Apple unveiled a new approach Thursday to making money from the mobile ads that have increasingly started to populate the apps — particularly the free ones — that users download from the iTunes App Store.
Called iAd (of course), the new platform offers advertisers and iPhone app developers a perk: users who click on an advertisement don’t need to leave the application to view the ad. Often, when users click on an ad in app they are using, the Safari Web browser opens to take the user to the ad. As a result, the user needs to reopen the app after viewing the ad, a frustrating result.
Apple’s approach to mobile advertising is not new, said Eric Litman, CEO of Medialets, which is a rich media platform for mobile apps. But he also said, “you could not have asked for anything better to happen.”
“Nothing will impact the mobile advertising market more than Apple pushing rich media for mobile,” Litman added. “Apple is a force with its marketing expertise and now it is telling the [ad] buying community how important this is.”
Litman said the mobile ad market should reach about $500 million in 2010, citing two estimates — one slightly higher and one slightly lower than $500 million. “That number could be significantly different this year because of the muscle Apple will put behind the market,” he said. (Litman calls the iAd news “fantastic” in this blog post.)
By 2013, mobile ad revenue is expected to exceed $10 billion, according to a recent study by Heavy Reading.
Digital advertising in general continues to grow, but the recession took its toll on the space last year. The Interactive Advertising Bureau said Wednesday that online advertising increased by 2.6 percent in the fourth quarter of 2009, reaching a quarterly high of $6.3 billion. That increase was in contrast to a year that saw digital advertising, as a whole, decline by 3.4 percent (to $22.7 billion) from 2008.
Apple’s iAd platform allows for a richer, video-based mobile ad experience. As a result, app developers will have new opportunities to create fresh and creative eye-catching ads, much like app developers are innovating with apps. Also, Apple said Thursday that it will sell and serve the ads, with developers receiving 60 percent of the revenue.
During Apple’s announcement, CEO Steve Jobs said using search to deliver ads was not as effective on a mobile device as it is on a desktop. People are “using apps to get to data on the Internet,” he said, “not generalized search.”
The iAd platform will debut with Apple’s iPhone OS 4 software platform this summer. The key feature to the OS 4 upgrade is the ability to have multiple apps open on the iPhone at the same time. Hence, you could be reading a news story using the New York Times’ Editors Choice app while listening to music with the Last.fm app. Prior to OS 4, iPhone users could have more than one program open only if they were made by Apple, such as using the iPhone’s actual phone while checking the calendar.
Litman’s Medialets produces rich, video-based mobile ads that work on the iPhone. The company developed the technology for the acclaimed Docker’s shakeable iPhone ad. The company’s technology, however, also works on iPad and on Android devices as well.
“I built my whole business on the premise that traditional, online display advertising won’t work in the mobile space,” Litman said. “And for a brand to see meaningful impact on their mobile displays, they need to be leveraging rich media. Apple’s announcement is the biggest endorsement i could have hoped for in 2010.”
The iAd announcement comes in the wake of Apple’s purchase of mobile ad firm Quattro Wireless in January for a reported $275 million.
“The Quattro deal was much more of the people,” Litman said.
The Quattro management team remained with Apple after the deal and their influence has widely been reported as being critical to the iAd platform.
