ChasNote

One thing that’s made me a fan of Apple’s iAds approach is its focus on building a mobile advertising experience for brands wanting *create* demand in mobile environments, rather than a platform that allows retailers and direct-response marketers harvest demand that was created elsewhere (the Google approach). As mobile advertising matures, brand advertising and DR advertising will both be elements of the winning model. But in these early days, as the the big players — namely Apple and Google — are establishing their ad products and their reputations, I’m wondering if it’s a good move for Apple to open the floodgates to mobile banners from app developers pitching you on their $0.99 downloadable products. When advertisers optimize for click-through and conversion-to-immediate-sale, the banners tend to favor jarring colors and annoying tactics to fool us into clicking — not beautiful ads that enhance the experience, like Superbowl commercials that are more fun to watch than the game. According to the Business Insider,

“the new iAd for Developers program is Apple’s way of getting more (albeit cheaper) ads in its system to fill its inventory glut, while also moving more app downloads through its App Store, and helping the developers who run its ads in their apps make a little more money. A potential win-win-win, if it works out.”

Cheaper ads to fill an inventory glut? That doesn’t sound like the formula that’s made Apple successful elsewhere.

From TechCrunch coverage of Apple’s WWDC:

“Apple has iAd commitments for 2010 totaling over $60 million, which the company says represents almost 50 percent of the total forecasted US mobile ad spending for the second half of 2010. Jobs said in his keynote that Apple has only been selling iAds for 8 weeks.”

Watch the demo here at the AdMob blog.

I’ve recently come out as supporting Apple in the mobile advertising war. This demo of iPad ad formats offered by Google-owned AdMob isn’t changing my mind just yet.

From Ken Auletta’s Publish or Perish essay in the New Yorker:

“Traditionally, publishers have sold books to stores, with the wholesale price for hardcovers set at fifty per cent of the cover price. Authors are paid royalties at a rate of about fifteen per cent of the cover price. A simplified version of a publisher’s costs might run as follows. On a new, twenty-six-dollar hardcover, the publisher typically receives thirteen dollars. Authors are paid royalties at a rate of about fifteen per cent of the cover price; this accounts for $3.90. Perhaps $1.80 goes to the costs of paper, printing, and binding, a dollar to marketing, and $1.70 to distribution. The remaining $4.60 must pay for rent, editors, a sales force, and any write-offs of unearned author advances. Bookstores return about thirty-five per cent of the hardcovers they buy, and publishers write off the cost of producing those books.”

So when the book is an ebook, publishers aren’t paying $1.80 for paper or $1.70 for physical distribution, or the $1.80 plus $1.70 on the thirty-five percent of books they produce and distribute and later sell for pennies on the remainders market. Say you sell 65 physical books, that’s $350 in costs (since you need to print and distribute 100 of them) — $5.38 per book that you don’t need to spend if book buyers read it on a Kindle or iPad.

Yet David Young, chairman and CEO of Hachette Book Group, seems to speak for all the big publishers (per Auletta’s article) when he says:

“The big concern — and it’s a massive concern — is the $9.99 pricing point. If it’s allowed to take hold in the consumer’s mind that a book is worth ten bucks, to my mind it’s game over for this business.”

What?! The current business model earns book publishers a buck or two on an item that retails for $26 and sells for about $13 (since big retailers often sell best-sellers at half price). If the Kindle version saves publishers more than $5 per book, and Amazon wants to sell them for $3 less than the physical edition of the book ($10 instead of $13), why are publishers up in arms? Doesn’t it seem like publishers ought to make what they make now, plus some part of that extra $2 per book?

In the inaugural post at his eponymous blog, my colleague Bob Buch suggests Apple’s vertically-integrated approach to business and not-integrated-enough approach to mobile advertising may limit its initial success.

“After launching DiggAds, I’ve become convinced that the future of advertising will be to integrate ads into the user experience of the site. This doesn’t mean just sticking them in the middle of the page, it means including the functionality of the site within the ad itself — essentially, transforming ads into content. Examples of this include DiggAds, Facebook’s social ads, Twitter’s new Promoted Tweets product, and of course, Google AdWords. I was disappointed that Apple did not follow this model.”

Amen.

Check out the full post.

More thoughts on the battle between Apple and Google for mobile advertising dominance.

Toward the end of Ben Parr’s post at Mashable on the nascent mobile-advertising battle between Apple (who recently acquired Quattro) and Google (who recently acquired AdMob) he says “Google’s greatest advantage against Apple is that it has more relationships and experience with web-based advertising, and it already has the technology to back it up.” But, then again:

“If tomorrow Apple launched an ad platform for iPhone and Google launched a comparable one for Android, Apple would win simply because it has a larger base of iPhone and iPad users to advertise against, making it more enticing to developers and advertisers alike. That advantage cannot be understated.”

Maybe.

But it’s not just about ad-sales experience or smartphone market share. It’s also going to come down to corporate DNA, and who’s wiring is better suited to capturing the types of ad dollars being spent in mobile. If mobile advertising is driven by targeting for local advertisers and retailers offering coupons — the transactional, direct-response arena that it dominates — Google will win big. If national and global marketers put their wallets behind building brands and stimulating (rather than harvesting) demand on mobile devices, I’m putting my money on Apple.

Earlier this week Digg launched its iPhone app. Chris Howard shares more of the details (including a chance to win an iPad) at the Digg blog.

Look out, Simon and Spearfishing 3D, the Digg app has entered this week’s Top 10 downloaded apps!

Back in November, the NY Times reported that Apple filed a patent for un-skip-able ads for iPhones and iPods. Speculation at the time by ChasNote reader RolfSF:

“methinks this is geared more toward some of the ad-supported software models, perhaps giving some ‘free’ iphone apps a means to be free for a price.”

RolfSF was listening in on Apple’s earnings call earlier today and heard something that confirms his speculation: Peter Oppenheimer said the company had acquired Quattro to “offer developers a seamless way to make more money” in their apps, particularly free apps.

You have to wonder if Apple plans to staff an ad sales team.

From NYT:

“Filing a patent application, of course, doesn’t necessarily mean that the company plans to use the technology. But the application shows, at the least, that Apple has invested in research to develop what it calls an ‘enforcement routine’ that makes people watch ads they may not want to watch.

“Its distinctive feature is a design that doesn’t simply invite a user to pay attention to an ad — it also compels attention. The technology can freeze the device until the user clicks a button or answers a test question to demonstrate that he or she has dutifully noticed the commercial message. Because this technology would be embedded in the innermost core of the device, the ads could appear on the screen at any time, no matter what one is doing.”

An “enforcement routine” to force ads down the throats of iPod users?! That will go over well! It reminds me of that ridiculous attempt by Japan’s government to make it a crime to skip TV commercials back in 2005.

It’s fun to watch these AT&T commercials from 1993, in which they do an excellent job of predicting the next decade and a half of technical innovation. What they didn’t see coming was Google, Apple, Skype, WebEx and whoever makes FastPass.

(Thanks, NOTCOT! ????????? ????????? ?????

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