Ending several weeks of subdued speculation, Apple finally announced the iPhone 4 at the annual WWDC last Monday. The device’s front-facing camera and higher resolution display serve as the two tentpoles in Apple’s pitch to drive consumers to make the iPhone 4 their next smartphone of choice. But what appealed most to us online marketers was a little detail overlooked by many and dissected by few: Jobs’ claim of Apple dominating 48% of the mobile ad market by the end of 2010. Considering both his previous predictions and recent headlines surrounding the company, one has to wonder how grounded in reality this claim really is, and just what Steve would do to try to accomplish it.
(A little crib note history – Apple purchased Quattro Wireless this past January for $275mn, ostensibly to counter Google’s earlier $750mn purchase of AdMob, which itself signified the search giant’s determination of dominating the mobile ad space. These purchases were both result and precursor of several months of public Apple/Google spats, and they also helped contribute to the rise of a tech rivalry unseen since the days of, well, Apple and Microsoft.)
Corporate drama aside, the question at hand is: can Apple beat Google at its own game and dominate the mobile ad market in just six months? It sure looks like it – but at what cost to its P&L, brand perception, and relationships to other tech and ad companies?
While Apple comprises only 25% of the North American smartphone market, it claims that it dominates mobile browser usage, with 58% of mobile web traffic derived from an iPhone (with Android at a distant second with 23%). As with all figures quoted for marketing purposes, this number’s up for verification (others claim the number is more like 33%). But whatever the number, it’s clear that iPhone users are far more avid mobile browsers than any other smartphone user. There’s not much that needs to be done to improve sales of the device, as year-over-year growth indicates that Apple isn’t too far away from taking the number one spot from Nokia fairly soon.
Jobs and Co. are banking on this growth and the unique nature of iAds – notably what the platform promises in terms of ability to create relevant and emotional connections to the user – in compelling developers to in turn bank on displaying ads in their applications instead of profiting from the one-time application purchase fee. Long story short – with iAds, users get better, cheaper apps; developers are further incentivized with more $$$; and Apple wins even more $$$.
Apple’s investing heavily to ensure success of the iAd gamble. The company’s secured $60mn in commitments from large brands such as Disney, AT&T, Citi and others to make iAds a success. And not only has Jobs secured the involvement of these heavyweights to insure his investment, but he’s also putting up strong, if not borderline illegal, defenses to add an extra layer of insulation. It’s become recently apparent that Apple’s implemented policies to ensure that AdMob’s display ads do not appear on any of its products, an act of which by itself could trigger a very interesting battle between Google, Apple and, as reported this morning, potentially the United States government (and who knows, maybe the EU as well – they love a good technology antitrust battle).
Whatever the case, Apple’s promise for iAds indicates that digital advertising is set to invoke the wrath of Jobs in a manner similar to how he helped rattle the personal computer market with the Macintosh and likewise, to mobile computing with the iPhone. However, there’s a thin line between protecting investments and playing fair, and it looks like it’ll be a few weeks (or even days) before we see which side Apple finds itself slipping toward.
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