or Connect
AppleInsider › Forums › Mobile › iPhone › Apple's iAd platform called a 'billion dollar opportunity'
New Posts  All Forums:Forum Nav:

Apple's iAd platform called a 'billion dollar opportunity'

post #1 of 30
Thread Starter 
When Apple's just-announced iAd mobile advertising platform matures and sees wide support from the App Store developer community, it could generate as much as $4.7 billion in revenue per year for the company, one analyst believes.

Broadpoint AmTech

Brian Marshall with Broadpoint AmTech said Friday that Apple could employ a "hybrid" ad pricing model that would include cost per click, cost per action, and cost per 1,000 viewers. In a wide-ranging sensitivity analysis issued in a note to investors, the high-end pricing assumption could generate $32 per 1,000 viewers, at a price of $0.032 per ad, generating $4.67 billion in revenue in one year.

In the middle ground of his analysis, which Marshall cautioned investors relies on "numerous assumptions," Apple would earn $17 per 1,000, resulting in $2.48 billion in revenue.

"Once again Steve Jobs and gang did a phenomenal job with the iPhone OS update scheduled for summer (iPhone/iPod touch) and fall (iPad) launch," Marshall wrote. "While we believe multitasking was the single most incremental functionality added (of the 100+ new features), it is our view that AAPL's new mobile advertising platform ("iAd") stole the show and will be significant to the financial model."

He continued: "In fact, we believe the iAd platform could generate an incremental $2.5bil in revenue and $1.00+ to AAPL's financial model when the business hits its stride."



Piper Jaffray

Gene Munster said he believes iAd "could be the catalyst mobile advertising needs." He sees Apple's advertising business in 2011 amounting to $220 million. He said the total market for in-application mobile advertising was just $45 million 2009.

By 2013, he sees the in-application market for advertising reaching $700 million, with about 70 percent that from ads in the iPhone platform. Munster said Apple could capture $380 million of the market through iAd, giving it a 77 percent market share on the iPhone platform.

"We believe the iAd platform could act as a significant catalyst for mobile media as it will be the first solution to deliver rich media to a significant user base in a friendly format on the mobile web," Munster wrote his note to investors Friday morning.

Apple's presence in the mobile display advertising space has led Piper Jaffray to increase its estimates for the market. While the firm had originally expected mobile ads -- both in applications and on the mobile Web -- to top $1 billion in 2013, they now believe that threshold will be reached in 2012. Munster noted though they expect Apple to be a "significant player," revenue from mobile ads is "unlikely to be meaningful in the scope of Apple's broader business."



Kaufman Bros., Needham & Company

The iAd announcement also earned a positive reaction from analyst Shaw Wu with Kaufman Bros., who said iAd has the potential to "uproot and redefine" the mobile advertising market. However, he doesn't see it as a strong direct financial opportunity for Apple

"Mobile advertising is particularly important for free apps, which we estimate represent approximately 25%-30% of total apps," Wu said. "We continue to believe the financial impact to AAPL will be minor to negligible as this is more a service for app developers to make money."

In addition, Charlie Wolf with Needham & Company called iAd a "game changer." He also believes Apple's multitasking solution "blows out" the competition.

Revealed on Thursday, iAd aims to redefine mobile advertising with interactive and media-driven content included right in mobile applications without having to launch a browser. Jobs said that he believes a lot of the advertisements in existing App Store software "really suck."

Jobs showed off a sample advertisement for Toy Story 3 that included character views, sound and video clips, and even a miniature game within the ad. The advertisement could be closed at any time by clicking an 'X' in the upper left corner, taking the user instantly back to the application they were using.

The new platform stems from Apple's purchase of mobile advertising firm Quattro Wireless, acquired for $275 million early this year. Jobs admitted Thursday that Apple's first choice was competing firm AdMob, but Google "snatched" them before Apple could make a deal.
post #2 of 30
These analysts don't know a thing. There's a built-in assumption the agencies would willingly cede all of their business to Apple sight unseen, which may be true for a small fraction of developers up front. Secondly, there is no immediate visual distinction between an iAd and a regular "click-me-and-I'll-kick-you-out-of-your-app-and-open-Safari" ad. I still wouldn't click on the ad because I've already experienced the unpleasantness.

