So iAd was announced, as expected. The first thing I thought of when I saw it is Xzibit saying “yo dawg, I put an app in your app so you can app while you app,” but that’s just because I read too much Reddit.
The second thing I thought is ‘damn, this is mighty similar to Medialets and some of Greystripe’s stuff.’ It’s not quite the same thing – both of those companies have a multiplatform strategy and Medialets also has an analytics product. We also don’t know anything about targeting or reporting, although of course there will be some because iAds, ultimately, is Quattro, and Quattro has targeting. In the end this will probably be good for those startups. Agencies will treat iAds like it’s the new black because it’s Apple, the iAds will get built in HTML5, and building an ad unit that can’t be used anywhere but the iPhone stinks. So these startups – or other startups – will come along and say ‘hey, run your HTML5 iAds in Android using our SDK’ and they’ll do just fine. It’ll likely impact their efforts over the short-term, though. Fine if they’ve got runway, not fine if they don’t.
The next thing I thought was ‘that Toy Story 3 ad looked like it was the normal 320×50 banner size, before it expanded.’ So, this is fine for every ad mediation system out there (think Mobclix and Burstly and AdMob’s Adwhirl) – iAds will just become another source of supply, and they can successfully and probably rightly argue that a whole bunch of ad sources plus iAds outperform iAds alone. There’s only an issue if Apple starts selling ads with a non-standard footprint – which isn’t so likely, because standard-sized ad space is already baked into a lot of existing applications.
The 60/40 revenue split is interesting – this is a perfectly normal revenue share for a high-touch ad network, but it’s higher than the 70/30 split for application sales and in-app purchases. Because of this, Apple’s going to have to deal with developers thinking that they’re gouging them (including developers who mistakenly assume the other ad networks are passing along 100%.) Other ad networks will also have some opportunity to compete on price – although premium ads at 60/40 will likely outperform remnant at 100/0, being able to claim you share more revenue than Apple has a nice psychological effect. So why 60/40? My best guess – it’s because Apple wants iAds to be big, but not so big that paid-app developers switch en masse. At 60/40, there’s a little bit of a psychological barrier to trying out advertising that wouldn’t necessarily be there at 70/30. But this is just a guess.
There’s still big unanswered questions around brand safety and ad scarcity. Having an ad framework baked into your SDK will imply to developers that everyone can get ads – after all, every developer can do everything else that’s in the SDK. However, most brand advertisers don’t want to run alongside Jiggling Asian Schoolgirls 3.0. Just because you want some awesome high-paying Nike video ads for your application doesn’t mean you’re going to get them. In addition, advertisers have budgets, and those budgets can run out, especially if you’re selling a new medium at high rates. What happens if Apple doesn’t sell enough high-quality ads for even the respectable applications? Will the impressions just be left unfilled? Will direct marketers get a chance to hawk herbal lose weight patches by the click?
The biggest loser today was unambiguously Flash. Rich media advertising is one of the biggest uses of Flash – but now agencies are going to start developing rich media ads using HTML5. ‘HTML5′ is the important part. If the ads were built with Objective-C, Adobe would shrug. But HTML5 will run everywhere there’s an HTML5-capable browser – both on other phone OSes and on desktop browsers. Desktop-focused ad servers will serve HTML-based ads just fine. Once agencies start realizing that they can either build an ad unit twice (once in HTML5, once in Flash) or just do it once in HTML5 and forget about it, Adobe risks ending up as nothing more than an HTML5 authoring tool, and then only if they move quickly.
I’m off to download the developer preview of the iPhone 4.0 SDK, to see if I can glean any more information – which I likely won’t write about, since these things are generally under NDA. But there’s my initial thoughts on the iAd portion of today’s announcement.
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This is probably the best write up I’ve seen so far of the actual effect of iAds on the mobile market.
The 60/40 rev share is definitely an interesting price point, but like you said I think it’s simply inline with what most other ad networks price at. The interesting piece will be the CPMs that are asked.
Mobile CPMs, much like video CPMs, were expected to be around $30 and then quickly fell. The whole 100% share of voice, higher CTR, and more engaged audience arguments weren’t going to cut it. The CPMs eventually fell to the 10 – 15 level for most publisher’s direct sales and I’ve seen the eCPM of remnant (even from Quattro) go down to less than $1.50.
Either way this is definitely going to shake up the market and how mobile advertising is seen. Who knows, maybe it will have an effect on total search revenue in the long run like Steve said.
very interesting piece of thought. my biggest question is that of non standard format adoption. Traditionally agencies proves to be slow at adopting something not IAB proofed. even with a big brand like APPLE they will need to produce enough case studies at scale to show the investment is worth the ad dollars but also that this format engage enough users in some some of economical/sizable funnel for brands.
I do believe though that apps as ads is a certainly long term trend and this is just the first step
Good analysis and well written.
Share splitting is indeed interesting. 60/40 will appeal to your regular noname-app-developer-making-a-life, because they can now get ad revenue for the “light” version – a win-win. But I doubt it appeals to big names who do care about brand dilution and contamination.
As Rikin says, the key issue will be the price of CPMs. Apple will argue that the quality of the contact will be higher (targeted, full-attention, the works). But, they are still playing the old game (CPM). This is nowhere near the efficiency of Google’s bid-per-contact. There is no revolution here, not even the smell of it.
So, will the Nikes of the world be interested? Not, as long as agencies have to produce two versions of it (flash and html5). There is a fair chance that html5 will establish itself soon. The question is *how soon*. You need a whole eco-society (developers, advertisers, agencies, ad-designers) to jump onto the wagon before it gets any traction at all. A few months may decide upon the faith of iAd. It will be exciting to observe this …
Greg,
Great post, thanks for sharing your insights. Now that a few months have gone by, I still think your assessment is right on target. I work for a company called Sprout that is developing a software that addresses your point about agencies NOT wanting to build creative in two formats. In short, the platform exports your creative in Flash and HTML5 simultaneously. You can see a demonstration of this here:
http://www.youtube.com/watch?v=yu26clUivuo
At the end of this demo you can see how the Flash and HTML5 look side by side. The fact is that it’s going to be a while before advertisers are ready to fully make the switch to HTML5 because tools, like Sprout, will take some time to reproduce all the functionality of Flash. There is no question in our minds that this will happen … but in the meantime, we think there is an important place for tools that help agencies through this transition. Does that make sense from your perspective?
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