Every iPhone 4 will come equipped with the iAd platform, Apple’s platform for what it hopes will be a new generation of highly-interactive, visual display style ads embedded directly into the framework of mobile apps. Though it does not provide assurance that the market actually will be as big as many foresee, Apple and Google moving so directly into the space will have the predictable impact on the market.
Apple and Google have validated the existence of the market, which in a sense will “lift all boats.” But Apple and Google immediately stake out positions as leaders in the nascent market, puttng pressure on all other contestants, most of which will not have the resources to compete head to head with either Apple or Google.
To be sure, the mobile portion of the display advertising market is quite small at the moment. Revenues will reach $593 million in 2010 before more than doubling to almost $1.6 billion in 2013, eMarketer estimates. But that’s a small fraction of total online advertising.
In 2010, direct advertising will represent about $159 billion, while brand advertising accounts for $146 billion. Direct Internet advertising accounts for about $17 billion in spending while Internet brand advertising will represent about $6.5 billion, according to the Direct Marketing Association.
Analysts at JP Morgan estimate that Internet-based “graphical” advertising (display) will reach about $8.3 billion, while search advertising will come in around $16.6 billion.
In the mobile marketing space, text messaging still is king, representing about $3.2 billion in 2010, while mobile display will generate about $253 million while mobile search contributes about $321 million.
Of course, most observers say the biggest reason for optimism about mobile advertising is simply the gap between user “time spent” with Internet and mobile media and the amount of advertising devoted to those media channels. Simply put, people spend way more time interacting with Internet media than the ad spend devoted to those media would suggest.
Newspaper advertising, on the other hand, is much larger than user engagement would suggest should be the case. Users spend 38 percent fo their time with Internet media but advertisers spend only eight percent of their budgets on Internet media.
Time spent and dollars spent metrics are much more in line for television, radio and magazines. People spend 37 percent of their media time with television, and TV gets 32 percent of the ad spend. People spend seven percent of their time with magazines, and that category gets six percent of ad spend.
People spend 19 percent of their media time with radio, while radio gets nine percent of ad spending. On the other hand, people spend just eight percent of their time with newspapers, but that channel gets 20 percent of ad spending.
For the moment, Apple only says it has gotten $60 million in ad commitments for iAd in the second half of 2010 from Nissan Motor Co., Citigroup Inc., Unilever PLC, General Electric Corp., AT&T Corp., which is the exclusive service provider for the iPhone, and Walt Disney Co.
Apple says it will give 60 percent of the revenue generated from the ads to developers creating applications for the Apple App Store.
Though success is not guaranteed for any contestants, Apple and Google have validated the mobile marketing business.
