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ECommerceTimes.com

Apple to Introduce Mobile Advertising Into Its Ecosystem

By Erika Morphy
Jan 5, 2010 2:07 PM PT

Apple is acquiring mobile ad company Quattro Wireless for an undisclosed amount, Andy Miller, Quattro's vice president, mobile advertising, said in a statement on the company's Web site.

Apple to Introduce Mobile Advertising Into Its Ecosystem

Apple and Quattro did not return calls from the E-Commerce Times by this article's deadline.

Apple, of course, has a rich array of products, including the iPhone and iPod touch lines. What it doesn't have is a distinct platform for advertisers to reach the huge numbers of consumers using these devices.

The Quattro acquisition is expected to change that by adding another option for monetization to Apple's primary business models.

"Apple is gearing up next-generation mobile phones -- higher-end as well as lower-end -- with advertising as a an alternate go-to-market strategy," Srini Dharmaji, CEO of GoldSpot Media, told the E-Commerce Times.

"Essentially, the growth in iPhone and [iPod touch] usage has put Apple in the position of delivering lots of content," Michael Boland, senior analyst and program director with BIA/Kelsey, told the E-Commerce Times. "A mobile ad network is a logical step and puts a monetization engine behind some of these efforts. This is also something in which it showed interest through the rumored failed bid for AdMob last quarter."

Will Users Balk?

There are several questions surrounding the deal, not the least of which is its value. Will Apple develop an ad platform for third-party networks? That would be a complete departure from its current business model. Or will it focus on building a platform for its own products, including the rumored tablet computer?

"Apple obviously has a huge investment in the iPhone and now they are coming out with the iTablet," noted Greg Sterling of Sterling Market Intelligence. "From what I can see, its primary goal is to offer monetization to its own ecosystem right now."

There's also the question of whether Apple's user base will accept advertising on their gadgets.

Mobile phones are intimate devices -- especially iPhones, which can be endlessly customized, Adam Hanft, CEO of the marketing and branding firm Hanft Unlimited, told the E-Commerce Times.

Advertising doesn't really work in this environment, he said. "It's a jarring intrusion that poisons the experience. And it's too easy for consumers to ignore. The cliche of sending someone a message for a discount on a latte when they're passing a Starbucks has encouraged many tens if not hundreds of millions of misspent assets, of which the Quattro and AdMob acquisitions are two recent examples."

That said, the potential its user base offers advertisers may well be too great for Apple to resist. "The iPhone has introduced a profound social change," noted Hanft.

Apple will likely try to balance demands from advertisers and expectations from its user base by insisting that marketers craft ads that are tailored for the iPhone environment. That shouldn't be too hard a reach, Hanft said, as most Apps developed for the iPhone are glorified ads in the first place.

The Right Time

Timing, particularly in light of Google's pending US$750 million AdMob acquisition, may have pushed Apple to take this step, suggested Sterling. "There were rumors that Apple wanted AdMob, and it may have been that they were afraid that all of the good mobile ad exchanges would be snapped up."

It's obvious now that the race is on, remarked Joe Cufari, VP of Personal Communications Devices (formerly Audiovox Communications).

"The new model may eventually move to little to no subsidy, and the device will be underwritten by the advertising that will exist on it," he told the E-Commerce Times.

"This model is much better for the advertiser, as it's much more personal and completely real-time," added Cufari. "It could also allow the advertiser to take advantage of location-based ads."


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