Apple's iAd Hasn't Cracked Mobile Advertising

Apple trotted out impressive stats about all kinds of things, but there was no mention about iAd penetration, revenue driven, or new capabilities.

Apple doesn’t really miss opportunities to talk about their success, so it’s probably safe to say that the iAd has been a bit of a disappointment so far.

The Hope

When Apple launched the iAd, people had high hopes for what they might be able to do for the mobile advertising industry. A lot of the common thinking was that Apple had revolutionized so many other industries, that perhaps they could do something new and amazing with these high quality mobile ads.

While Apple wasn’t in the advertising business like other companies, people thought their creativity and successful ad campaigns of their own might allow them to take mobile advertising to a new level.

Not so fast my friend.

The Results

Dan Frommer from AlleyInsider did an article about the iAd progress in March. Some notable things in it were that the price of iAds was cut in half, there was a mixed reaction from agencies, and that the iAd sales team had lost a bunch of people.

Outside of the advertising industry, I don’t feel like the iAd has had much impact either. As a user of many iPhone apps, I can’t ever recall even seeing an iAd. Perhaps I have, but if so it definitely wasn’t memorable. And I’m somebody who actually cares about advertising!

The Future

Apple can obviously choose to do what they want and experiment wherever they want. However, I’m not sure advertising is in their core DNA. After all, at the developer conference yesterday Steve Jobs himself said in reference to their mail product:

“No ads,” he boasted. “We build products that we want for ourselves, too, and we just don’t want ads.”

That doesn’t sound like the CEO of a company that really is 100% behind mobile advertising.

Has Jobs learned that “mobile display ads” don’t work? Has Apple just struggled to gain traction?

Or perhaps, is mobile advertising just going to really take off when it’s entirely different and more of the form of location-based deals? But doesn’t that only work for local businesses? How do national brands get in front of people on their mobile device?

The answers still aren’t there, but as more of people’s computing time AND entertainment time shifts to their mobile devices, you can bet there will be a lot of companies trying to figure out how to get in front of people. Just don’t expect Apple to solve it.

From Silicon Alley Insider Chart of the Day

As seen in the image, Facebook is growing like mad in the display advertising space with a trajectory that is vastly different than any of the other major players in the space. That growth is borderline shocking, but shouldn’t be that surprising for anyone who’s been following their user growth as well.

What’s scary about this is that Facebook still hasn’t REALLY turned on the revenue spigot, and they still might not for some time as they continue to focus on user growth and improving their core products.

It still feels like much of their revenue potential is untapped, and as long as they stay private they will really be able to focus on core product offerings for quite some time.

I know some people still wonder if Facebook will fade out like Myspace did and no longer be the flavor of the day. They point to the fact that they don’t use it anymore, or they know a 23 year old who doesn’t use it after they graduated from school. I don’t think this matters. I don’t think comparing Facebook to Myspace makes much sense anymore, if it ever did.

There are major differences between the two companies. Mark Zuckerberg is an entirely different type of founder. The company has built a very different experience even though they both are “social networks”. Their company location, their executive team, their culture, and the fact that they have remained in control of their own destiny by never selling makes them very different. Add the major fact that Facebook is now pervasive through every demographic globally is something that Myspace never accomplished. It will be much harder for Facebook to fade out as a fad. I think it’s hear for the duration as a major player.

Where can Facebook go from here? I wouldn’t be surprised see more innovation out of Facebook, perhaps some that is fairly unpredictable at this point in time. They are still releasing new product functionality rapidly which is a positive sign.

One thing I’m curious to see if Facebook becomes a bigger threat to publishers by starting to use their social network to create their own socially-built or heavily socially-enabled properties. What would a Facebook News site be like? Or Facebook Sports? Facebook Entertainment?

I’m very curious to see if a Facebook Sports could be a credible threat to sites like ESPN, Yahoo! Sports, and others. I’m sure the Facebook team would not build it in the same traditional publisher model, so I’m curious to see what that could look like. They obviously could drive huge amounts of traffic to these types of properties very quickly. They’d also allow Facebook to sell more premium display advertising which would help their revenues tremendously and make them even more of a direct threat to Yahoo!/AOL/MSN and the rest of the companies who sell a lot of premium advertising today.

