Is Apple's iAd Mobile Ad Service Its Next Cash Cow?
Apple CEO Steve Jobs said iAd would be made available later this year to the iPhone, the iPod Touch and the iPad as part of the OS 4.0 rollout. Given Apple's substantial advantage in the mobile device space with iPhone already, iAd could turn quickly into another Apple cash cow.
Jobs himself seems to think as much; he was reportedly heard telling advertisers that iAd would be Apple's "next big thing."
Apple's iPhone OS 4.0 update, made public Thursday, included expected additions like multi-tasking for third-party apps and tools for managing those apps. It also included the first public confirmation of the iAd software, which OS 4.0 developers can embed in their applications. Developers, in fact, keep 60 percent of ad revenue earned through the iAd service, and Apple keeps 40 percent.
Apple's move is coming at the right time, with money spent on mobile advertising rapidly increasing in the U.S. and abroad. A recent projection by researcher eMarketer pegged spending on mobile advertising in the U.S. at $416 million in 2009, with expected growth to at least $1.5 billion by 2013.
The analyst community's views on how Apple stands to benefit through iAd are mixed. In a roundup of analyst comments on iAd posted by The Wall Street Journal Friday, Piper Jaffray has Apple grabbing as much as 70 percent of an estimated $700 million in in-application advertising by 2013. Kaufman Brothers, by contrast, sees iAd's impact on Apple's bottom line as "minor to negligible."
Whether iAd provides a boom or a blip for Apple may be immaterial compared to how it helps Apple further compete with Google, its nascent rival on a number of fronts and soon in mobile advertising platforms. Heavy speculation on whether Apple would debut a mobile ad platform to rival Google's began in January, when Apple acquired Quattro Wireless for $275 million.
"Search is not happening on phones," Jobs was reported as saying at the Cupertino, Calif. event Thursday. "People are using apps and this is where the opportunity is to deliver advertising."
Apple may end up helping Google in the short term, however. Google is currently at loggerheads with the Federal Trade Commission (FTC) over its attempted acquisition of AdMob, for $750 million.
The FTC has held up the deal on antitrust concerns, but now that Apple has a rival mobile ad platform with iAd, Google will likely have a much easier time proving to the FTC and other federal regulators that it has significant competition in the space.