryn Koegel
Kathryn Koegel
A veil of silence hangs over the advertising industry, as thick and unattractive as Scarlett O' Hara's post-war recycled drape dress. At a mobile conference last week, the hot NON-topic was the iAd. Agency execs one after another deflected questions about Apple's iAd platform and one after another began admitting it was all due to non-disclosure agreements. We're talking about an ad unit here, not the plans to a stealth bomber and it's just odd when an industry that focuses on communication goes silent due to Apple's power in the market.

There's something strange afoot when one of America's most beloved and popular companies starts acting like it's working with Pentagon-level secrets. The latest Apple response to "leaked info" is enlivening the trade media these days and has even made it into the realm of top pop culture. I still can't believe that "The Daily Show's" Jon Stewart devoted eight minutes to rant about how "Steve" had become "the man" while Bill Gates, the one we always knew to be nefarious and anti-competitive, was now off in Africa saving children from malaria.

I was in the midst of writing an extensive paper for Ad Age about the ins and outs of mobile marketing when Apple CEO Steve Jobs dropped his A-bomb on the world at an April 8 press conference. I foolishly expected Apple to respond to my queries -- Ad Age is after all a publication of record in the ad world -- but Apple stuck to its usual behavior of not commenting on anything. A contact of mine who had been given a demo of this top secret ad surreptitiously whispered (with the drama of Deep Throat) on her non-trackable landline: "watch the video."

I encourage anyone who wants to see a cult of personality in action check out the widely available video from the press conference. You'd think we were in North Korea or something with the continuous claps of approval and bowing and scraping. They say Obama got a 30-day pass with the White House press corps but he has nothing on Steve.

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About 44 minutes into the presentation, he gets to the iAd. But first, he disses mobile advertising in general: "most of it really sucks." Ok, Steve, if it sucks, why did you buy a mobile ad network? Quattro does creative for some of its clients. Are you saying their work sucks and you are going to save them from doing a bad job? I've seen some of their stuff -- it's good. He then reveals his exciting new units which are.... (ta-da!) exactly what companies like Medialets, Greystripe and Crisp Wireless have had in the market over the past year.

No, they do not seamlessly sync with commerce, but the commerce Steve is referring to is his commerce, as in things sold through the iTunes store. I don't like that Steve. I wanna buy through Amazon, I wanna pay with PayPal. This is a democracy, and a free market. I want choice and I want competition for my business.

So what is the iAd? My theory is that it is the best possible ad vehicle for selling casual games. If you watch the video, he notably does not refer to the creators of apps as "publishers," "content creators" or "producers" but as "developers." He also notes the downward pricing pressures that app developers face: poor guys are making $.99 or less on a fancy version of Bejeweled or increasingly likely: giving those apps away for free to get enough usage to attract advertisers. (ComScore data show a 13% decrease in gaming behavior over the past year but an increase in the number of games downloaded -- that means we are talking serious churn.)

The Apple app store is a victim of its own success and has learned the bitter lesson content producers online already know: the more content available the greater the downward pressure on price and the less consumers are willing to pay for any of it. With more than 185,000 apps in that store, it's tough for consumers to discover new apps. If download numbers are going down as well as prices paid, developers are screwed. It is nice to know that Steve thinks the fairy dust of the iAd will fix it all. But I'm not so sure. Here's why:

Environment can trump audience
Yes, the Apple app-natics are highly favorable to advertisers, but the top free apps that drive the volume of downloads are not exactly the kind of context/environment that brand advertisers are dying for: let's see, you have an IM app, a social network, a violent video game ("World at War: Zombies Lite"), some casual games I'm clueless about and my personal favorite: "Exotic Positions". While that new KY product that promises the ultimately fulfillment for both parties may have found the ultimate context, Nabisco, not so much.

Available inventory and channel conflict
Martin Nisenholtz, the executive in charge of The New York Times website, stood with Steve at the iPad launch to proudly show off his free ad-supported app. Is Martin going to say to Steve: "Yeah Steve, sell the New York Times in your network. I don't need to have any say in what ads show up and let us take 40% of the revenue." It seems unlikely the Times and other "branded" content sites will agree to Steve's terms.

