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The ad space race – Will Apple’s iAd overtake Google’s AdMob

Alex Christie

5 August 2010

Along with the release of Apple’s 4th generation iPhone comes the new iPhone OS 4.0 software which features the new iAd. iAd is Apple’s advertising system that allows developers to include advertising in their apps to earn more money. Apple has big plans for iAd and wants to dominate the mobile ad market in the way Google dominates desktop advertising. But with the release of iAd comes a head on collision with Google’s AdMob and a potential headache for app writers.

Mobile adverting is a massive industry and growing. In 2009 there were an estimated 4.6 billion mobiles compared to typical online advertising platforms (desktops & laptops) at around 1.1 billion.

The reason for this clash with Google is Apple’s decision to change their developers agreement; which effectively blocks outside competition from collecting critical usage data from iPhone applications. Apple will now only transmit to “an independent advertising service provider whose primary business is serving mobile ads”. Therefore Google who devised the Android mobile operating system (see examples) are shut out. The question is will Apple succeed in restricting AdMob to just Google’s own mobile products?

Mobile ads

Mobile ads are usually displayed as web banners (top or bottom of page) or SMS adverts (90% of mobile marketing revenue worldwide). Other forms of mobile ads are: MMS, ads placed within games / videos, full-screen mobile ads (which appear while page is loading), audio ads (either playing before a voicemail recording or while waiting to be connected to speak with a telephone-base service e.g. bank assistant or ticket teller.

Ad campaigns are usually measured by click-through rates and impressions (views) but also conversion rates and click-to-call rates.

What are iAd & AdMob?

App developers insert iAds into their apps which sit on Apple’s servers and the revenue is then split 60/40 in favor of the app developer. The potential revenue for Apple is massive with $60 million (£41 million) worth of commitments for mobile ads predicted for 2010.

AdMob, set up in 2006, was bought by Google in 2009 for $750 million. Google claim to serve 7.1 billion mobile banner and text ads per month of which one-third were destined for iPhone/iPod/iPad devices. Apple also wanted to buy AdMob but was beaten to it by Google.

Whilst starting a campaign with Google AdMob is relatively straightforward, and open to anyone, Apple’s iAd works out trickier and more expensive. Apple reportedly aims to charge close to $1 million for ads on its mobile devices. But when you set this against the current usual spend of around $100,000 to $200,000 for existing mobile deals they are expensive.

Will iAd succeed?

Apple’s theory is that iAd will shake up the advertising media business and the publishing industry. But traditional marketing and advertising agencies, which run client’s brand campaigns, may deem the demographic of iPhone and iPad ownership too limiting for the price of running an iAd campaign. Agencies may also be put off by Apple’s desire to have greater control over advertisers’ marketing campaigns.

Another issue is Apple’s tight developers agreement and the technical barrier of Apple’s restriction on Adobe Flash. iAd is based on HTML 5 technology which has not been widely taken up by agencies as yet.

The bigger issue at play here is a mobile advertising world dominated by Apple will restrict revenue streams for developers and consequently users. Competition is healthy and should not be restricted if we want technology to advance; and if the future is to be different platforms for different mobile devices then the cost to development, analytics and marketing services will grow massively to accommodate them.

What remains to be seen is which platform developers decide to side with.

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