• by Mark Walsh  @markfwal, April 8, 2010

Apple Thursday unveiled its rumored "iAd" mobile advertising system, with CEO Steve Jobs touting it as "a new kind of mobile ad," capable of delivering the emotional impact of TV advertising within applications.

Jobs laid out Apple's push into mobile advertising as part of a presentation in San Francisco previewing the forthcoming version of the iPhone operating system which will offer 100 new features including multitasking and iBooks -- the new iPad bookstore -- as well as iAd.

Apple signaled its broader ambitions in mobile with its $275 million acquisition of mobile ad network Quattro Wireless, which specializes in in-app advertising and provided the foundation for the company's new mobile ad platform. The Quattro deal followed on the heels of Google's $750 million bid for rival mobile ad network AdMob and opened up a new front in the companies' mobile turf war.

Although Apple is making its first foray into mobile advertising -- and advertising of any kind -- Jobs was characteristically brash in dismissing industry efforts within the category to date. "Most of this mobile advertising really sucks, and we thought we might be able to make some contributions," the CEO told the crowd of developers assembled for the much-anticipated sneak peek at iPhone 4.0.

What he promises with the iAd is the emotional resonance of high-end TV advertising combined with the interactive nature of the Internet to provide engrossing ads within applications across Apple devices including the newly released iPad without requiring users to exit an app.

With users spending 30 minutes per day using apps, Jobs projected delivering 10 ads per day per device, adding up to Apple serving 1 billion a day by year-end. (More than 185,000 apps are available in the App Store and more than 4 billion have been downloaded to date.) By comparison, Quattro before its purchase by Apple was serving 4 billion impressions a month, while AdMob delivers more than 10 billion a month.

Through the iAd network, Apple will handle ad sales and ad-serving while giving developers a 60% cut of revenue -- a smaller share than the 70% split that has previously been standard in Apple revenue-sharing agreements with developers.

During Thursday's presentation, Jobs highlighted in-app ads for "Toy Story 3," Nike and Target, showing units that functioned like mini-apps within apps offering a host of interactive options. The Toy Story ad, for instance, presented a menu offering things like video clips and theater locations, while the Target ad allows users to create a shopping list within the app.

Jobs emphasized that the ads were created with HTML5, the latest version of HTML Apple is pushing as an alternative to Adobe's Flash, the technology powering most Web video and rich media ads. Despite the lack of support for Flash, developers welcomed Apple's plunge into advertising with the iAd system.

"A lot of companies offer interactive ad units. However, Apple will create a quality standard and make it much more polished," said Lilly Gold, cofounder of app development firm IntuApps. "They will attract many more companies to advertise, which will in turn mean more revenue."

The smaller 60%/40% revenue split also wasn't viewed as a hurdle to developers embracing the platform. "The predicted growth of mobile advertising revenues will likely more than make up for this decrease," noted Dominique Jodoin, president and CEO of app developer Bluestreak Technology.

Companies like Medialets and Crisp Wireless that create rich media ads for mobile apps also applauded Apple's mobile ad initiative. "Apple's done more to move the needle in the brand community for mobile advertising than anyone else, and that was before they owned an ad network," wrote Medialets CEO Eric Litman in a blog post. "Now that they're promoting rich media units on a grand scale, we're convinced that the flow of dollars into mobile ads -- across all platforms -- will only increase."

First impressions among agency executives were more mixed. Phuc Truong, managing director of Mobext U.S., Havas Digital's mobile marketing unit, said Apple had taken Quattro's ability to serve ads within apps "to a whole other level" in terms of interactivity without leaving an app. "So it's a more seamless environment for advertisers and another way for creative people to think about delivering brand messages," he said.

But Paul Gelb, manager of emerging media for Razorfish, wasn't as impressed, noting that the ability to serve ads that people can interact with inside of apps has been around for some time. He was disappointed Apple didn't open up the door to mobile Web-based advertising with iAd. "That seemed like the thing that was missing," he said. "It's still a significant difference to Google where you can buy across all platforms and search from a company that has years of experience in an ad-based model."

Gelb questioned how quickly Apple, completely focused on building hardware and software for the last three decades, could pick up the ad business. But with Google's purchase of AdMob for now stalled by an ongoing Federal Trade Commission investigation, Apple may have more time to steal a march on its chief mobile rival. Earlier this week, The Wall Street Journalreported the agency may be preparing to block the deal on antitrust grounds. For its part, Google has pointed to Apple's acquisition of Quattro and the launching of the iAd network to show competition is robust in the emerging mobile ad space. Google and AdMob combined would have an industry-leading 21% share of the mobile ad market, compared to 8$ for Quattro, according to an IDC estimate.

Apple's long-awaited introduction of features like multitasking for third-party applications in iPhone 4.0, so people can use more than one program at time, could also help to boost its parallel ad efforts. The new software will also include Game Center, a set of APIs allowing developers to create apps with the ability to invite friends to play a game or start a multiplayer game.

iPhone 4.0 is set to launch this summer and will be compatible with the iPad and newer versions of the iPhone and iPod touch.