I think Facebook feels today like they have bigger problems to solve than the next generation of sports site though like launching a new type of inbox. At some point though, when they are public and revenue becomes very important, I think we may see them disrupt many publishing verticals as well. It’ll be interesting to watch.

That’s a loaded question of a headline firmly entrenched with Frederic’s opinion leading us down the path of lousiness. That being said, I don’t know that anyone can argue that digital advertising is at the place where it needs to be in order to deserve the large shift of advertising spend that will eventually move online from offline. But is it lousy? Does it deserve the tongue lashing Frederic gives it? As a whole, it does not, but of course there are portions of it which do. The same could be said for television and print magazine. Are we to believe that all TV and print ads are high quality and perfect?

Not only that, some of Frederic’s arguments don’t make any sense so let’s take those head on:

Let’s face it. On digital media, advertising hasn’t delivered. In the news business, we have a rule of thumb: An electronic reader brings 15 to 20 times less in advertising revenue than a print reader does.

Frederic uses this to say that digital advertising has missed it’s target. Even he points out though that there are many other factors that play into this. Besides that though, perhaps this isn’t just a case of digital advertising not being effective, but some of this should be attributed to measurement. What do I mean by measurement?

Well, offline advertising does not have the same tracking mechanisms and analytics that digital ads have. We know the actual physical response that digital ads create, and can back those actions into ROI metrics against our ad spend. We don’t have that luxury with offline advertising, so it’s much easier to overcharge advertisers in the offline world. Additionally, digital advertising gets little to no credit for it’s brand building impact, for digital ads influencing offline purchases, for digital ads influencing online searches and purchases but not directly from an ad click, etc. While these indirect things are attributed to offline ads without any real measurement, and they can charge more for it. What gives?

While Frederic might say that digital ads bring in 15-20 less ad revenue as an offline reader, I’d tend to say that perhaps offline ads are 5-10 times more expensive than they should be.

They end up as fodder for ad-blocking systems. Unfortunately, these defense mechanisms are thriving. A Google query for “ad block” yields 1.25 million pages that send you to dozens of browser add-ons. On Firefox, AdBlockPlus is the most used extension, with more than 80 million downloads and more than 10 million active users. The same goes for Chrome, whose ad-blocking extension is downloaded at a rate of 100,000 times a week and now has more than 1 million users. For Internet Explorer, there are simply too many add-ons to count.

Wait, so because people use ad blockers that means digital ads suck? What’s the comparison here? There’s really no equivalent of digital ads in the offline world so this is a stupid comparison. The only thing close to an offline ad blocker would be the DVR allowing people to skip commercials. And those haven’t been popular right? Of course they have. Either online or offline, people generally do not like advertising and chose to ignore it or block it in any way possible. No matter how creative or good an ad might be, there will always be internet users who will want to block any and all ads. If there were an offline equivalent that allowed people to block newspaper, magazine, and TV ads, don’t you think those same people would block them? Of course they would.

Another sign of the ad-design failure is Apple’s decision. Not only does Apple enter the mobile-ad business as a sales house, but Jobs’s company will also design ads, for a hefty $50,000 to $100,000 fee. Apple’s message is that the profession needs to reboot advertising graphical standards. How strange to see a technology company giving lectures on design to the very people who prided themselves for their creative brilliance.

I generally agree with Frederic that ad design can improve. But there are also already many great ad implementations that have been done, and many more that will be done. While this happens, there will still be lousy ads. In fact, there will be a lot. You know why? These lousy ads actually drive A LOT of direct response, and in turn revenue. Does Frederic think that all these ugly and annoying banners exist simply because there are no good designers? On the contrary, almost all of them are intentionally designed to be ugly and annoying to catch the eye and draw the click. I’ve seen the ad results of when people test nicely designed ads vs. lousy and annoying ads. Guess which one generally draws the most clicks and revenue? Yep, the lousy ones. If we measured brand-building impact, then the results might be different.

