Raising The Bar on Mobile Advertising: Apple's OS 4

Apple announced iAd today as part of their OS 4 program today. I speculated in this post on why they purchased Quattro Wireless a few months ago, but now we have more details. This post is on iAd only - my colleague Charles Golvin has a more complete analysis in his post.

First, looks like Apple will leverage Quattro's business model and use their sales force to sell ads. This should work early on for large buys.

They are continuing to be very supportive of their developer community with 60% of the ad revenue going to the developers. Not a lot of details now, but this could be generous. Part of the revenue needs to go to the sales team as well. There will be less leftover for Apple. Models such as Admob's have more of a self-serve model that have the potential to be more cost-effective especially with smaller buys. The types of companies that will have the budgets to develop interactive ads that take full advantage of the platform - accelerometer and location plus rich media - will have the budget to spend on media as well - not just on the creative.

Beyond developers, Apple is continuing their focus on the consumer experience. They are looking to protect the quality of the user experience by controlling the ad experience. Steve has raised the bar on quality of mobile ads by keeping consumers within their existing application or experience. He anticipates that the ads will be engaging enough to be considered entertainment.

The iPhone/iPod Touch audience is an attractive one with 85 million devices sold. See this post for why I think this is such and attractive audience even if small as measured within the context of total cell phone users. Steve mentioned 1 billion possible ad impressions a day - not sure when.

What else will make this inventory valuable?

- Users of iPhones are some of the most likely to transact among all cell phone owners and even smartphone owners. See post. Demostrated ROI will bring investment and more advertiser spend. The ability to transact within the ad ... "stunning" was what my colleague Charlie Golvin said. He has a high bar for "stunning" so I can't wait to see it.

- Rich media ads engage consumers. His demos of Nike and Toy Story ads were impressive. These ads sell for more. They'll also cost more to create - good opportunity for the agencies.

What else do I expect to see?

- We saw a lot of companies and agencies race to innovate and develop compelling iPhone applications for branding and other marketing purposes. Many simply had the goal of generating "buzz." We could see more of that.

- We didn't hear a lot about targeting - making use of past purchase behavior, day-to-day use of applications, etc. We did hear about location. Knowing that I have downloaded and am using the latest Audi application or browsing automotive sites on my iPhone might indicated that I am in the market for a car - that would be valuable information to automotive OEM's. Knowing that I buy alternative rock music or that I read mysteries adds other dimensions. Location - given the structure of how they sell ads - this will more likely be purchased by large, national companies with stores throughout the country. Location (from the consumer's perspective) will be more interesting when it helps me find local mom and pop stores that better match my interests.

- We didn't hear much on analytics for the advertisers. This will be interesting to watch as the more effective Apple can be in demonstrating ROI - bought movie tickets, purchased a Nike shirt, bought the movie Toy Story - the more advertisers will spend. They'll spend on branding now, but I think they'll spend more if they can drive sales.