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Apple stuns market with iAd news: $60M in advertiser commitments

For all his whining about mobile advertising, CEO Steve Jobs confirmed yesterday that Apple?s iAd mobile ad network had commitments for 2010 totaling more than $60 million.

Among the iAd advertisers that Mr. Jobs mentioned at the iPhone 4 launch yesterday in San Francisco are Nissan, Citibank, Unilever, AT&T, Chanel, GE, Liberty Mutual, State Farm, Geico, Campbell?s Soup, Sears, JCPenney, Best Buy, Target, DirecTV, TBS, Liberty Mutual Group and Walt Disney Studios. One or more of these brands ? which one not disclosed ? had to pony up at least $10 million to be the one of the initial iAd advertisers.

?IAd is obviously not for people who are light of pocket,? said Mike Morgan, senior analyst of mobile devices at ABI Research, Oyster Bay, NY. ?There are quite a few advertisers on board for the iAd system, and those revenues go back to developers as well.

?If developers can create new revenue streams, then that leads to new app development, which in turn creates more space for ads,? he said. ?It?s so hard for mom-and-pop developers to make money, but a lot of major brands have found value in launching apps as a brand extension, and iAd is not even supposed to take you out of the app.

?That could be a pretty valuable marketing extension, a good way to drive people to your business, as long as they take advantage of location-based services.?

IAd, which is built into the newly announced iOS 4, lets users stay within their application while engaging with the ad, even while watching a video, playing a game or using in-ad purchase to download an application or buy iTunes content.

Developers who join the iAd Network can incorporate a variety of advertising formats into their applications.

Apple will sell and serve the ads, and developers will receive an industry-standard 60 percent of the iAd Network revenue, which is paid via iTunes Connect.

The iAd system requires iOS 4, which will be a free software update via iTunes 9.2 or later for iPhone and iPod touch customers.

IOS 4 will work with iPhone 3G, iPhone 3GS and iPhone 4, as well as second- and third-generation iPod touch (late 2009 models with 32GB or 64GB).

Will the new iPhone operating system and the launch of the iPhone 4G move the needle for mobile advertising? (see story)

If the list of brands that are partnering with Apple to be iAd launch advertisers is any indication, the answer is a resounding ?Yes.?

The iPhone 4, iOS 4 unveiled
Mr. Steve Jobs Yesterday unveiled the iPhone 4 to much fanfare at the Worldwide Developers Conference in San Francisco, Mr. Steve Jobs unveiled the iPhone 4 to much fanfare. So what do marketers need to know in advance of the June 24 actual launch?

Mr. Jobs revealed an array of upgrades and new features to the iPhone, as well as a new name for its operating system?iOS 4. However, for marketers, content providers and application developers, one of the key revelations was the official introduction of iAds and the impressive list of brands that have signed on for campaigns launching July 1.

?As far as technological features, the new screen is an important aspect, as it is going to allow you to show content on that device better,? Mr. Morgan said. ?What?s going to drive advertising? The content you can get on the device such as iBooks and iAds.

?All of that is developing a bunch of tools and extending the platform for these advertisers across iPhones, the iPod touch and iPad?all of them will have this new ad solution,? he said. ?The iPad and the new iPhone 4 will be an optimal canvas for advertisers.?

One major concern
AT&T?s decision to phase out unlimited data plans may affect the consumption of paid and ad-supported mobile content.

AT&T spun its new wireless data plans as geared toward making it ?more affordable for more people to enjoy the benefits of the mobile Internet,? but the move is clearly about reigning in the heaviest data users, and all-you-can-eat data plans are vital to spur the high levels of mobile content consumption on which publishers, marketers and advertisers thrive (see story).

?You have the new iPhone 4 available, but to get it with all of its features, you have to dump your unlimited data plan and get a 2 GB cap, which makes me nervous,? Mr. Morgan said.

?From multitasking and high-def video to Web surfing and app usage, all of these things require more data, but now you may have to pay more for consuming that data, which may create anxiety,? he said.

Step forward?
Even with concerns over networks capacity and data plans, there is no doubt that the iPhone 4 will rack up a few sales.

And, as always, brands and content producers go wherever the consumers are.

?The first key is whether Apple is continuing to advance the platform, and it certainly is doing that from multiple perspectives,? said Ross Rubin, director of industry analysis at the NPD Group, Port Washington, NY. ?They are continuing to refine the hardware and the form factor, keeping the enhancements of iOS and applications at the forefront.

?Clearly of most importance for marketers, Steve Jobs noted that there will be a large base of devices that are incorporating the iOS, including iPhone, iPod touch and iPad, and they will all be open to the iAd platform, rolling out July 1,? he said.

