Apple Developing iAds for Video

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Apple will be adding a video angle to its advertising offerings in the coming months, with a new product that will deliver in-stream ads to videos shown on the iPhone, iPad and (potentially) the Apple TV, according to multiple sources. The new product would not just expand Apple’s advertising capabilities and boost revenue, but could help convince more content owners to make their videos available on its iOS devices.

Many publishers have been slow to bring their videos to the iPhone and iPad, due in part to the lack of mature tools available for monetizing content on those devices. Because iOS devices don’t support Adobe Flash, publishers need to do additional work to make their current ad-serving systems work with the HTML5 video delivery required for the iPhone and iPad. That’s caused many publishers to think twice before delivering video to those devices. (For Adobe’s view on the HTML5-Flash battle, come see Adobe CTO Kevin Lynch at NewTeeVee Live on November 10, 2010 in San Francisco.)

But Apple’s new ad product could solve that problem by giving publishers an easier way to monetize their videos. According to a source, the new in-stream ad product would work with both Quicktime video and HTML5-delivered video. As a result, publishers would be able to serve the same type of pre-roll, post-roll and mid-roll video ads as in their online Flash players, but they would be able to do so natively in apps and through mobile web pages that appear on iOS devices.

The ad product would not only enable video publishers to serve their own ads against videos on the iPhone or iPad, but it would give Apple the ability to act as a video ad network for those that don’t wish to sell their own inventory. The in-stream ad system is also expected to have some targeting capabilities built-in, with mobile location data and anonymous user behavior data to help deliver targeted ads to consumers.

One source says the new ad product will most likely be introduced in the first or second quarter of next year, meaning it might be announced as early as Apple’s annual January event. Apple announced its first iOS ad product, iAd, at an event held in April this year.

Initially, Apple’s in-stream ad product would support video delivered to the iPhone and iPad, but the bigger opportunity for Apple could be in bringing the offering to its Apple TV set-top box. Apple has been working hard to try to develop a linear, subscription-based video service to compete against the big cable companies, but one thing holding it back is the ability to provide in-stream video ads on the device.

While many content companies, including the big broadcasters like ABC and Fox, are just fine selling or renting TV episodes on Apple devices, they still make most of their money from advertising. Offering up a subscription video service without a mature ad offering to go with it would be a non-starter, and could be one of the main reasons that Apple has had a tough time getting major content companies on board. But the new video product could alleviate some of those concerns by giving TV programmers the same type of dual revenue stream they get from cable providers. That could open up a whole new business for Apple and for its publishing partners.

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