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Is the iPhone the Next Ad Frontier?

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The iPhone Apps Store is turning out to be a hit not just for Apple, but for the dozens of others who have been selling their apps on the store. Those that have been giving away their applications for free are doing even better. And now they have a way to monetize their apps. Today, a whole gaggle of free ad-supported applications are making their debut, thanks in part to AdMob, a mobile advertising startup based in San Mateo, Calif.

The company has signed up brand-name advertisers such as Herbal Essences, Fox Searchlights’ Choke, MGMs’ College, Toshiba, CBS News, Luxor Hotel and DirecTV. These advertisements are going to be embedded into popular iPhone apps such as Tap Tap Revenge by Tapulous, Sports Tap, BubbleWrap and Loopt, in addition to other apps such as Whrrl and Moblyng that already run AdMob ads. AdMob clearly believes that there’s money to be made by embedding ads into these applications — both for them, and for the app developers. [digg=]

The company claims that its new rich media ad units, which were designed for the iPhone, have hit 100 million impressions in less than a month. “The company’s new rich media ad units designed for the iPhone have been live for just over a month and now has a reach of more than 100 million impressions worldwide each month.

“Ads on the iPhone deliver strong engagement for advertisers with triple, on average, the already high click-through-rates seen on mobile,” the company claimed in a press release. If that does indeed turn out to be a sustainable metric, advertisers are likely to view as the iPhone as platform worth supporting.

I’m sure that with the availability of geo-location data, on-screen advertising can be made more relevant and thus lead to better clickthroughs. More advertising dollars on iPhone apps could encourage developers to write more apps for the platform, and that could make the platform itself more enticing to phone shoppers.

To add a dash of rationality to my own arguments, I would like to point out that my thoughts are based on data from a single month and a single company working with a handful of brand advertisers. Let’s check in a few months and see how the story unfolds.

(Disclosure, Loopt is one of the sponsors for our Mobilize 08 conference.)

33 Responses to “Is the iPhone the Next Ad Frontier?”

  1. I’m impressed with the high CTR that Admob is claiming. It would be interesting if they subjected themselves to an advertising audit from PwC, D&T or any the other accredited systems and process companies. Getting some third party to attest to their claims would be extremely helpful.

  2. I can answer that question (being adjacent to the industry) – no. Apple doesn’t collect any of the ad revenue. Most of it goes to the app developer and some portion of it goes to AdMob. Unless Apple has a deal with AT&T to collect some of the money paid for the data plans on iPhones, their cut ends at the purchase counter.

    As for ads in apps – I say if the cost of free software is having those apps contain small commercials, I’m ok with that and I’m surprised at the negative feedback. We already tolerate it on the web and in most other media. This is really no different.

  3. What do you expect? While I love free software, the developers have to get paid somehow on free versions. Most people will not buy premium versions of computer software, yet alone iphone software. And if ads are the only way of generating revenue, even if the ctr is low, well.. that’s what they have to do.

    Graduation Sashes

  4. If I downloaded an application that had advertising I would immediately delete it because of the advertising even if I paid for it. If I had paid for it I would ask for a refund. The last thing I want in my life is more advertising

  5. Brad Burnham

    There a few other things to consider before getting too effusive about this market broadly and AdMob specifically. Separate the mobile web ads from those embedded in applications, and ask about current CPMs. When you do that you are likely to find that ads embedded in applications still make up a small portion of the total and the CPMs are not much better than run of site ad networks.
    That does not mean that this is not an important market. I, for one, buy into the idea that the personal computer of the future will be the one you carry in your pocket and that the market that develops around that personal computer will be huge.
    It is, however, very early in the development of this market and it is not at all clear that AdMob or any current player in the current mobile advertising market has any assets that are differentiated or defensible enough to suggest that they will be around much less dominant in five years when the structure of this market has settled down and it has grown to the point that the scale is meaningful to advertisers.

  6. The ads AdMob is serving engage the user in a much different way than traditional mobile or internet ads. The trick will be whether users actually take advantage of these new features. Part of that will be to guarantee that the ads’ fucntionality does not overshadow or interfere with the user experience of the app hosting them. It is also a bit of a “chicken and egg” issue, as it will only be successful if advertsiers develop interesting ads that take advantage of the iPhone’s capabilities, but in order to entice them, the audience has to demonstrate they are willing to utilize the added functionality…..

    full disclosure – We have chosen AdMob for the iPhone version of our app to be released. The deciding factor for us was that they were the only ad platform specifically catering to the iPhone and their ads looked the best on our app.