Analysts hemmed and hawed in May when the Wall Street Journal published a report quoting marquee campaigns for Apple's iAd platform into the $1 million range, or multiples higher than the average deal for mobile advertising.
That number may not be so far-fetched. Apple CEO Steve Jobs said June 7 at the Apple Worldwide Developers' Conference that advertisers have committed to $60 million worth of ads for the iAd platform, which launches July 1 to run on Apple's new iPhone 4.
That's nearly half of the expected mobile ad spend from July through December 2010, according to data from JP Morgan. E-Marketer senior analyst Noah Elkin told the Wall Street Journal (paywall) that is a lot of money for an unproven platform in a competitive market.
"By getting behind mobile advertising in this way, Apple could create a rising-tide situation that will give the business a lot of momentum," he added.
If this is true it presents a stiff test for Google and its AdMob mobile display ad and AdSense for mobile products, which aim to run on any smartphone platform but will be omnipresent on smartphones running Google's Android operating system.
Formed from the assets of Apple's purchase of Quattro Wireless, iAd enables developers to create ads that run within applications users download to use on the iPhone. Apple is launching its fourth generation iPhone June 24.
iAds require iOS 4, which will be a free software update via iTunes 9.2 or later for iPhone and iPod touch customers. iOS 4 will run on the iPhone 3G, iPhone 3GS, iPhone 4, and second and third generation iPod touch.
Advertisers who committed to iAd include Nissan, Disney, Geico, Citi, Unilever, AT&T, Chanel, GE, Liberty Mutual, State Farm, Campbells, Sears, JC Penny, Target, Best Buy, Direct TV and TBS. These businesses believe the iPhone, which has shipped more than 50 million units, is the device best suited to get their marketing messages out in the United States.
iAds work differently than most mobile display ads today. Users open an app, view an ad right within the application and return to their favorite online game, social networking app or other programs when the ad runs its course. Such ads do not launch new browser windows, which tends to irk users.
iAds are intended to be highly interactive, yet unobtrusive.
"iAd offers advertisers the emotion of TV with the interactivity of the Web, and offers users a new way to explore ads without being hijacked out of their favorite apps," Jobs said in a statement.
"iAds will reach millions of iPhone and iPod touch users -- a highly desirable demographic for advertisers -- and provide developers a new way to earn money so they can continue developing free and low cost applications."
Developers who join the iAd Network can choose to inject any ad format into their apps. Apple will take 40 percent of the ad revenues to sell and serve the ads, with the remaining 60 percent of ad sales going to the developer of the app making money.
That's the industry standard charged by companies such as Google. The search engine has been a dominant desktop search ad player for nearly a decade but, like any other Internet company such as Yahoo, Microsoft or Facebook, has yet to really scratch the surface of the mobile ad market.
Google just closed its $750 million purchase of AdMob and is already integrating the company's technologies. AdMob was the leading provider of in-app advertising for the iPhone and Android devices when it was approached by Google for a purchase bid last November.
Now it finds itself pitted against iAd, which has the cachet of Apple's money-making clout to lure developers and advertisers. There are more than 225,000 apps in Apple's App Store. If Apple can monetize even half of them with iAd, it will prove to be a formidable platform.
Moreover, AllThingsDigital reports that Apple's developer terms for iAd seem to exclude ad platforms such as AdMob. This would dampen Google's plans for selling ads on the iPhone.