Apple iAds – What’s the opportunity?

David Fieldhouse, strategy director and co-founder of Lucidity Mobile, says Apple’s new mobile ad network iAds is not a “silver bullet”, despite offering the creativity, targeting and standards advertisers crave…

Steve Jobs, the talismanic CEO of Apple, launched the new Apple advertising service iAds in May. Apple believes they have created an advertising channel that “will combine the emotion of TV and the interactivity of the web”.

A claim like this made by anyone else would probably be dismissed as mere hyperbole. Apple, however, has a habit of shaking up entire sectors with their products (think Mac, iPod and the iPhone) and so it’s worth taking a closer look at iAds and what it might mean for you and your brands.

What are iAds?

Put simply, iAd is a product that allows advertisers to serve messages into iPhone applications. Apple, having completed their acquisition of Quattro Wireless earlier this year (a mobile advertising network), is now approaching brands and agencies as a media owner hoping to tap into the burgeoning mobile advertising market.

The timing for Apple is good – the UK mobile advertising market grew 32% (IAB/PWC) in 2009 when all other media was either flat or significantly down which indicates we are in for a period of sustained growth. Smartphone sales are growing fast – up 70% in 2009 (GSMA Dec 09) and according to MMetrics (Feb 2010) iPhone units in the UK, which will only carry iAds, are now tracking at 3.1 million.

Why launch iAds?

Apart from the rather obvious answer of “cash” there are other issues at play, which have given rise to the launch of this service. There are currently well over 200,000 apps in the Apple store, which is a success story few predicted. When the iPhone launched many apps were priced at 99p or more and developers made vast sums of money selling apps for the iPhone. While the total number of apps on the store remained low it was easy for consumers to find these apps and developers made enough money to make it worth their while.

Fast forward 3 years and the app store is a very cluttered place. Sales of apps are decreasing as consumers can now find free versions which do the same job. Developers are the life blood of the app store and Apple knows this. They need to offer an additional way for developers to make money and the natural answer is through advertising.

Apple is therefore offering 60% of ad revenue generated to the developers and are keeping 40% for themselves. Time will tell if the ad money generated is sufficient to keep the developers happy.

What is the opportunity for brands?

iAds presents an interesting opportunity for brands. The first positive is the level of creativity and interaction an iAd can generate for advertisers. Because the iAd will only be served to iPhones, the creative is only limited by the device. An iAd can essentially do whatever an app could do currently and that means a banner can incorporate elements such as location, video, gaming, animation and a whole host of other features. Digital media is generally moving towards an engagement model rather than just measuring clicks and iAds are well placed to capitalise on this.

As an iAd unit is essentially “an app within an app” the consumer will not have to navigate away from their application in order to visit an advertiser destination. All interactions take place within the users browsing environment and so consumers will be much more likely to click and engage.

Importantly, the iTunes store can also be pulled directly into the iAd. Users merely then input their password to purchase further content (remember Apple has your credit card details). Could this be expanded for other retailers? It may be possible for consumers to purchase all kinds of goods and services in just a couple of clicks by using their Apple registered credit card. Powerful stuff.

Possibly the most interesting USP for iAds is the level of targeting available for advertisers. Apple will be releasing data such as age, location and gender but also will be able to tell what music people like, the TV shows they watch and the movies they are into. An advertiser can therefore serve rich engaging media into a highly targeted audience wherever they may be.

What should you watch out for?

So far all seems positive but there are some things to consider before trialling iAds. The service will only run on the new iPhone operating system (Os4) which reduces the amount of iPhone owners you can reach. Brand advertisers need scale and iAds may not offer this for some time.  Also as some apps are more popular and are used more often frequency capping will be essential – you do not want to reach the same audience over and over again.

Consumers may also not realise that by installing Os4 they are agreeing to give their iTunes data to advertisers (albeit anonymously). Could there be a privacy backlash? The lack of explicit “opt-in” (who reads all those T&C’s!) may cause Apple some problems.

Interestingly, it will be Apple themselves that may make trialling iAds difficult. Apple is a notoriously secretive company and is new to advertising. Apple will have to share more information and be more open with external companies than they are used to. If there is also as expected an aggressive pricing strategy ($1m minimum at US launch) combined with a lack of information, then spend will quickly switch to other channels.

Overall, iAds may offer the creativity, targeting and standards advertisers crave – but as with all new media channels it is not a “silver bullet”. Working out how to integrate iAds with other mobile and digital activity will also be key.

Your Comments

For more information, see luciditymobile.com