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iAd Network: Why Bother?

It will be super expensive to develop ads that are both rich and interactive.

Apple announced their iAd mobile ad network in conjunction with iPhone OS 4.0.  It seems that their heart is the right place, but WOW this seems like a problematic implementation.

As always, it is clear that for Apple, Apps are a means to an end (selling high gross margin iPhones and iPod Touches), rather than an end in themselves.   They are trying to make advertising monetization models work better for free Apps, by making the ad experience richer.  Unfortunately, this appears to be a bit of Apple gazing at their own navel and asking “what kind of ads would we want our agency to produce for mobile?”   These seem to create two big challenges:

  1. How is Apple going to be able to sell all that Emotion-Filled and Highly-Interactive Ad inventory?  The flip side is who is going to make all those fancy ads?  60% revenue share to the developer is indeed the industry standard rate.  It is fair, IF they can sell most of the inventory (without dropping price).
  2. Those are going to be expensive ads to develop.  Sure, for a nationwide Branded advertising campaign (like the kind Apple consumes), this is a tiny fraction of the media buy expense, so it’s not a big fraction of the total costs.  But for the more Direct Response end of the advertising spectrum, the production costs would seem like a challenge.  And the last decade of online advertising has been a relentless march away from the Branding end of the spectrum and toward the Direct Response end, so Apple is fighting against the tide here.

Awesome for developers IF Apple can fill the inventory with High-Emotion, High-Interactivity ads. Otherwise, no different than existing mobile ad networks.

So, it seems likely that Apple will end up with a few beautiful showcase ad campaigns, which have healthy CPMs, to show the world.   But the overwhelming majority of the ads served aren’t likely to be any different than those served by AdMob or Millenial Media or anyone else, which means Apple hasn’t done much to generate incremental revenue for App developers.

I don’t get why they didn’t do something more obviously helpful to those developers of free Apps, like changes to make it easier to do virtual item sales…

May 5, 2010 Update.  It is becoming increasingly clear that Apple is going to make life very difficult for the third-party ad networks.  I guess there is your reason for App makers to bother with iAd: Apple seems to be planning to kneecap the other mobile ad networks.

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  • carlick

    Apple may have so much distribution that it attracts advertisers.
    Nothing mentioned about targeting, but there should be some of that.
    Lastly, producing for the tiny screen in short bits is not as production-intensive ad producing for hi-def long form (30-second) big screen.
    I imagine millions of people standing with their iPhones at Starbucks weeping at the emotional pitch of the Avon Cancer Walk.

  • http://verploeg.com Eric Ver Ploeg

    @carlick

    YES, something like an Avon Cancer Walk ad will induce a million weeping eyes, will have high CPMs, will be promoted by Apple, and will win awards and accolades for Apple and the Agency that produced the ads. That will allow that Agency to sell a whole bunch of new clients, and will be a wonderful thing for them!

    But, from the perspective of the entrepreneur building mobile Apps, who is contemplating a mobile ad monetization mechecanism, it is the OTHER 999 million iAds served–which have essentially the same low CPMs as any other mobile ads, and presumably similar fill rates–that will drive the AVERAGE CPMs down into the same area as those served by AdMob or Millennial Media.

    Yes, it’s a big surprise that Apple didn’t mention anything about targeting. They’ve got the data, and could presumably present it without divulging any personally identifiable information. At least that would allow for some improvement in CPMs that the existing mobile advertising players can deliver.