The future of ad sales (3)

With the introduction of iAd, only shortly after the iPad, it’s interesting to see what Steve Jobs himself thinks of the future of advertising. Apart from selling his highly praised hard and software, he now also wants to take his share of the advertising income made on apps. I read how analyst Toni Sacconaghi (analyst at Sanford C. Bernstein) upgraded his estimates on May 7. He thinks Apple’s new advertising platform could generate an additional $800 million in revenue for Apple in fiscal 2010 and another $1.6 billion in fiscal 2011. And he also estimates Apple could keep another $250 million from more conventional advertising that runs on media ads/apps on the iPad. Apple will sell the ads, with developers who create the apps getting 60% of the revenue of any mobile ads, and Apple taking the remainder.

Mr. Jobs, speaking at an event at the company’s headquarters, took direct aim at Google when he noted that people are increasingly accessing the Internet on phones rather than search engines. He said ads inside apps were a more attractive way for companies to advertise on phones compared with traditional search ads, an area dominated by Google. Some people agree, others don’t.  From the latter category, I read this interesting opinion: The idea that ads are best served inside the sanitized, controlled environment of the app — and not the free environment of the Web at large — is an idea that goes against the history of the Internet. Apple seems to be betting that the pendulum will somehow swing back, and money will flow back towards the simpler, cleaner experience offered by apps.

But, as a result of this line of thinking (iPad making the web safe for advertisers) some publishers believe that ads on the iPad should be more expensive than those in traditional venues because the iPad presents media content so beautifully. Others just argue against that and say that if the iPad increases the supply of advertising venues, and the number of different types of content in which ads can appear also increases, how could this possibly also lead to an increase in prices?

Suddenly, the market has a new view on how to attract audiences and advertisers. We just got used to Google, serving ads wherever the user might be, and regardless of the device they are using. And now there is Apple with their protected environment on iPhone and iPad, using the iAd platform, offering a simple, fun, bug-free universe for users and advertisers.

In both cases the loser might be the media agency, which could lose control over where ads are appearing – after studying data, planning and negotiating rates. Elements that might not be available that easy in the near future.

The future of ad sales (2)

Till today, Google has the advertising clout with major brands all over the world thanks to its desktop search empire. Google wants to buy itself into the mobile advertising business by taking over mobile ad firm AdMob (late 2009 and currently being investigated), which will provide the same type of in-app ads like Apple. Despite the lack of track record in digital advertising, Apple on the other hand, has a strong mobile cachet thanks to the iPhone, which has sold more than 50 million units in three years, and the iPad, which sold over 500,000 units in the first week (1 mln after 1 month!). iAd already has analysts rethinking their predictions for advertising on the mobile Web. Steve Jobs clearly believes that ads in the context of apps make more sense and have more effect than the generic mobile search.

Creative agencies who have been presented to by Apple on using iAd and could only reveal bits of the presentation, such as this: each published advertisement will carry the iAd logo to differentiate it from other advertising content, that there will be only one advertising banner per screen and that the ads “look and behave a lot like apps”. Unlike browser-based ads, iAd ads can tap into all major OS features of the phone, from compass and accelerometer to the multitouch interface.

Mediabuyers’ view:  Apple is going to sell 100% of the ads. Apple doesn’t do cheap, they do premium. So I’d expect buyers to become trained very quickly that this is expensive inventory.

Another view (blog by Henry Copeland): Apple thinks it can divide the market as it does with app developers: the creator and the buyer, mediated by Apple. The market for advertising is far more complex. First there are the end clients, or: brands, with the money. There are various types of agencies: creative, ad buying, planning, strategic. Then there are the publishers and other content creators. There are ad networks. There are tech companies running around trying to sell any and all of the other players their latest innovation. And of course there are sales teams larded throughout, each selling to the next level in the pipeline. Everyone talks with everyone, covertly trying to eat their partners’ lunches and win an upper hand.

Copeland goes on: “Maybe Apple doesn’t know this, but most of advertising innovation isn’t instigated by agencies, but by publishers and ad networks and tech vendors competing tooth and nail to win business from agencies and their clients.”  I partly agree with Copeland, but this new medium called a ‘tablet’ is taking the market by storm. The numbers of iPads sold within 28 days are staggering.

Key issues for print publishers these days:

1)      How to stay relevant for readers and brands using their platform.

2)      What publishing format will prevail in the next 10 years – print, internet or mobile apps?

3)      How to protect your expensive content?

4)      How to deal with new dominant players like Apple?

The future of ad sales (1)

Apple’s iAd – On April 8, Apple introduced iAd, an advertising platform that runs ads directly within applications for the company’s popular iPhone smartphone and iPad tablet. Advertisers will love it because in contrast to current web ads, users will not be pulled away from the content within the apps after visiting the link. On top of that, and maybe even more important, iAds will bring much more engaging advertising than online ads currently offer. Apple’s CEO Steve Jobs unveiled iAd during the introduction of iPhone 4.0, stressing that advertisers are better off targeting ads within applications rather than running ads alongside search results (read: Google). He thinks they can offer the opportunity to make 1 billion ad impressions a day on tens of millions of Apple mobile device users. iAds will allow apps developers to use advertisements in their apps, pocketing 60% of the revenue. Apple will sell and host the ads (!).

Well informed ad sales sources are quoted to say that Apple could charge advertisers 5-10x the normal amount for campaigns created for applications running on Apple’s iPhone and iPad. The price could reach as much as $1 million for iPhone and iPad ads, compared with $100k to $200k for comparable mobile ad deals, ad industry officials told the Wall Street Journal. Piper Jaffray analyst Gene Munster says he expects the mobile in-app ad opportunity will be roughly $220 million in 2011, the first full year of iAd, commensurate with the growth of Apple’s mobile device user base.

