Friday, April 16, 2010

What is Apple thinking with iAds?

Of all the things Steve Jobs talked about during his announcement of iPhone 4.0 OS, only one deserved his full enthusiasm: iAds. Those who have seen this live will tell you that his energy levels were at level high only when he talked about ads (here is the video).

Why is iAds significant?

The first easy answer is: it is Apple's answer to Google, they hate them now, Google stole AdMob from them, and they declared war on the #1 revenue stream Google has (and the only one: keep in mind how diversified Apple's portfolio is compared to Google).

Sure, that is key, but I believe there is more. To understand this, you must see the presentation and the ads they showed. Check this video. Again, do not read anything else in this post without watching the video.

Jobs says: "the same as a television show", but better because we are adding interactivity on top of the emotions.

When I looked at mobile ads as a business model for Funambol, my first instinct was to consider mobile an extension of the Internet.

On the Internet, you have transactional advertising, where the goal is to have you buy something. It is the business Google is built on. Click on an ugly banner or even text link, jump to a page and do something. The ad is a teaser to get you someplace else, a place you were looking for (you searched for it). Forget where you were. It is the same model used in newspapers (call this number for a super discount on a trip to Hawaii, and drop your newspaper). No wonder newspapers are dying and all that money is flowing to online advertising (note: TV is not dying).

Most people thought mobile will be the Internet on steroids. Not only you could jump somewhere, but you could also be physically close to that store. Because you are mobile.

If you look at TV, the model is different. It is branding, not transactional. They want you to remember their brand, not to leave your couch. TV ads are all about emotions. Videos, stories. They work wonders, although they are hard to quantify (but, once again, they work, look at the number of Droid sold by Verizon because of the campaign they built: no surprise it is the most used Android phone). Branding works the same on billboards and magazines.

Now, let's go back to mobile. When I asked Ujjal, one of my advisors, about mobile ads he told me: "I know everyone is convinced mobile ads are going to be transactional, but I think it will be branding instead". He told me the mobile device was not a good medium to do things (like buying stuff) because of the size, and location where you would be looking at the ad (in a parking lot). Yes, you might buy a book on a mobile phone (or a wallpaper, or another mobile app) but it stops there. You won't buy a mortgage in your parking lot, and that's where a lot of transactional advertising comes from...

Now I believe Ujjal is right. And I believe iAds is the start of the explosion of mobile advertising. I think transactional mobile ads will be linked only to Maps (and Google has a big lead there, so I am not saying they will be dead, at all). But in apps, it will be all branding.

What is iAds? Branding, with interactivity. "The same as a television show". But better.

Will the barber shop down the road have this ads? No way. It is the traditional brands, those that use the vast majority of their budget on TV ads. Where the real money is.

It is the TV money coming to mobile. Something that will generate a lot of revenues for developers, if the ads are properly targeted (and, believe me, they will: Apple will make sure they will). Something that will lock developers even more on the iPhone/iPad platforms. Why moving to Android when the billions of ads are flowing to the Apple platforms and you can make a ton of money? If money is made with Maps in Android, what is in store for developers? Nada, it is all dollars for Google, not for developers.

If the iPad is the future of computing (in the home, at least), and the Internet becomes a subset of the Mobile Internet, iAds could become the dominant force of advertising. Add interactive TV and it is game over.