Apple iAd Is a Stake Pointed at Google's Heart
You can't deny that Apple (AAPL ) is good at making money and is always happy to acquire more. But the company's announcement of its new mobile advertising platform, iAd, at the iPhone OS 4.0 event yesterday is less about making money than it is trying to thwart the strategic plans of rival Google (GOOG).
Yes, I'm sure some users are thinking aye-yie-yie at not only an other iMoniker, but the thought of facing ads in apps. As Apple CEO Steve Jobs explained it, he saw the chance to deliver a billion ad impressions a day over iPhones and iPads. The rationale for that number is that people spend half an hour a day using apps, with one ad every three minutes and 100 million devices.
Frankly, the number currently is probably overstated. According to Apple's own numbers, it had sold 42.5 million iPhones through last quarter. Many of those sales are upgrades, the number of iPhones currently in use is likely far lower. Even with iPod touches thrown in, Apple is nowhere near close to 100 million devices that could serve up ads -- yet. However, throw in iPads and wait a couple of years and the volume is certainly in the many tens of millions.
With iAd, ads will appear in apps where developers wanted to enable the revenue stream, with Apple taking 40 percent. But you have to wonder why Apple is getting into this business. It's not as though Apple is hurting for revenue, nor for apps whose developers could charge for their software. The driving reason is that Apple wants to stick it to Google. Enabling iAd does that in two ways.
Google CEO Eric Schmidt -- not currently among the closest friends of Jobs, to put it mildly â€"- has stated that he sees mobile advertising as the next big thing for Google. Search ad revenue increases, but already you can see Google's growth slowing, and the tech sector is addicted to constant expansion. The more mobile ad dollars that Apple takes, the more it denies Google, restricting the potential revenue and size of a main competitor.
The other way iAd injures Google is through app developers. Smartphones need apps for successful consumer acceptance, and a new way to make revenue attracts attention from developers who might otherwise put time into Android software.
The one potential for this to blow up is if users get resentful about seeing ads in apps. However, the only way to know if that will be an issue is to watch what happens over the next year -- not just with initial adoption by developers, but in who actually makes money, and whether consumers complain over annoyance.
Stake Image: Flickr user DRB62, CC 2.0.