Now Google has real competition. That's the sentiment from most advertising and marketing executives I spoke with after hearing news of Apple's iAd system.
We know that Google focuses on advertising, but now offers hardware and software, to make a push into mobile. Apple, though primarily focusing on hardware and software, leverages its distribution of devices and rich media capabilities to add an advertising platform.
It's not in Apple's DNA, but company engineers have the knowledge to create the technology to make ads contextually relevant because they own the device, not just the browser, which is what Google has been trying to do in mobile, explains Amielle Lake, Tagga Media chief executive officer. She reminds me Apple can link in geographic location-based data to other data specific to someone's mobile phone.
Targeting ads becomes easy when the company doing the serving knows the device owner's habits in terms of how they use the phone and can infer likes and dislikes based on sites visited and applications downloaded, Lake agrees.
These close-looped marketing and advertising experiences create the perfect scenario for mobile ad platforms, Lake says. But Lake believes Apple has a leg up on Google because, for starters, Apple sold more than 41.8 million iPhones as of December 2009.
"They are also competing on giving developers a healthy piece of the action, 60%, to motivate greater participation of apps and content to Apple devices," says Lake. "Google took a different approach by creating an open platform."
Piper Jaffray Analyst Gene Munster estimates Apple will take a 40% cut of all ad revenue generated from hosting and selling the ads on the iAd platform. He cites Jobs as saying iPhone users, on average, use apps for 30 minutes each day. "If Apple served an ad every three minutes, it equates to 10 ads per device per day, or about 1 billion ad opportunities per day," he writes. "While this analysis appears to be aggressive, as the device ecosystem grows beyond 100 million users, we think 1 billion ad opportunities per day is achievable."
It's not clear if Apple's entrance into the space will soothe concerns by the Federal Trade Commission surrounding Google's pending acquisition of AdMob. It becomes a little more difficult to prove that the acquisition would affect prices or diminish any form of competition.
Aaron Goldman, managing partner at Connectual, says Apple's move could prompt Google to make another move to shake thing up a bit without waiting for the AdMob acquisition to close. He says about 15,000 developers support the AdMob platform, but the company has still failed to "crack the nut" on what it takes to get a mobile ad format correct. If Google does make a move, the ad format will likely become more interactive.
Executives say Jobs will make Apple's advertising push more about interactive product placement in applications and less about search or banner and display ads. That sounds oddly familiar to Yahoo's strategy for the Yahoo Entertainment application -- because why would the Sunnyvale, Calif., company design an advertising module that moves closer to support Google applications when Apple clearly, at least for now, remains the dominant leader in mobile applications and devices.
Other companies have already begun to release products that will support Apple's ad strategy. Mobile ad optimization company Smaato just launched a version of iSOMA SDK for iPad applications and mobile Web sites to assist in supporting multiple new ad formats.
Not all agree Apple's iAd strategy will influence the direction of the mobile ad industry. However, Mason Wiley, senior vice president of marketing at performance-based advertising firm Hydra, made a comment that solidifies my thoughts that the mobile ad industry will move more toward Yahoo's strategy and away from banner and search ads.
"Apple's iAd platform is much more limited in scope, as it really only focuses on creating app-like ads within apps," Wiley says. "While it makes sense for Apple because apps have been so central to their success, Google is looking to increase the use of their mobile phones, as full-featured Web devices, which provides unlimited possibilities for a variety of advertising models."