Apple getting into the ad design business is a sign that they feel that ad design can get better. I’d also argue though they are doing it to charge advertisers an arm and a leg, to get closer to them, and to cut out middlemen and give themselves more of the profit. It’s not simply that they think ads suck.

Frederic’s last points about ads being bought and sold in too much of a tech or engineering point of view has some truth to it, but should that really be surprising at this stage of the game? We’re talking about a computer-driven world, it’s natural for the tech people to be leading the charge. Rest assured Frederic, good ad design will catch up, there’s too much money at stake for it not to do so.

Not only is this interesting for marketers, but will this create a new type of ad network or new types of tools that are developed on this? Will there be Twitter focused ad networks who will optimize campaigns for you on the Twitter ad platforms? If you’re a larger advertiser, do you now need to optimize budget across search, display, Facebook, and Twitter options? Is there any ad network or agency that can do that? Is there any tool or service? There will be.

There has been considerable speculation about why Google not only purchased Admob, but spent so much money in doing so. The obvious off the cuff answer is to get their hooks into the mobile display advertising space by acquiring the most well-known mobile ad network. Some people such as Niki Scevak don’t think that’s a particularly good idea, and others such as Silicon Alley Insider seemed to have to work a bit to justify it.

While Niki makes some decent points about mobile advertising being tied to mobile commerce, and mobile commerce not being a huge market yet, I think the question I’d ask here is how will mobile commerce NOT become huge over the next few years? Mobile phone usage is skyrocketing and innovations such as the iPhone, Droid, and phones and software yet to be developed are going to keep that pace of innovation and change going. While I’m probably an early adopter, I’ve conducted numerous ecommerce transactions through my iPhone and in fact bought a book for my iPhone Kindle App just today. While I didn’t see an ad for this book on my phone, why couldn’t I have seen one that drove me to the purchase?

Regardless, I don’t think the mobile ad network is Google’s sole motive, and perhaps not even it’s strongest motive for the acquisition. I think John Battelle and Ian Schafer nailed this one by pointing out that the key asset for Google is the DATA.

This is data that will obviously help for ad targeting and the like, but getting iPhone app data (and other types of data) will be immensely valuable as Google attempts to take on Apple to own the mobile phone (software) market. The mobile data nut is just being brought to the table and is just now people are beginning to think about cracking it. It’s also worth pointing out some past Right Media colleagues of mine (Greg Yardley and Jesse Rohland) started Pinch Media a while back to handle mobile application analytics. This will be an interesting space to watch moving forward as mobile continues to grow.

I think this study or at least the way it’s being covered by the media is deceptive because of the question “Do you want ads tailored to your interests?”. Very few people actually PREFER ads to having no ads at all right? If you changed this question to “Do you want ads on the websites you visit?” you’d probably get a similar 66% result or worse. If you changed this question to “Would you rather get an ad to punch a monkey, or an ad with a discount for that coat you were shopping for earlier this week” I’m pretty sure the answer would be that they’d prefer the tailored ad over the generic ad.

The study also pointed out that the 66% gets even worse when people are told how those tailored ads can happen due to their behavior being tracked on the web and in offline stores. For people who are not very familiar or comfortable with how advertising on the web works and what happens with the data that is collected, this tracking sounds very scary. Their natural assumption is to believe there is some easily readable record that has their name and contact information along with all the exact things they did on the web. The reality is that the above board companies are keeping this data non-personally identifiable and that no human actually ever really looks at the data. Like most people I’m interested in privacy, but after years in the industry and knowing how this information is used I’d much rather have ads that are tailored to me based on my browsing behavior than generic ads that have no value.

There are far more dangerous things that can be done with data from the web by far more dangerous people than advertising companies. People should be much more concerned about that than behavioral targeting.

The bottom line is though that there isn’t enough consumer control over what data is exposed, to who, and why. This is where I think the happy medium will come in the future. People will become more comfortable when they understand it and are given more control over their data. Education is the key, and online marketers and advertising companies need to lead this educational effort.

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