With a market capitalization of over $200 billion and more than $40 billion in the bank, big brands’ commitments to put $60 million into Apple’s new iAds service may seem like chump change to Apple. But as part of a “give no quarter” strategy, Apple continues to maintain tight control of the monetization potential of its mobile devices with the goal of adding several more zeros to its iAd revenue while maintaining enviable profit margins.
At this week’s Apple Worldwide Developers Conference, the company announced it will debut its iAd mobile advertising network on July 1 on iPhone and iPod touch devices running its iOS 4 software platform. Committing to the interactive, rich media iAd platform was an impressive roster of leading global brands including AT&T, Best Buy, Campbell Soup Company, Chanel, Citi, DirecTV, GEICO, GE, JCPenney, Liberty Mutual Group, Nissan, Sears, State Farm, Target, Turner Broadcasting System, Unilever and The Walt Disney Studios. Apple will sell and serve the ads, and developers will receive 60 percent of the iAd Network revenue, paid via iTunes Connect.
According to Apple the over $60 million in commitments represent almost 50 percent of the total forecasted US mobile ad spending for the second half of 2010. This claim has a footnote in the Apple press release: Percent of forecast based on an annual run rate basis, starting on July 1. US Mobile Display Advertising forecast from the report by JP Morgan, “Nothing But Net – 2010 Internet Investment Guide,” January 3, 2010.
Has JP Morgan sized the market correctly? AdMob’s CEO Omar Hamoui doesn’t think so, but offers no third-party statistics or forecast to challenge the statement. Michael Chang, CEO of Greystripe, a small mobile advertising company, puts the “pond” of mobile advertising at one billion dollars for 2009, but that sounds more like a statement of potential rather than actual advertising placements. Whether Apple is right about the market potential or underestimating to play it safe, market size stats are fodder for the competition between Apple, Google and others to win advertisers.
Unknown is where the advertisers – some still reeling from the recession – are coming up with the dollars to make their iAd commitment. Most likely, they are cutting back somewhere else; when 2010 actuals become available, we could see a perceptible shift to mobile advertising from other online formats. Google may be happy to let their customers shift their ad dollars from other vehicles to pump up their mobile platform – at the end of the day, revenue goes into the same pot. But there are bound to be social networking sites losing ad dollars as the big – and not-so-big – brands push their ads to intersect with our increasingly mobile computing lifestyle.