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
post #3 of 30
As mobile devices become ever more pervasive the iAd model will grow. That is if the App model OS/gui becomes dominant. It is hard to see how it won't at this point. I suspect a derivative / iteration of the iPhone OS is the future of virtually all mobile computing. Apple won't be the only player, of course but they have a good head start.
I think a big challenge for the advertisers will be to not piss the end users off with intrusive poorly placed ads.
post #4 of 30
Quote:
Originally Posted by SpamSandwich View Post

These analysts don't know a thing. There's a built-in assumption the agencies would willingly cede all of their business to Apple sight unseen, which may be true for a small fraction of developers up front. Secondly, there is no immediate visual distinction between an iAd and a regular "click-me-and-I'll-kick-you-out-of-your-app-and-open-Safari" ad. I still wouldn't click on the ad because I've already experienced the unpleasantness.

There is a subtle but I think significant difference, which is that iAds have an almost Wii-like "iAd" in the corner:



I think it's enough for people to quickly differentiate.
post #5 of 30
The FTC might give Apple a second shot at AdMob.
post #6 of 30
Quote:
Originally Posted by Blastdoor View Post

The FTC might give Apple a second shot at AdMob.

Even if Quattro is already purchased? I don't think Goog will sit by idle.
post #7 of 30
Quote:
Originally Posted by Cousin Dirk View Post

There is a subtle but I think significant difference, which is that iAds have an almost Wii-like "iAd" in the corner:



I think it's enough for people to quickly differentiate.

Nice pic, the iAd branding may help but don't you think people will ignore the ad simply because it's an ad. For me to consciously to click on an interactive ad I would have had to have been informed via word of mouth, that this ad is worth clicking and the demos don't seem any different than going to product's website for an interactive experience. Don't get me wrong, I think it's a great move in many ways I just don't see it generating many more clicks than the current setup.
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
Reply
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
Reply
post #8 of 30
Just can't wait until start searching for my uncle's "TOMATski" name to place a call to be greated with a "Tomato sauce" ad from someone...

Right... this is system wide ads... why won't Apple use it in their apps?
post #9 of 30
If ads were like the ones Steve demo'd I'd be clicking on them just for the entertainment value. It is exactly as he said. Current ads take you out of your app. If you're really unlucky you'll get some malware to boot from them. These iAd ads will be refreshing. I'm speaking as a person that mainly watches the Superbowl for the commercials.
post #10 of 30
Quote:
Originally Posted by ilogic View Post

Even if Quattro is already purchased? I don't think Goog will sit by idle.

The AdMob deal is dead and there is no value for Apple anymore as they are rolling out iAd. Steve Jobs said it, mobile ads (the majority of them are from AdMob) currently suck for lack of better words. There is no way he is interested in AdMob now.

I have a feeling that developers will migrate to iAd in droves because it's simply better. If this happens, Google's attempt to prevent Apple from entering the Ad business will be useless. I hope this happens

Google entered Apple's market and then snatched up AbMob for a huge premium.
Don't be evil, right?
post #11 of 30
Quote:
Originally Posted by SpamSandwich View Post

These analysts don't know a thing. There's a built-in assumption the agencies would willingly cede all of their business to Apple sight unseen, which may be true for a small fraction of developers up front. Secondly, there is no immediate visual distinction between an iAd and a regular "click-me-and-I'll-kick-you-out-of-your-app-and-open-Safari" ad. I still wouldn't click on the ad because I've already experienced the unpleasantness.

I think that agencies could benefit from this. Apple is primarily serving as a host. Apple will not be creating the ads. I think that we will be able to figure out which ads will take you out of the app. If developers use ads to support their free apps, and also use Apple's iAd platform, I expect them to promote that fact as a differentiator from other developers who use the old style of ads. So when you look at the description of an app, you would see that detail highlighted. It's also possible that there may be a logo or something next to each app that identifies the apps as using ads that are iAd-based. If the apps are sufficiently engaging and provide a chuckle or two, then some of us will not mind clicking on them, otherwise we'll mostly ignore them, like we do with other ads.
post #12 of 30
Quote:
Originally Posted by solipsism View Post

Nice pic, the iAd branding may help but don't you think people will ignore the ad simply because it's an ad. For me to consciously to click on an interactive ad I would have had to have been informed via word of mouth, that this ad is worth clicking and the demos don't seem any different than going to product's website for an interactive experience. Don't get me wrong, I think it's a great move in many ways I just don't see it generating many more clicks than the current setup.

