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April 8, 2010, 2:30 p.m.

Three ways Apple’s iAd might impact the news industry’s continued advertising woes

Apple’s Steve Jobs just unveiled iAd, the company’s new advertising platform for the iPhone and iPad. It’s an ad platform designed for apps, like the news apps that many news organizations make, and Jobs promises to use the app framework to provide a more interactive, engaging, and rich-media experience to users. Here’s his pitch. (Quotes are taken from Engadget’s live coverage of today’s Apple event and thus may be off by a few words here and there.)

We have a lot of free or reasonably priced apps…we like that, but our [developers] have to find ways to make money. So our devs are putting ads into apps, and for lack of a better way to say it, we think most of this kind of advertising sucks.

When you look at ads on a phone, it’s not like a desktop. On a desktop, search is where it’s at. But on mobile devices, that hasn’t happened. Search is not happening on phones; people are using apps. And this is where the opportunity is to deliver advertising is.

The average user spends over 30 minutes every day using apps on their phone. If we said we wanted to put an ad up every 3 minutes, that’s 10 ads per device per day. That would be 1 billion ad opportunities per day. This is a pretty serious opportunity, and it’s an incredible demographic. But we want to do more than that. We want to change the quality of the ads too.

You know the ads on the web — they’re eye catching and interactive, but they don’t deliver emotion. What we want to do with iAds is deliver interaction and emotion. So that’s what iAd is all about. It’s about emotion plus interactivity. The ads keep you in your app. Today when you click on a banner ad, it yanks you out of your app and throws you onto the advertiser’s web page. So people don’t click on the ads. Because iAd is in the iPhone OS itself, we have figured out how to do interactive and video content without ever taking you out of the app.

For devs to add this to their apps is really simple. They can do it in an afternoon. Apple is going to sell and host the ads, and we’re going to do a 60/40 split [Apple keeping 40 percent of revenue].

Jobs then went on to show a number of in-app ads that served as immersive experiences: launching mini-apps within the app, showing videos, games, and more. They did look impressive (although calling them “emotional” might be pushing it). This sort of rich-media advertising feels like the next wave, at least, now that devices are starting to have the horsepower necessary to stream these kinds of experiences.

And here’s how Apple’s pitching iAd on their site:

iAd is a breakthrough mobile advertising platform from Apple. With it, apps can feature rich media ads that combine the emotion of TV with the interactivity of the web. For developers, it means a new, easy-to-implement source of revenue. For advertisers, it creates a new media outlet that offers consumers highly targeted information.

So what might iAd mean for news companies? It’s waaaaay too early to tell, but here are three quick thoughts:

Smaller newspapers have an extra incentive to build iPhone apps. The nationals (NYT, WSJ, WP, etc.) all already have iPhone apps, and they would be hesitant to hand over a significant part of their advertising franchise to Apple anyway. (Hesitant to hand over 40 percent of revenue, too.) But for smaller news outlets that haven’t been able to see a return on an app-development investment — and without the sales-force resources that might be necessary to educate local advertisers about mobile advertising — iAds promises an easy reason to get on board. With the cost of basic content-app development dropping — you can get a decent app built with under $1,000 and a few days of a staff nerd’s time these days — the CBA equation gets simpler.

A shift away from search and toward content could really help news companies. iAd argues that while search advertising is justly dominant on desktops and laptops, the app experience is the right target for ads on mobile devices, because people spend less time searching and more time in their favorite apps. If that turns out to be true, that’s a huge boon for content companies like news orgs. Search is a field that news companies have no business competing in; local search efforts have flopped, and Google is an unscalable mountain.

But building apps that sustain people’s interest for extended periods of time? That’s at least a game that news orgs can compete in. As we’ve seen, news apps aren’t as engaging as they could be, and news content still isn’t a perfect match for mobile in a lot of ways. But I’d be a lot more optimistic about news companies figuring out ways to make their apps better and more engaging than I’d be about news companies stealing a slice of search advertising revenue from Google.

Could there be room for a Yahoo-style newspaper partnership? The Yahoo deal with newspapers comes down to a simple equation: Yahoo gets a ton of eyeballs, but doesn’t have the ad sales force to reach local companies. So newspapers provide the sales force and Yahoo provides the eyeballs.

I have no doubt that the Nikes, Disneys, and Targets of the world will be happy to deal with Apple directly. But will your local furniture store? Or your neighborhood Korean restaurant? We’ve already seen indications that Apple wants to keep location-based advertising to itself, but who’s going to sell those ads? Maybe a future some predicted years ago — newspaper sales teams serving as a one-stop shop for advertisers seeking placement in a variety of online and print locations, some newspaper-owned, some not — could finally come to be.

There’s lots we still don’t know about iAd — like whether apps that use the platform will still be able to use other ad platforms, say, to deliver developer-sold advertising alongside Apple-sold messages. iAd won’t arrive in apps for several months, and it’s unclear how many companies will want to invest in building the kind of immersive experiences Jobs showed off today. But at first glance, I’d guess that Apple’s entry into the Google-dominated online advertising world might not be a bad thing for news companies seeking a digital lifeline.

POSTED     April 8, 2010, 2:30 p.m.
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