Ad sales view: Apple may charge advertisers a penny each time a consumer sees a banner ad, and $2 each time someone taps on that banner ad. Apple could also charge up to $10 million for ads in iPhone applications to begin appearing with the launch of the iPhone 4.0 in June, the Journal said.

An analyst view: “It seems the gap between the mobile budgets Apple is going for is much larger than most mobile budgets. The big brands might step in, but the reality is money from mobile still comes out of emerging media test budgets, which are smaller budgets. That said, if anyone is going to pull it off, it’s going to be Apple.”

The Future of Reading

In Feb this year, Josh Quittner wrote an interesting article in Fortune called The Future of Reading. For those who don’t know Quittner – until Sept 07, he was editor of Time Inc.‘s Business 2.0, which he joined in April 2002 after seven years at Time Magazine, where he served as technology editor and the editor of its spinoff technology supplement Time Digital.  He is considered as one of the magazine industry’s digital drivers.

Allow me to shorten Quittner’s article. Central issue from a (digital) magazine point of view:  will consumers pay for content on a tablet when they can get free web content. Most people still enjoy the printed medium. But they want it delivered in an exponentially more useful way. With the arrival of Apple’s iPad and other tablet computers — touch sensitive, full color, easy to watch video on, network-connected to virtual newsstands and stores — the publishing industry might once again have a remunerative way of giving it to them.

The web is for scanning, not deep reading. People typically spend two minutes or less on a site. Why do you think the killer app is called a browser? It’s hard to make money with online advertising. Today, online ads bring in junk CPMs — about 10% of the revenue per 1,000 views compared with print. No wonder that the Wall St Journal has brought its online content behind a ‘pay wall’ and fighting search engines to make them stop searching and indexing their online content.

While old media can find much to cheer about with the arrival of the Tablet Age, which promises to smooth old media’s transition from paper to digital, the publishing industry still faces considerable obstacles. Key questions raised:

1. Will anyone be willing to pay for content delivered to a tablet when they can get information for free on the web? Steve Jobs proved with that first iPod that people would willingly pay for music when you made it easier to buy than to steal — especially when the media is linked via a store to a cool, fetishistic device. When you’ve invested in a tablet (or an iPhone or a Droid or a Kindle, etc.) and love it, you want to increase its functionality — with media.
2. But aren’t tablets just a better way to browse the web? Jobs pitched the iPad as a better way to access the web, in fact. But with the tablet, there ought to be room for great, downloaded apps that are usable offline too.
3. Reading? Reading is dead. According to the Magazine Publishers Association, 174.5 million people paid to subscribe to magazines in 1970; that number has steadily and consistently risen over the years, to 324.8 million as of 2008. Magazines are just vertical collections of content that feed our individual interests. Like blogs. The trick for publishers will be to figure out how to be compensated for individual articles as well.
4. How will tablet-based ads work better than the web? While I think most publishers will allow you to skip an ad with a swipe of your fingers, a 10-inch full-color touch screen gives the advertiser a rich enough canvas to grab you by the eyeballs and make its case.
5. Can traditional publishing companies reorganize and move fast enough to embrace and serve new platforms? They haven’t reinvented or reimagined themselves so far. That’s because the old way of doing business has been blindingly successful. The biggest mistake they made was in ignoring the people who might have been able to solve their problems in the late 1990s when things went bad: their best reporters. Instead they tapped consultants and strategists. Publishers of the greatest newspapers and magazines should have gone to their very best reporters and deployed them!
6. Conclusion: The model of the magazine as we know it is just outmoded. The publishing industry — books, magazines, newspapers — ought to be approaching the problem of content creation differently. We should be thinking about selling attention. Content creators are battling for a user’s time.

iPad competition

`Nook`- the American book chain Barnes & Nobles will release an update for the Nook, the e-reader of this company. Users will be able not just to read books, but also surf the net and play games. Users can, after the update, also shop and check out books one hour for free in the Barnes & Nobles webshop. Apart from this, the bookshop chain will also deliver a better WiFi-connection which enables users to turn pages quicker and offers a better navigation for the touch screen.

The arrival of the iPad means more competition for the existing e-readers in general. Amazon.com already came up with an answer offering a simpler browser for the Kindle. In February, Barnes & Nobles announced that since the arrival of the Nook (Oct 09), their online sales has increased with a whopping 32%. The chain opened the webshop back in 1997 to compete with Amazon.com. The e-readers that were launched already before the Kindle and Nook were Sony’s Reader and iRex’ iLiad (Philips). More e-readers are about to be launched this year, among them Adam by Notion Ink and the JooJoo by Fusion Garage. The HP/MS joint venture  for the Slate was unfortunately cancelled this week (see discussion on LinkedIn). A chronological order of e-reader introductions is listed below, including current price and OS.

Reader/Sony (Jp)               (Nov 06, $350, E-ink, Linux)

iLiad/iRex (NL)                    (Aug 06, $499, E-ink, Linux)

Kindle/Amazon (US)        (Nov 07, $259, E-ink, Linux)

Cybooks/Bookeen (Fr)    (Dec 07, $350, E-ink, Linux)

Cool-er/Interead (US)      (May 09, $249, E-ink, Linux)

Nook/B&N (US)                    (Okt 09, $259, ePub, Android)

iPad/Apple (US)                   (Feb 10, $499, ePub, iPhone, Safari)

Adam/Notion Ink (US)    (Q3 2010, $325, Android, Firefox/Chrome)

JooJoo/Fusion Garage (US) (Q2 2010, $500, propriety OS)

Slate/HP+MS (US)               (Q3 2010, $400, W7, Flash) project cancelled 04/2010

Courier/MS (US)     (Q4 2010, $ ?, WCE6)