Apple iAd Challenges Google's Mobile Ad Strategy

Apple CEO Steve Jobs's introduction of iAd April 8 marked a significant challenge to Google's mobile advertising designs. The Federal Trade Commission is mulling whether or not to sue Google to halt the search engine's $750 million bid to buy AdMob. Rolling out with iPhone 4.0 this summer, iAd appears to have beaten Google to the spot, offering in-application advertising that Google would have offered with AdMob's help.

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.