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.

Apple Publishing Inc. (2)

Book publishers in general are happy with Apple’s iPad. The 30/70 revenue share was gladly accepted and seen as a way to break the Amazon dominance on the e-Reader market.

So much for the book publishers. One-off (book) revenue deals sound fair, but what about the newspapers and magazine market in the US? Recurring sales on newsstand is one, but just think about the subscriptions! These reader relations are dating back for years and will now be consumed by Apple.

Another issue is the ownership of subscriber data. Publishers have spent millions of the years to collect data about their readers. That knowledge not only influenced their marketing plans, but also sometimes the editorial directions a publication took. By getting separated from these data (Apple doesn’t have a habit of sharing consumer data with partners) publishers claim not to be able to make a good publication in future. Other like Conde Nast are more positive and consider the iPad as a ‘digital newsstand’.  Listen to Sarah Chubb, president of Condé Nast Digital: “We also don’t get the consumer information in a typical newsstand sale, so part of why I’ve been thinking conceptually about this is, out of the gate, we think of it as a newsstand buyer.”

The companies will also pull in revenue from advertisers through the iPad. Condé Nast has gotten its GQ iPhone app approved by the Audit Bureau of Circulations. That means each copy sold digitally counts in the same way as a newsstand copy, and is included in its guaranteed circulation. It plans to do the same with iPad copies. That means if the iPad and iPhone apps take off, Condé Nast could charge advertisers more for each ad page. Smart!

Another interesting thought I read goes like this: media is segmented by format, vehicle and purpose. Books, newspapers, magazines, radio, television and movies stand alone as distinct entities. However, the iPad presents new possibilities for blurring the lines between these various media types. Unlike the iPhone, the iPad mimics the size and portability of traditional printed material such as books and magazines. In the example of the New York Times, the design of the page is easy on the eyes and demonstrates how typography and page design can be preserved in digital media.

And this one:  good news for advertisers, too. The creative ads we are accustomed to seeing in printed publications can be incorporated into page layouts for the iPad app, eliminating ineffective and irritating banner and pop-up ads that plague browser-based versions.

Finally this reassuring one: it is once the dust settles and a preferred tablet OS is established or two (next blog), competing for that space, that we should begin to get nervous about a possible dominant role of Apple in publishing land. For now, I think they deserve a big hug and thumbs up!

“There’s no iMagazines and there’s no iNews,” said Sara Ohrvall, senior vice president, of research and development for Swedish media company Bonnier. “Either we have to package our products much differently, or we just lost the paid content game.” The simple answer is that magazines should offer their own apps to control the distribution.

Apple Publishing Inc. (1)

Threat or Opportunity? – We sometimes wonder how much Google can be allowed to be dominant in the sector of web search, but what about Apple? Some people are warning the industry – like at last week’s Ad Age digital conference. Apple has just launched a device that has the potential of changing the world of portable computing, just as it did with the iPod and portable music. But with the iPad – basically a big iPod Touch – it’s not just offering another smart, shiny new consumer device, but it’s also tightening its grip on its platforms as it transforms into a media company. It’s complicating relationships in media, to say the least! Somebody, on the other hand, called it “standard (US) symbiotic oligarchy” (or: nothing has changed).

The NYT recently opened an article on the iPad saying: “the print world welcomed Apple’s new iPad on Wednesday, eager to tap into the 125 million customers who already have iTunes accounts and are predisposed to buying more content from Apple”. A very optimistic view. Think about it: Apple has control on the hardware (the iPad), how publishers create content (the software-development kit), how consumers access media (the App Store) and, since its announcement last week, also advertising (iAd).

And don’t forget the 30% share Apple is forcing on traditional publishers taking their off-line publication on the iPad. Apple chose which publishers would be on the iPad launch platform and hand-picked his favorite papers and magazines. Some welcomed Steve Jobs as the new messiah. Tables were turned. A new digital magazine format inviting publishers to offer their content on it! To put it even clearer: can or will Apple Publishing Inc. decide which media will be available on iPad? Or are they just a media retailer and not a publisher? Kindle from Amazon didn´t create a problem in book publishing either (apart from book price pressure).