I think overall people will choose to ignore ads way more often than they will click on them; however; in some situations, ads may using the iAds platform may get clicked more frequently than regular ads. I think that you're right, it's word of mouth and app reviews that may change that. Ads that are visually interesting, offbeat, funny, or actually useful, will get some clicks after word spreads. Let's say you're in an app and you see a banner or something to click on, advertising another app by the same developer. If clicking on that app gave you a video preview of the app, but did not take you to a website, you may be more inclined to click on it. One of the reasons why I hesitate about buying apps is because I don't have a feel for the gameplay. A video of the app may be appealing enough to make impulse buy it from the app that I'm in. Ads in the form of interactive mini games may also be more click-inducing than regular static ads.

So my point is that after a while, we may begin to get a feel for which developers use iAd for lame ads that are a waste of time, and which developers have deep enough pockets and enough creativity to make us consider clicking. App reviews may be main vehicle for spreading the word about the quality of ads. App reviewers are not shy; they will let us know if ads are worth a click. Just my thoughts. How this all plays out should be really interesting, but Apple appears to be really trying to keep developers in their camp.
post #13 of 30
Advertising can work even without the viewer clicking. There is value in name recognition alone.

Also, I suspect that the developer may not be able to select which ads run in the app. They just offer space to the ad agency. The ad displayed probably changes from time to time.
Unofficial AppleScript Studio Lobbyist
Reply
Unofficial AppleScript Studio Lobbyist
Reply
post #14 of 30
I don't know about anyone else, buy if my kids see a Toy Story 3 ad, they're going to click on it.

Yes, a lot of ads won't be clicked on. That's why it's only $17 ppm.

It's easy to say, I never click on ads, I skip through commercials, I change the station when ads come on, I never open junk mail, etc... But...enough people do that it makes it worth while.
post #15 of 30
Quote:
Originally Posted by jpcarvalhinho View Post

Just can't wait until start searching for my uncle's "TOMATski" name to place a call to be greated with a "Tomato sauce" ad from someone...

Right... this is system wide ads... why won't Apple use it in their apps?

Don't be an idiot!

What possible reason could they have to include it in their own apps?

Apple's own apps already serve to drive sales of some paid service already.
post #16 of 30
I guess we will find out in due time, but I am more interested in the specs. What standard sizes are allowed like we currently have online. 728x90 468x60 etc. And since they are HTML5, where are the JS files and images packaged? I'm sure there will be account info reporting etc in realtime to the agencies and the devs, but as ad creators we need to get our workflow guidelines in place as soon as possible. Probably in typical Apple fashion they will share the pertinent info with their partners first and let the little guys figure it out on their own, like iBooks, Tunekit and Pastrykit, releases were handled.

Life is too short to drink bad coffee.

Reply

Life is too short to drink bad coffee.

Reply
post #17 of 30
And here I thought 'banner ad' and 'fun' were mutually exclusive.
post #18 of 30
Quote:
Originally Posted by SpamSandwich View Post

These analysts don't know a thing. There's a built-in assumption the agencies would willingly cede all of their business to Apple sight unseen, which may be true for a small fraction of developers up front. Secondly, there is no immediate visual distinction between an iAd and a regular "click-me-and-I'll-kick-you-out-of-your-app-and-open-Safari" ad. I still wouldn't click on the ad because I've already experienced the unpleasantness.

I bet the old ads will disappear very quickly once this goes live. If you're a developer with an ad supported app, you'd have to be crazy not to want to use these ad in your next update. The users will like it better and so will the dev, since they're making more money from ads.
post #19 of 30
Who pays for the bandwidth to receive these ads?
Does viewing an ad go against the user's data quota?

Its probably negligible but its the principal of the thing.
Its a bit like having to put up with commercials on cable when your already paying for the cable. (Remember when cable came out the rational for the giving the cable companies a monopoly was that there would be no commercials and the there would be lots of public access opportunities, community service stuff, etc. That soon evaporated.)
post #20 of 30
Quote:
Originally Posted by replicant View Post

Google entered Apple's market and then snatched up AbMob for a huge premium.
Don't be evil, right?

From what I read (I can't recall the source now, more than likely NYT), Apple and AdMob entered into a 45-day (??) exclusive agreement. For whatever reason, Apple was not able to complete the deal within that period.

From the point of view of the management of AdMob, do you think they would have sat idle as the deadline came near? From a purely strategic perspective won't AdMob have been lining up other prospective buyers even before the deadline?

It is common for several companies to bid, once a takeover comes into play. It is not a similar situation, but the Vice-President of the real estate agent company that is handling a $6.5 million property that we are interested with is encouraging us to send a Letter of Intent. There were already other bidders because the property is in a very desirable location.

