The growing appeal of ads in apps

Depending on the source, marketers in the U.S. spent anywhere between $184 million and $416 million on mobile advertising in 2009, so it's easy to understand why so much skepticism greeted Bernstein Research analyst Toni Sacconaghi's recent prediction that Apple alone will collect about $815 million this year from its forthcoming iAd initiative. According to Sacconaghi, Apple will reap about $550 million from advertisements inserted into applications and another $265 million from media providers like publishers and television networks--and that's on top of the $825 million iAd is expected to add to iPhone developer coffers. It's all dependent on marketers meeting Apple's iAd asking prices, of course--late last month, The Wall Street Journal reported Apple is planning to charge close to $1 million per ad when iAd launches this summer, and may demand as as much as $10 million for inclusion in the first wave of iAd promotions. By comparison, ad execs say they typically pay between $100,000 and $200,000 for similar deals running across rival mobile platforms.

iAd is predicated upon the concept of rich media advertisements 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," Apple CEO Steve Jobs explained at the official iAd unveiling in April. "We think people are going to be a lot more interested in clicking on these things." A million bucks still seems like a exorbitant price, but a new study issued by mobile audience media company JiWire suggests Apple is definitely onto something--52 percent of wireless subscribers surveyed by the firm say they acted on an advertisement inserted into a mobile app within the last 30 days, and 18 percent made a purchase from an in-app ad. No less significant, 76 percent of respondents say they prefer free, ad-subsidized applications over paying cash for the same apps. Also noteworthy: JiWire adds that 40 percent of consumers in the study sample spend more than an hour each day interacting with mobile applications, with an average of 22 per apps per device.

The JiWire survey also supplies good news for location-specific mobile services: Eighty-four percent of respondents indicate they would be just as likely or more likely to engage with ads relevant to their current whereabouts, and another 53 percent would even be willing to share their location to receive more relevant offers. Those results correspond with a recent Mobile Marketing Association study that found nearly half of U.S. consumers exposed to mobile ads while using location-based services took at least some action, a decided improvement over both text-based and web-based ads. One other finding of the MMA survey: Although 10 percent of total mobile phone owners say they use location services at least once a week, 63 percent of iPhone users turn to location services on a weekly basis. Even if iAd doesn't generate $815 million this year, consumers' willingness to accept ads in their apps means the business of mobile advertising is poised for a radical transformation no matter what. -Jason