Apple iAd Challenges Google's Mobile Ad Strategy

By Clint Boulton  |  Posted 2010-04-10

Apple iAd Challenges Google's Mobile Ad Strategy

Apple CEO Steve Jobs announced many things during the company's iPhone 4.0 media briefing April 8, but none more dangerous to Google's designs for the mobile Web market than iAd.

Rolling out this summer in iPhone 4.0, iAd is a platform that constitutes Apple's reimagining of advertising on smartphones. While Google has extended the keyword advertising model it popularized on the desktop to the mobile phone, Apple's approach is to let iPhone app developers offer ads within applications.

Jobs said most of the ads developers have put into their applications themselves "really suck." He also wrote off Google's practice of putting ads in its search results, a business Google executives have regularly characterized as bountiful and growing.

"When you look at a mobile device, a phone, it's not like a desktop," Jobs said during the event. "On the desktop, search is where it's at. That's where the money is. But on a mobile device, search hasn't happened. Search is not where it's at; people aren't searching on a mobile device like they do on a desktop. What's happening is they're spending all of their time in apps."

In Jobs' example, when iPhone users want to find a restaurant, they go to the Yelp app for the iPhone instead of searching Google. This is anathema to Google, which sees itself as the gateway to connect users to what they want to find online.

Jobs provided some simple statistics to prove his point. Noting that the average iPhone user spends 30 minutes using applications per day, Jobs said Apple could put up an ad every three minutes.

Each iPhone user would glimpse 10 ads within applications per day, or roughly as much as people might see in a television show. Apple expects to have 100 million iPhone and iPod touches on the market this summer, providing 1 billion ad impressions per day for developers who choose to pair ads with their applications.

Apple will give application developers 60 percent of the sales from the 185,000-plus apps available through Apple's App Store. 

When Jobs clicked on an ad for the Disney movie "Toy Story 3" in an iPhone app, he was transported to a screen with video clips and offers for theater tickets. When he closed the ad, the screen reverted back to the app.

Why Googles Mobile Ad Plans Are in Trouble

Previously, the app had to be closed so that another function could be opened. This is a big departure from the classic banner ad, where users would click and launch a browser to see an ad, and not get back to where they were before.

While there is a subset of iPhone users who will shrink from the prospect of interacting with ads, there is no escaping the feeling that Apple has outmaneuvered Google, at least for now.

Enderle Group analyst Rob Enderle told eWEEK this appears to be a much better thought out way to tie advertising revenue back to applications. Kelsey Group analyst Michael Boland wrote in his blog:

"It's a bold but logical platform for building, distributing and displaying mobile ads. Its deep integration with the device and operating system is perhaps its biggest advantage. This will enable the mobile ads and campaigns we've been waiting for."

A Google spokesperson declined to respond to the idea that iAd poses a competitive threat to its mobile ad business, but he did note: "This is more evidence of how quickly mobile advertising is evolving and growing."

Still, Google has much cause for concern and that statement was more for the benefit of the Federal Trade Commission, which is poised to block Google's $750 million proposal to acquire mobile ad provider AdMob.

The irony is that Apple was poised to buy AdMob, which is the leading maker of in-app advertising for the iPhone, before Google "snatched them from us," as Jobs admitted during the event.

Apple instead acquired AdMob rival Quattro Wireless for $275 million and formed iAd. Google is sweating the possibility of having its mobile ad plans dashed because regulators believe letting Google have AdMob will give it a near monopoly in the mobile ad market.

"This is a competence much closer to Google's and Apple has clearly outdone Google with this announcement," Enderle told eWEEK.

"This would be like a top tennis player going one-on-one with a top basketball player in basketball and winning by showcasing moves the basketball player had never thought of. Incredibly embarrassing for Google. In this instance, rather than being upset, I'll bet the Microsoft folks are silently cheering for Apple."    

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