iAds – A Whole Different Order of Magnitude

Michael Hedges May 5, 2010 Follow on Twitter

Not content with disrupting the entire media sector, new media giants Google and Apple have their sights on the mobile advertising business. Apple’s CEO Steve Jobs has firmly seized the opportunity to leverage ‘very cool’ for big money.

Both Google and Apple have explained to all paying attention the importance of the terminal device. Apple has always been there, once being a computer maker. Its transition to music players, mobile phones and now the iPad follow the same logic. Google’s YouTube became the worlds’ TV station. Only relatively recently has Google jumped into smartphones and when the gorilla jumps everybody listens.

Google has always been in the advertising business. The search giant seizes the vast realm of the internet, indexes it then spits it back to users with ads attached. Those ads are served up by technology parallel to search algorithms. Based on keywords and other profile criteria the ads, supposedly, find eyeballs more likely to buy. The advertising people love that concept, particularly when served up by cost-per-thousand (CPM) rates a fraction of old media rates.

Media consumers have long experience with terminal devices, starting with radio then television receivers. Smartphone makers, kindly remember Apple is but one, seized the concept of selling an access device filled with all sorts of cool stuff. Radio and television receiver makers did exactly the same, to the point of subsidizing content. Deep in the last century, US radio receiver manufacturer Radio Corporation of America (RCA) set up its own broadcasting network, later known as NBC. That business model fell off the rails when the ad money started rolling in.

Apple pushed that concept a bit further by allowing third party developers, under tight controls, offer or sell their applications, those clever little tap-to-access apps. Other smartphone makers are following that lead after first hoping to keep applications safe within their own hands. There’s no need in the 21st century for a terminal device maker to subsidize content. Developers are standing on their heads trying to get space on iPhones.

Moving into advertising through the applications surface is, though, the absolute paradigm shift. Apple’s Steve Jobs is introducing the iAds program in style. Compared with other new media advertising plans it’s expensive. Apple will charge advertisers one US cent for each ‘view’ and 2 US$ each time a person taps the banner to see the full ad, reported the Wall Street Journal (April 26). Advertisers will pay in advance minimums approaching 1US$ million. Advertisers wanting to be the first on that block to show cool ads on Apple smart devices may pay up to 10 US$ million.

“This has nothing to do with the prices that currently exist in the market,” said DVDW mobile division chairman Mark Mächter to Horizont.net (May 3). Apple, he suggests, “probably has big companies like Nike or Adidas in mind…”. Yup, media buyers really like those really low CPM search ads and the knock-on effect of driving prices lower with all media.

And advertisers will also be enticed by geo-positioning tricks to point customers to stores and customized ad presentations based on prior buying behavior with built-ins like the iTunes store. 

“Mobile content provides attractive and resourceful target groups with high education and income,” said TNS-Gallup researcher Knut-Arne Futsæter to Kampanje (May 3). “The mobile phone has become a significant major media platform to hit the busy decision makers in an increasingly fragmented media market.”  TNS-Gallup released first quarter mobile content usage figures for Norway showing one in six Norwegians accessing mobile content once a week, one in ten once a day and one in 13 owning an iPhone. “Smartphones allow you to read news on your mobile in a whole different order of magnitude than previous solutions,” he added.

Signing up for the iAds program is a bit like buying access to a pre-qualified customer base. Apple’s devices – from iPod to iPhone and iPad – are more expensive than most music players, smartphones and whatever the iPad is. The Apple brand has always been quite cool, extraordinary ad campaigns burning in that message. And that message has always been tightly controlled. Apple only allows approved third-party apps for the iPhone. The same level of company control will come with iAds. It’s a brand concept completely lost on traditional media that tend to overlook brand-killing bad ads.

Google’s genius team is more than just looking at the mobile advertising market. It recently acquired, pending US anti-trust authority approval, mobile ad server AdMob for US$750 million. But the two company’s ad market strategies couldn’t be more different. Google AdWords is an automated auction allowing – originally – small advertisers to buy text and banner ads on millions of websites. Bigger advertisers discovered the joy of cheap ads. Google gave up a similar program selling radio ads in the US when broadcasters wouldn’t give up premium space. It’s likely that Google will keep to the same strategy.

Apple appears to be targeting the other end of the long tail, intending to dip into the heady space of premium advertisers. With the ad people looking to spend more, generally, and continuing to shift spending to new media, Apple brings its strong brand image into the equation.

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