Christian Louca

11 March 2010 | Posted By, Gareth Willmer

Apple has the tools to succeed in the mobile ad arena, but will face established rivals and may need to adapt culturally to make the most of the opportunity

Mobile ad revenue totalled £28.6m in the UK in 2008, nearly double the previous year. Having enjoyed enormous success with apps, Apple is poised to move into the fast-growing ad market with its purchase in January of Quattro Wireless for a reported $275m.

Apple won’t comment on its plans but signalled its intentions in the EMEA region by recruiting two executives early last month: Theo Theodorou and Todd Tran, who have significant experience in mobile ads.

Andy Wasef, emerging platforms director at media agency MEC Interaction, says Apple is looking to bolster Quattro Wireless’s standing in the UK and Europe and could then look at how to integrate its services. He expects Apple’s strategy to become clearer in the next few weeks, which could include monetising some of the free content on iTunes and establishing a revenue-share model with newspapers and magazines on the iPad. Industry players also expect Apple to make strong moves into the location-based ad market.

quick facts

• Mobile ad revenue totalled £28.6m in the UK in 2008, up 99.2% on 2007, according to the Internet Advertising Bureau
• Last month ComScore and the GSMA launched Mobile Media Metrics to help mobile media reporting for publishers, agencies and advertisers
• ComScore and the GSMA said 16m UK mobile users viewed nearly 7bn pages of online content via mobile browsers in December 2009
• The Apple App Store has seen more than 3bn applications downloaded globally in less than 18 months

David Fieldhouse, mobile manager at media agency MediaCom, believes Apple will develop the world’s largest in-app mobile ad service, a strategy that appears to make sense if the company wants to secure ad revenues on the back of sales from its App Store. It recently announced the App Store had seen more than 3bn apps downloaded in less than 18 months, with more than 100,000 on offer.

Fieldhouse says creative opportunities for in-app ads are growing as the industry moves from static banners to other formats, such as clickable video.

Apple’s move into advertising may also help it maintain a competitive edge as the rest of the mobile industry attempts to regain the initiative in the app market. At February’s Mobile World Congress in Barcelona, industry body the GSMA unveiled a joint move by 24 global operators and three vendors to build an open platform to deliver apps to mobile users.

Meanwhile, industry players say Apple has the raw materials to succeed in the mobile ad market. Fieldhouse says the Apple brand carries an “enormous amount of equity”, while the company has the reach and devices to make a success of the mobile ad market.

Christian Louca, MD of mobile ad company YOC, says, “By buying Quattro, Apple has an opportunity to integrate hardware, software, content and advertising. In that sense, it’s playing to the strengths of the iPhone.”

Media agencies and publishers point out Apple already has billing mechanisms in place and a large amount of user data that could prove valuable, such as information on location and lifestyle. “Could it use this data to generate more personalised ad impressions?” asks Ilicco Elia, head of mobile at Reuters Consumer Publishing, warning it’ll have to be careful about how it uses any data for personalised advertising.

It’s difficult to assess the potential impact of Apple’s entry into the mobile ad market because the company is keeping its cards close to its chest. “It’s traditionally a very secretive company,” says Fieldhouse. “To engage with media and ad agencies, it’ll have to be more collaborative and share information earlier so we can communicate opportunities to our clients.” MediaCom is already in discussions with Apple and Fieldhouse says early signs are the company does want to collaborate.

Meanwhile, some commentators from the ad industry warn any attempts by Apple to exert too much control over the market could backfire. Many have referred to a recent blog post on its developer forum in which the company warned it will reject apps primarily aimed at serving users with location-based ads. Apple said the move is to protect the user experience, but others see it as an effort to take control of the location-based ad market and that Apple could use its dominance to squeeze out other ad providers. It may also be a concern that Google is already trialling location-based ads with US advertisers.

“If Apple wants the iPhone to continue to be a key device for advertisers, it can’t build barriers between itself and the ad networks,” says Louca. “It needs to work with the industry to keep pushing the medium as well as the message. The iPhone is just one device in a global market; brands expect reach as well as quality in campaigns.”

In addition, Apple will need to think about how much control it wants in partnerships with publishers. Andrew Nicholls, partnerships and mobile manager at Dennis Publishing, says publishers like to have control over the advertisers they use and the ad costs they charge. “Will publishers still be able to sell sponsored apps or does Quattro want a slice?” he asks.

A further challenge for Apple is that it will be up against established players such as 4th Screen, Yahoo and YOC in the UK, where companies have already built relationships with planners and buyers and where Quattro Wireless is a largely unknown company. In addition, Apple will have to contend with Google, which purchased mobile ad network AdMob for $750m in November.

With recent acquisitions reflecting growing momentum for mobile ads, 4th Screen MD Mark Slade is hopeful 2010 will bring significant growth. But he tempers this, saying, “There are many people in the market with bullish expectations,” adding that it’s inadvisable to get too excited about short-term upturns.

URL Link:

http://www.nma.co.uk/features/apple-and-mobile-ads/3010992.article