Originally, the iPad was an answer just to Amazon’s Kindle and Sony’s Reader, purely aimed at digital book publishing. In negotiations with Apple, publishers agreed to a business model that gives them more power over the price that customers pay for e-books. Publishers had all but lost that power on Amazon.com’s Kindle e-reader. In a newly set price range, Apple will keep 30% of each sale, and publishers will take 70%. This fixed agreement with Apple gives publishers leverage to negotiate with Amazon on future pricing. Apple’s strategy could bring significant changes to the e-book market, where Amazon has so far captured more than 90 percent of the market. Apple just brought back competition in a market dominated by Amazon.

Five of the six largest publishers — Hachette Book Group, HarperCollins Publishers, Macmillan, Penguin and Simon & Schuster— had signed on to provide e-book content for the new tablet. Only one book publisher did not sign (yet) on to the iPad: Random House, the world’s largest publisher of trade books.

Silver Bullet for Publishing?

Publishers in various forms and shapes are still at the core of our day-to-day content supply. Some digital natives working at media agencies these days are wondering whether they should continue investing in publishing dinosaurs. Everything on mobile! It’s the iPad!

Well, I agree some may look like dinosaurs in their (broadsheet) print formats, but they know how to process content and how to present it the best way. They are just struggling to find out how to make money with the various channels available. Some developments are taking place fast and a century old industry just seems to lack time to adapt.

Maybe the introduction of iPhone and iPad will change things to the better. The future of books, magazines and newspapers seems brighter, thanks to Apple. I read a great quote on one of the iPad blogs recently: “….. it creates a whole new channel for sharing content with consumers, and it also begins to define a new creative medium that can become part of a communications strategy.”

I’m listing for you 10 challenging thoughts on the iPad I found in relation to publishing. Bits taken from a debate initiated by a recent column on AdAge.

1. The iPad could be the turning point – are consumers willing to subscribe for regularly delivered content again? New models are to be developed for billing, revenue sharing and advertising.
2. The web has proven to be a lousy platform for branding. It used to be owned by magazines and newspapers and they could become king of the hill again if applied smartly.
3. The new generation-Y wants constant streams of info, but their iPhone is too small to show real compelling pictures and video. The content is available, a new suitable channel is borne?
4. Distribution of content has skipped another big hurdle. Is this the best of TV (video), radio (sound) and magazine/paper (print) combined? Electronic publishing is now really upon us.
5. But, you can read books and listen to music on your laptop too. There is no work software on the iPad, so an extra gadget to carry along.
6. Interactivity with books is news. The idea of “augmented content” or “augmented literature” is a new category created. It’s about the user’s EXPERIENCE with the devices that really matter. Not getting WORK done.
7. The iPad has major hardware issues. It is the software (iTunes store) and marketplace that makes Apple worth mentioning in this context. You are NOT going to need an iPad to access content. I.e, listen to iTunes on a Window’s machine.
8. (comparing to iPod and iTunes) in the case of the iPad, the revolution may be the Apple bookstore, not the device.
9. The iPad isn’t a pill publishers can take and, presto, become attractive. It’s going to take WORK. Lots of it — the painful, sacrificing, work-up-a-sweat kind.
10. Because magazines are created for targeted communities their advertisements in print magazines are just as much a part of the reader’s experience as the editorial content. This is also why print is still extremely effective. In regards to the iPad, if publishers and agencies can carry that experience over to the iPad you’ll continue to have a win-win-win situation with the reader, publisher, and advertiser.

Advertising Jobs saved by Steve?

I believe the launch of Apple’s iPad is going to change ad sales dramatically and in a positive way. How exactly nobody knows yet, but the debate is worth following for those in ad sales business and the ones closely connected.

This blog wants to keep track of the different thoughts on digital magazine ad sales. Who are the leading publishers, the media agencies’ opinion, the advertisers and the new tools available.