?While it?s not necessarily a feature that consumers find attractive per se, it helps to enable the applications they use, free applications that are dependent upon advertising revenue, including apps such as Pandora for example.?

Could this be a win-win for brands, application developers and consumers?

Only time will tell if the large sums brands are handing over to Apple to launch iAd campaigns will be worth the hefty price tag.

?Apple has paid out a billion dollars to developers, which reflects the revenue that has been generated through the App Store via mobile apps, and look at the early success of the iBook store,? Mr. Rubin said. ?Apple is making the iPhone and related devices robust platforms for developers and content providers.?

Forrester Research mobile analyst Charles Golvin? first-take on the new Apple iPhone said that while the iPhone 4 is not the leap forward that Apple paints it as, it is an exceptionally beautiful device and is a substantial upgrade that will succeed in maintaining Apple?s mind and market share growth.

Apple?s carrier partners will benefit more in renewed loyalty as existing customers upgrade than in new customer acquisitions, though Mr. Golvin expects AT&T?s new introductory pricing tier will lure in family plan additions as well.

With its FaceTime video calling application, the company has demonstrated what it does best: make technology usable by mainstream consumers.

Mr. Golvin said that if Apple succeeds in convincing the industry to adopt FaceTime as a standard, the New York World?s Fail of 1964 will finally realize one of its visions: video telephony.

Overall, reaction to the announcement has been largely positive.

?It?s an impressive advance from a hardware and features perspective?it?s as big of a leap forward as the first iPhone was relative to what else is out there on the market,? said Noah Elkin, senior analyst at eMarketer, New York. ?The quality of the brands they?ve signed on as advertisers, the large financial commitments, are certainlyindicative of pretty high intersest in iAd.

?Everything that Mr. Jobs showcased with the platform will make it a better content consumption device that it was before, including a better gaming device,? he said.

New features
The iPhone 4 comes with iOS 4, which includes more than 100 new features and 1,500 new APIs for developers.

IOS 4 features multitasking, folders, enhanced mail, deeper enterprise support and, of course, Apple?s new iAd mobile advertising platform.

The iPhone 4 will be available in the United States, Britain, France, Germany and Japan on June 24, starting in the U.S. at $199 for the 16GB model and $299 for the 32GB model with a two-year contract in both Apple and AT&T?s retail and online stores, Best Buy and Walmart stores.

The new iPhone 4 features FaceTime, Apple?s WiFi-enabled video calling platform, and the new Retina display, which the company claims is the highest resolution display ever built into a phone.

Apple?s 3.5 inch Retina display has 960 x 640 pixels?four times as many pixels as the iPhone 3GS and 78 percent of the pixels on an iPad.

?Apple's new iPhone's video capabilities are going to be a great step forward in the industry,? said James Citron, CEO of Mogreet, Los Angeles. ?With the ability to consume and share video easily, both consumers and advertisers will win because of how deeply the iPhone is integrating rich media into the device.

?Nonetheless, as with each iPhone release in the past, it will likely place increasing demands on network bandwidth to keep up with consumer demand,? he said.

In addition, iPhone 4 features a 5 megapixel camera with LED flash, HD video recording, Apple?s A4 processor, a 3-axis gyro and up to 40 percent longer talk time?in an all-new design of glass and stainless steel that Mr. Jobs claims is the thinnest smartphone in the world?9.3 millimeters.

The new iMovie application for iPhone lets users combine movie clips, add dynamic transitions and themes and include photos and music. Users can buy it for $4.99 through the App Store.

The new iBooks application will be available for iPhone 4 as a free download from the App Store and includes Apple?s new iBookstore, letting users browse, buy and read books.

There are now more than 60,000 books available in the iBookstore, and users have downloaded more than five million books in the first two months.

?It goes without saying, the iPhone 4G represents a significant new feature set from Apple, one we at Nuance are very interested in,? said Scott Taylor, vice president of mobile solutions at Nuance, Burlington, MA.

?For example, it is clear many of these features, such as application multitasking, improved resolution and cameras and unified inbox, will further increase the utility of the iPhone as a device for staying connected to people and information with this highly mobile user base,? he said.

Marketers, as well as content and service providers, are all figuring out how they can use the new iOS 4 features to meet their objectives and further their company?s business.

?With these expanded features we expect there will be an increase in users? demand for a simple and intuitive means by which to interact with applications when they are on the go?and as this demand increases the opportunities for speech technology increases as well,? Mr. Taylor said.

?And, we are of course eager to see how the new audio capabilities?such as the two microphones and noise cancellation?can be leveraged to improve speech recognition,? he said.     

?And, finally, from the application developer perspective, we are very pleased to see that Apple has reaffirmed its commitment to this important community as we continue to see more and more iPhone developers seeking to incorporate speech technology into their applications.?