Ads in apps signal Apple's next mobile revolution

First there was iPad, and now there is iAd. As expected, Apple formally unveiled its mobile advertising platform during a Thursday media event to announce the pending release of its iPhone 4.0 operating system--predictably if awkwardly dubbed iAd, the system promises developers of free iPhone and iPad applications a new channel to monetize their software, awarding them 60 percent of all ad revenues. Mobile advertising is nothing new, of course, but it's the intangibles--like Apple's power, scope and prestige--that immediately set iAd apart. According to Apple CEO Steve Jobs, the computing giant will soon have 100 million devices on the market--assuming an average of 10 ads per device per day, that equates to a billion ad impressions daily. Add to that 4 billion iPhone application downloads, 3.5 million iPad app downloads since the device launched this weekend, and 64 percent smartphone mobile browser usage share (metrics quoted by Jobs on Thursday), and the iAd opportunity sells itself.

As legendary Ronco pitchman Ron Popeil would say, "But wait, there's more!" iAd isn't just about strength in numbers--it's also about the user experience, the hallmark of Apple's consumer identity. "What we want to do with iAds is to deliver interaction, but also deliver emotion," Jobs said, according to The New York Times' live blog coverage. "For a lack of an elegant way to say it, we think most of this mobile advertising really sucks, and we think we might be able to make some contributions." Apple's answer: Rich media ads that keep the user within an application, instead of transporting them somewhere else. "We have figured out how to do interactive video content without ever taking you out of the apps," Jobs explained. "We think people are going to be a lot more interested in clicking on these things." Onlookers say the Toy Story 3 iAd demonstrated Thursday more closely resembled a native application than an advertisement, complete with a game as well as audio and video clips from the upcoming film--the follow-up Nike Air Jordan ad, also boasting video along with a history of the celebrated athletic shoe, appears no less immersive.

By proclaiming "mobile advertising really sucks," Jobs is plainly taking a shot at archrival Google, currently the 800-pound gorilla in the mobile ad segment. But Google has been eagerly awaiting iAd's arrival ever since Apple first signaled its intentions by acquiring mobile advertising network Quattro Wireless for $275 million--after all, iAd represents Exhibit A in Google's argument that its own $750 million acquisition of mobile ad network AdMob does not pose a threat to the competitiveness of the space. Earlier this week, The Wall Street Journal reported that the Federal Trade Commission is assembling an internal litigation team as it prepares to mount an antitrust challenge to the Google/AdMob deal--sources indicate the FTC has also sent letters to AdMob's competitors requesting sworn statements about the potential impact of the acquisition, as well as briefed Congress about its concerns. Sen. Herb Kohl (D., Wis.), chairman of the Senate subcommittee on antitrust, has also voiced his apprehension, writing a letter to the FTC urging the agency to carefully scrutinize the AdMob acquisition and arguing that it "raises important competition issues."

Google was quick to seize on the Apple/Quattro deal as confirmation the competitive spirit still thrives. Hours after the acquisition was disclosed in early January, Google group product manager Paul Feng turned to the Google Public Policy Blog, writing "When we announced our planned acquisition of AdMob in November, we noted that the mobile advertising space is highly competitive--with more than a dozen mobile ad networks. Today's news that Apple is acquiring one of AdMob's competitors, Quattro Wireless, is further proof that the mobile advertising space continues to be competitive. And with more investments and acquisitions in the space, including from established players like Apple and Google, that's a sign that vigorous growth and competition will continue. That's ultimately great for users, advertisers and publishers alike." Great for now, perhaps, but if iAd delivers on all of Apple's lofty promises, then the mobile ad segment may indeed end up the one-horse race legislators fear--with even Google left in the dust. -Jason