The ban on third-party analytics in apps
There is no definitive answer on what will be allowed in terms of measurement of apps. On the panel I lead at the mobile conference, a representative from Flurry, an app analytics company, said that if the language Apple has issued around analytics is indeed interpreted as stated, his company has a great product for Android and BlackBerry phones. One thing that Steve doesn't seem to get about advertising is that "Brand" advertisers typically want to understand the "who" of a media property and the subsequent reach of an ad. He does not allow Nielsen and comScore to meter iPhones, and unless Steve also builds an app demographic-based panel, he won't be able to get at that. His iAds will appeal, but purely from a direct response basis.

Apple does creative?
For the time being Apple will be creating ads -- partly because there just aren't that many HTML5 developers out there. How does AKQA feel about that or leading mobile agencies like Ansible or PhoneValley? Wish they could talk about it on the record. And by saying you're doing the creative but basically offering programming services, aren't you just repurposing ideas developed for the wired web, print or TV? Apple's in-house creative folks are probably good, but are they Cannes-worthy idea people or just a bunch of programmers?

The whole Flash vs. HTML5 pissing match
Steve says Flash doesn't work that great. Adobe says HTML5 isn't fully baked. Why are we in advertising forced to suffer through arguments about programming languages that we cannot possibly contribute to? What this seemingly unfair fight will do is add more cost to the creation of content and ads for mobile -- online has long been burdened by disproportionate technological costs to print and TV. Mobile is now that much worse.

The terms
It's a 60/40 split with Steve getting 40% of the cost of the media buy. Even in the iTunes store, he only gets 30%.

The flash-in-the-pan nature of apps
According to mobile analytics firm Umber, 90% of apps never get used. Marketing is supposed to be about some kind of ongoing relationship with a halo effect from environments with loyal audiences. In apps that are downloaded today and gone tomorrow: the majority of them are games, entertainment and lifestyle, according to Flurry, will the ads matter? Will they achieve appropriate frequency?

His media math is flawed
Steve says 10 ads for every 30 minutes of content like TV with 100 million devices which equal 1 billion impressions a day. Serious scale. But the argument does not take into account the reach of individual apps, context, audience (the iPhone audience is not one specific demo), the global nature of the usage (nobody really buys on a global basis) and the fact that nobody could afford to actually buy all that inventory. This is a tonnage metric or what is politely called "potential reach" in the online media world.

He believes in clicks as a way of measuring effectiveness
Steve discussed effectiveness in his iAd network as being measured in clicks. OK, then, just admit it's a DR business based on gaming and not some kind of brand engagement play as his ad examples showed. We all know about the fallacy of clicks as a pure measure of ad impact. Get with it, Steve.

Android is proving that the iPhone is not as special as we once thought
According to data supplied for the Ad Age mobile WhitePaper from MobClix, a neutral party as they are a mobile ad exchange that works with inventory on all device platforms, behavior on the latest Android devices and iPhones is remarkably similar. If we're going to talk metrics like click rates, it's almost identical. Phones like the HTC Incredible with their eight-megapixel cameras and ability to use two apps at once (now, not when the latest OS comes out) are becoming a personal statement in the same way iPhones were over the past two years. In fact, is the iPhone sooooo...2007-2009?

Just like Jon Stewart who ended his anti-Steve rant with a confession of absolute love for the product, I will conclude with a paean to Apple and its use of advertising. Apple truly gets that you can create value out of something that costs more than anything else in its category if you can develop a lifestyle and a culture around a brand. (Yes, in an article about Apple's retail architect, the stores were referred to as the "cathedrals" of our age -- take that, Chartres.) From the brilliantly art-directed "1984" to the thematically compelling "Think Different" to the current personification of brand values of "PCs vs. Macs" (the hopeless nerd John Hodgeman vs. geek chic Justin Long), Apple has told us stories about its products that consumers embraced. I draw the line, however, about this latest fairy-tale. There is nothing magic about iAds, and while I applaud Apple for trying to elevate the mobile ad to take its place beside TV and interactive ads, I vehemently disagree with some of the ways Apple has chosen to go about deploying it in the marketplace.

This is a marketplace, and one that is supposed to be open at that. Let's let the agencies do the creative, the measurement companies assess it, the programmers not have to do all that redevelopment to make it work, and all the parties who want to, sell it. Comments, Steve? I look forward to hearing back from you.

ABOUT THE AUTHOR
Kathryn Koegel is a media research and marketing specialist who has worked for internet, TV, print and mobile media comapanies including DoubleClick, the Gemstart TV Guide Television Group, U.S. News & World Report, and the Online Publishers Association. She is currently working on an Ad Age Insights white paper focused on best practices for brand marketers using interactive media, to be published this fall.
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