Since it is the owners that make the decision, there is no apparent conflict of interest for the real estate agent trying to drum up more potential suitors, to get the best deal for his clients.

The situation I described might have similar scenario with respect to the acquisition of AdMob.

If I am not mistaken, it was after this deal did not materialize that Apple hired a new Vice-President(??) that will deal exclusively with acquisitions.

I agree with the observation that Apple already bought the smaller ad agency. It to is a waste of time and money, as well as bad publicity, to attempt to go after AdMob, even if Google won't be allowed to buy AdMob.

Apple could start with the existing talent of that agency (even hire more creative ones) and create a more innovative ad agency.

Steve Jobs is the heart of Apple innovations. Similarly, Jonathan Ive is the heart of the design department. Apple can use the same model also to evolve their new Ad agency. All it needs is one very good artist/designer who understands the essence of consumerism.

CGC
post #21 of 30
The ads will be created by HTML5 programmers and served live (ie no wifi and no 3g/Edge, no ad) through the OS from Apple servers. Apple recently received a patent for serving ads through the OS. All the developer of the app has to do is tie his/her app into the Apple ad server via an API and collect 60% of the revenue. That's pretty compelling for the app creator and could help drive quality app creators to the Apple iPhone ecosystem. Because Apple is serving the ads they'll have a lot of analytics to kick back to the agencies/advertisers.
post #22 of 30
Quote:
Originally Posted by WhiteRabbit View Post

I bet the old ads will disappear very quickly once this goes live. If you're a developer with an ad supported app, you'd have to be crazy not to want to use these ad in your next update. The users will like it better and so will the dev, since they're making more money from ads.

And so will Apple as they make more money, and at the same time get to have a say in the advertising game (html5). I don't think the agencies are ceding control to Apple. Apple is simply offering a better way to position ads. As the user experience also is better and the format different the agencies get more to work with. Ultimately the Agencies and advertisers will decide if the iAds will work better. They have a new canvas - no they have to get creative.
Personally I rarely click on ads. I may see an ad which will make me head for the company website, but clicking on the ad - its just not in my DNA. Makes me feel like a sucker.
post #23 of 30
Quote:
Originally Posted by solipsism View Post

Nice pic, the iAd branding may help but don't you think people will ignore the ad simply because it's an ad. For me to consciously to click on an interactive ad I would have had to have been informed via word of mouth, that this ad is worth clicking and the demos don't seem any different than going to product's website for an interactive experience. Don't get me wrong, I think it's a great move in many ways I just don't see it generating many more clicks than the current setup.

Correct. In fact, it's quite possible that other banner ads would simply emulate that little iAd flourish to confuse customers. If I was a banner ad company, I might do it just for the additional clicks.

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
post #24 of 30
Quote:
Originally Posted by WhiteRabbit View Post

I bet the old ads will disappear very quickly once this goes live. If you're a developer with an ad supported app, you'd have to be crazy not to want to use these ad in your next update. The users will like it better and so will the dev, since they're making more money from ads.

I'm not sure they will make more money using iAds. The split will remain the same, as Jobs mentioned ("standard agency split").

Of greater interest to me and perhaps to others, is when Apple starts to intrude upon Google's web advertising dominance. Why not roll out iAd as a general web service? All ads are created using HTML5, so I see this happening after a trial run on the thousands of apps.

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
post #25 of 30
Quote:
Originally Posted by replicant View Post

I have a feeling that developers will migrate to iAd in droves because it's simply better. If this happens, Google's attempt to prevent Apple from entering the Ad business will be useless. I hope this happens

Quote:
Originally Posted by All Day Breakfast View Post

The ads will be created by HTML5 programmers and served live (ie no wifi and no 3g/Edge, no ad) through the OS from Apple servers. Apple recently received a patent for serving ads through the OS. All the developer of the app has to do is tie his/her app into the Apple ad server via an API and collect 60% of the revenue. That's pretty compelling for the app creator and could help drive quality app creators to the Apple iPhone ecosystem. Because Apple is serving the ads they'll have a lot of analytics to kick back to the agencies/advertisers.

iAD is part of 4.0's deep plumbing, so they'll certainly only be seen on Apple mobile devices in the beginning.

But if they're effective (and they seem well-designed in terms of finding that intersection between those "emotional and interactive" axes Steve defined), isn't it highly likely that someones else will clone the approach, i.e., in Android and Win Phone 7 (and in various ways on Macs and PCs)?

