Apple Could Jump-Start Mobile Advertising, Challenge Old Media

Apple Inc. Chief Executive Steve Jobs said Monday that the company’s iAd platform, its mobile advertising network, will go live on July 1, introducing yet another disruptive force in the media industry.

The rise of digital advertising already has weighed heavily on traditional media businesses–such as publishing, radio and television–and the nascent mobile market is expected to bring a new wave of upheaval as devices like Apple’s iPhone and iPad proliferate.

Mr. Jobs told an audience at his company’s annual World-wide Developers Conference in San Francisco that the iAd platform will pull in $60 million worth of advertising in the second half of this year, with spending commitments made in recent weeks by major advertisers such as Nissan Motor Co., Citigroup Inc., Unilever PLC, General Electric Corp., AT&T Corp., which is the exclusive service provider for the iPhone, and Walt Disney Co., where Mr. Jobs holds a board seat and is a major shareholder.

“For something that hasn’t been in the market and is unproven, that’s a lot of money,” said Noah Elkin, senior analyst with eMarketer. “By getting behind mobile advertising in this way, Apple could create a rising-tide situation that will give the business a lot of momentum.”

Mr. Jobs said the iAd platform will be built into Apple’s upcoming new phone, the iPhone 4, which he introduced at the conference. The platform, he said, will allow developers to incorporate sophisticated, interactive advertising into the applications they develop for Apple’s App Store, which sells downloadable programs that run on its devices. The App Store now has 225,000 applications available that have been downloaded a total of five billion times.

Apple will give 60% of the revenue generated from the ads to developers. Mr. Jobs said the company doesn’t aspire to be an advertising agency; rather, it developed the platform “to help our developers earn money so they can continue to create free and low-cost apps for users.”

The mobile advertising market will reach $593 million in 2010 before more than doubling to almost $1.6 billion in 2013, eMarketer estimates. In January, Apple acquired Quattro Wireless, a mobile advertising company, for an undisclosed sum, and used its platform to create iAd. Google Inc. and a host of other firms are also competing in the business.

“Apple has proven itself to be one of the most innovative companies in our lifetime, and they will be a powerful player in the advertising,” said Bob Davis, a partner with Highland Capital, which was a stakeholder in Quattro before it was sold to Apple. “There’s already a lot of tough competition out there though.”

John Shelton, chief executive of Strata, an ad-software provider that manages $50 billion worth of ad transactions, said that, while mobile makes up a small portion of the total ad market, there is pent-up demand from large advertisers and agencies to enter the space, and Apple is poised to tap into it at an opportune time.

“I think you’ll see a lot of agencies really pushing this,” Mr. Shelton said. “These devices are just showing up in the market, like televisions in the 1950s, and all of sudden, I think you’re going to see a watershed of advertising coming in here.”

Provided By: TheWallStreetJournal

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