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.