And if Apple gets serious about being in the ad biz - the business that provides 95% of Google's revenue, and which along with Craig's List, has brought the newspaper and magazine businesses to their collective knees - might they not logically find ways to place their own iAd like inverts into non-Apple programs?

There is precedent. Non-iAd ads can already be placed in i-apps. Apple makes iTunes and Safari (and via a subsidary, Filemaker Pro) for Windows. And has come out of nowhere multiple times to become a driving force in the retail music biz and then the movie and TV rental and sales biz. And is becoming one in the gaming industry and soon in the book biz. Not to mention impacting sales in the P&S camera/vidcam area.

So if they can extend this new opportunity, I certainly suspect they might.

And, yeah, I too remember when Apple was in the computer business. One thing's for certain. They weren't kidding when they changed the corporate name.......

An iPhone, a Leatherman and thou...  ...life is complete.

Reply

An iPhone, a Leatherman and thou...  ...life is complete.

Reply
post #26 of 30
I totally think iAds are a game-changer, and here's why:

They can enable you to buy ANYTHING with a single click.
Not just apps.
Anything.

For all my thoughts:
http://www.derekmartin.ca/2010/04/09...-game-changer/
post #27 of 30
Quote:
Originally Posted by bigpics View Post

iAD is part of 4.0's deep plumbing, so they'll certainly only be seen on Apple mobile devices in the beginning.

But if they're effective (and they seem well-designed in terms of finding that intersection between those "emotional and interactive" axes Steve defined), isn't it highly likely that someones else will clone the approach, i.e., in Android and Win Phone 7 (and in various ways on Macs and PCs)?

And if Apple gets serious about being in the ad biz - the business that provides 95% of Google's revenue, and which along with Craig's List, has brought the newspaper and magazine businesses to their collective knees - might they not logically find ways to place their own iAd like inverts into non-Apple programs?

There is precedent. Non-iAd ads can already be placed in i-apps. Apple makes iTunes and Safari (and via a subsidary, Filemaker Pro) for Windows. And has come out of nowhere multiple times to become a driving force in the retail music biz and then the movie and TV rental and sales biz. And is becoming one in the gaming industry and soon in the book biz. Not to mention impacting sales in the P&S camera/vidcam area.

So if they can extend this new opportunity, I certainly suspect they might.

And, yeah, I too remember when Apple was in the computer business. One thing's for certain. They weren't kidding when they changed the corporate name.......

You raised a good point but Apple's core business is not advertisement. Google derives most of its profits from it (btw Google didn't even come up with this idea by themselves but stole the concept of AdWords from idealab). I don't see Apple's iAd expanding to other platforms as the perception is that Apple is forced into this defensive move in order to prevent another company like Google to control the mobile advertising business in light of the fact that the majority of traffic is driven by Apple's own devices.

Maybe you are right and iAd will expand and this "forced" play into the ad business will turn out to be a whole new business opportunity for Apple. Should have hold on longer to AAPL...
post #28 of 30
Quote:
Originally Posted by lo_fye View Post

I totally think iAds are a game-changer, and here's why:

They can enable you to buy ANYTHING with a single click.
Not just apps.
Anything.

For all my thoughts:
http://www.derekmartin.ca/2010/04/09...-game-changer/

Thanks for the link. I hadn't actually thought of iAds like that before. Mark over on Gizmodo was positively frothing and grabbing pitchforks (sorry for referencing another site). However, I am of two minds about it currently but I like the way you have extrapolated out an idea like that.
Cheers.
..... the greatest fame comes from adding to human knowledge, not winning battles.
Paraphrased from Napolean Bonaparte, 1798
Reply
..... the greatest fame comes from adding to human knowledge, not winning battles.
Paraphrased from Napolean Bonaparte, 1798
Reply
post #29 of 30
From a business perspective the big thing about the iPad was the productivity apps and the big thing about OS4 was iAd.

iAd is more about creating pull towards HTML5 and sending a signal to Google to stop dicking around with Flash.
post #30 of 30
Quote:
Originally Posted by lo_fye View Post

I totally think iAds are a game-changer, and here's why:

They can enable you to buy ANYTHING with a single click.
Not just apps.
Anything.

For all my thoughts:
http://www.derekmartin.ca/2010/04/09...-game-changer/

If this is as you say (sorry, I didn't read your web site) I believe Apple would still have to pay a licensing fee to Amazon.com for their "1-click" patent.

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: iPhone
AppleInsider › Forums › Mobile › iPhone › Apple's iAd platform called a 'billion dollar opportunity'