Apple tempers revenue expectations for iAd's first year

Apple said it will limit initial revenue expectations for its fledgling iAd mobile advertising network, chalking up the service's first year as a learning experience. During the computing giant's Q1 earnings call Tuesday, Credit Suisse analyst Bill Slope questioned how the financial community should consider the economics of the iAd service, asking "Is it a potential profit center or are you looking at it as a break-even type of business like iTunes and the App Store?" Apple senior vice president and CFO Peter Oppenheimer replied "We are putting our toes in the water but don't expect much from us this calendar year. We think we will learn a lot and build a foundation for the future."

Apple unveiled iAd earlier this month in conjunction with its forthcoming iPhone OS 4.0 update. iAd promises developers the tools to insert rich media advertisements into their iPhone applications, promising a more interactive and engaging user experience than rival mobile ad efforts. For selling and hosting the ads, Apple will retain 40 percent of revenues, pushing the remaining 60 percent to the app developer--Apple currently claims 30 percent of revenues generated from App Store downloads. Apple CEO Steve Jobs boasts iAd can serve as many as 1 billion ad impressions per day across the worldwide iPhone ecosystem.

Apple reported a first quarter net profit of $3.7 billion, up 90 percent from $1.62 billion in the year-ago period; the firm posted revenue of $13.5 billion, up 49 percent from $9.8 billion in the year-ago period. Apple sold a record 8.75 million iPhones in the first quarter, representing a 131 percent increase from the 3.79 million sold in Q1 2009 and slightly higher than the 8.7 million sold in the previous quarter.

For more on Apple's iAd expectations:
- read this Seeking Alpha earnings call transcript

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