Why Apple's $1M iAd Price Tag Will Come Back to Bite It Down the Road

Last Updated Apr 29, 2010 12:53 PM EDT

Apple (AAPL) is demanding $1 million from advertisers who want to be first onto its iAd platform for the iPhone and the iPad -- a major shot in its war against Google (GOOG) for control of mobile advertising and apps.

The two companies have adopted different postures in their relationship to advertising, and it's not clear which will win. Apple's strategy seems likely to give it a short- or medium-term lead as its hot new devices charm everyone that encounters them. But Apple's bottleneck-control strategy over how ads are created may give Google and its Android platform the long-run advantage.

If you read between the lines of recent coverage of iAd, you can see that although ad agencies are excited about it, they're wary of the level of control Apple is exerting over how ads are created for it. The WSJ reported:
The ads will go through an approval process, and Apple will build the ads itself during the first couple of months to make sure they work well and attain a certain aesthetic and functionality, ad executives say. Eventually, Apple plans to create a developer kit so that agencies will be able to design and create the ads themselves.
"As a creative director, I can completely understand that they created this new baby and they want to make sure it gets born looking gorgeous. But as a creative director, I don't feel completely comfortable letting Apple do the creative," says Lars Bastholm, chief digital creative officer at WPP's Ogilvy.
Apple's control over which apps get onto the iPhone has already led to several screwups. A Pulitzer prize-winning comic artist's app was rejected for criticizing politicians, a teaching tool using an unapproved code language was approved and then withdrawn, and, famously, no porn is allowed on the iPhone.

Google, by contrast, is actively reaching out to app developers and agencies, and seems determined to help the creative community rather than teach and control it. The NYT got this message from an app developer, praising Google's developer-friendly approach and criticizing Apple's "we'll deal with you when we see fit" system:
... it took us about three months of resubmitting our app to Apple before they stopped rejecting it for inappropriate content. And even now (after we peaked at the No. 7 paid app), we still have no relationship with anyone there. Huge difference in approaches between the two companies.
So how might Google -- with its uglier, less well designed platforms -- win this war? By leaving itself open to whoever wants on to its systems, Pulitzer winners and pornographers alike. It is difficult to maintain a monopoly in the long run because monopolies tend to stifle innovation. Apple's bottleneck for app and iAd approval is one example of such stifling. The future of mobile, however, is all about superior innovation, and in the long run superior innovation will come from systems that anyone can get onto for whatever reason.

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