Apple plots mobile advertising revolution

12 April 2010

CUPERTINO: Apple, the consumer electronics giant, is set to launch a new mobile advertising service, which it argued will combine the best features of television and online communications.

The company, which bought Quattro Wireless, the specialist ad network, earlier this year, revealed details about the iAd platform while unveiling the next-generation operating system for the iPhone.

It said that iAd will be used primarily to monetise applications, some 4 billion of which have been downloaded to date across 450,000 iPads, 35 million iPod Touches and 50 million iPhones.

"On a mobile device, search is not where it's at, not like on the desktop," Steve Jobs, Apple's chief executive, said. "They're using apps to get to data on the internet, not generalised search."

According to Jobs, 64% of iPhone owners regularly access the mobile internet via their handsets, while the average customer also spends 30 minutes a day on various apps.

If Apple displayed ten ads in applications per phone per day, it would achieve one billion commercial impacts during any given 24 hour period, the organisation has estimated.

In seeking to demonstrate the potential of this approach for brands, Jobs said Apple wanted to exploit the most engaging characteristics of online and television advertising, providing "emotion plus interactivity."

"We think most of this mobile advertising really sucks and we thought we'd like to make some contributions," he continued. "We want to change the quality of advertising as well."

"The feedback we've gotten from the few companies and agencies we've spoken to: this is highly interesting to them ... This is a pretty serious opportunity and it's an incredible demographic."

Apple will take around 40% of advertising revenues generated from this service, but it does not intend to encroach too far into the area occupied by agencies.

"We do not have any plans to become a worldwide ad agency ... We're learning as fast as we can, but we're babes in the woods," Jobs said.

Nielsen, the research firm, stated that smartphones made up 21% of all wireless subscriptions in the US at the end of 2009, up by 7% on an annual basis, and will take a 50% share of the market by the third quarter of 2011.

AdMob, the mobile ad network, also recently reported that the iPhone's operating system delivered 50% of smartphone data requests in February 2010, compared with 24% for handsets powered by Google Android.

Google acquired AdMob for $750m (€558m; £488m) in 2009, in a deal that is now being investigated by the Federal Trade Commission.

Speaking about Apple's launch of iAd, the online search giant argued it offered "more evidence of how quickly mobile advertising is evolving and growing."

Google also said its own mobile operations had grown five times over in the last two years, with the number of search enquiries from smartphones being between 30 and 50 times greater than those from more basic devices.

Mobile search and display adspend in the US stood at just $416m in 2009, per eMarketer, a figure it expects to reach $1.1bn by 2012.

JPMorgan has suggested that mobile marketing expenditure reached $2.6bn in 2009, although $2.3bn of this was drawn from text messaging, with display on $140m and search on $178m.

The investment bank predicted that the overall total for 2010 will stand at $3.8bn, with display on $404m and search on $513m.

Data sourced from Financial Times, Wall Street Journal, NetImperative, SeekingAlpha; additional content by Warc staff