Open Access? Apple Concludes a Broader Advertising Network Equals More Money

Apple has not, as a general rule, played well with others. As an enterprise, it prefers control, even in an era when the very notion of control and of sustainable competitive advantage have become more and more ephemeral.

It has certainly worked for them. But the world is becoming, if anything, less predictable. Which means that when John Gage of Sun Microsystems said in 1984 that 'the network is the computer,' he was on to more than he realized. Or maybe he was just smarter than everyone else.

Apple has demonstrated of late a propensity to act on this bit of wisdom, based on what it sees around it. Google, Amazon and Facebook are exhibiting a profound capacity to compete and innovate while strategically positioning themselves for the future.

Part of the challenge for Apple is that multiple players makes competition harder. Life was easier when it was Steve vs Bill. But now there is a fight over every digital water hole. And everyone comes armed to the teeth. So when Apple announces that it needs a wider net to generate more advertising revenue, it is revealing more than just a concession in one market segment. While there is no generalization worthy of the name, it is suggesting that if it begins to look more like Google in some respects - and vice versa - that is because the growth of such enterprises may be reducing strategic options, which is leading them down more common paths - and directly into each other's way. JL

Mark Bergen reports in Advertising Age:

Apple has concluded money in mobile ads comes from a wide net; in short, it'll look more like Google.
Apple is making its advertising ecosystem more accessible.
Starting today, anyone with an Apple ID will be able to open an account with iAd Workbench, the company's mobile-ad management tool, and kick off a campaign within two days. Previously, Workbench was only available to registered mobile-app developers.
At the onset of its mobile-ad business, Apple extended olive branches to a select group of brands, promising premier reach. But advertisers pushed back against its pricey offerings. Now, it appears Apple has concluded money in mobile ads comes from a wide net; in short, it'll look more like Google.
It is keeping pace with other competitors in the app world, too. Last week Bloomberg reported Twitter will soon unfurl a mobile ad product to push apps.
With the changes, Apple is rolling out new iAd capabilities. Customers using Workbench -- a web-based platform that allows ad buyers to launch, track and adjust their campaigns -- can now run short videos within an ad unit. In March, Ad Age reported Apple was soon bringing full-screen video ads to mobile. After today's changes, the ads can direct viewers to a separate website or promoted iTunes content, not just a mobile-app.
The tool still works exclusively for ads running on Apple's iOS phones and tablets.
Apple imagines the iAd expansion will draw in new types of advertisers -- an independent filmmaker or a small car dealership -- unwilling to take the earlier developer plunge. The company is also banking on bigger spenders, like major film studios and retail outlets, signing up.
Apple's runaway success in hardware has not yet translated to mobile marketing. Apple launched iAd in April of 2010, after acquiring mobile-ad network Quattro Wireless for $275 million. (And after making a failed bid for AdMob, before Google scooped it up.)
iAd came out of the gates with hefty clients -- including Unilever, DirecTV, Sears and State Farm -- but suffered a slow start. Its rates were high; most advertisers paid around $1 million to enter the platform, with some shelling out as much as $10 million for a home in exclusive categories. In 2012, Apple slashed prices, lowering the spending threshold for developers to $100,000 and lifting the developer's cut of ad revenue running on their apps from 60% to 70%.
Ben Phillips, who joined MediaCom as global head of mobile in December, said he's seen pricing come down in that period of time. "I'd say the pricing is very competitive." He added that the company has been "very good at driving consistency across different countries." During the past year, iAd has bulked up its executive team. And business accelerated. Net revenue hit $260 million last year, up from $38 million in 2011, and is expected to reach $487 million this year, according to eMarketer. But iAd's market share, at 2.7% of U.S. revenue, still lags behind Google, the entrenched leader, and the fast-rising Facebook.
Apple does, however, have another weapon in its arsenal. The company has quietly been deepening its advertising ties through iTunes Radio, which launched last September with several heavy-spending corporate backers. The streaming service is a direct challenge to Pandora, another top mobile-ad revenue earner. Last week, American Express signed on as an inaugural exclusive sponsor of iTunes Radio First Play, a channel that promotes music a week in advance. For now, the iAd Workbench expansion doesn't extend to iTunes Radio, although its incorporation is likely not too far off.
Ad buyers using Workbench will be given the choice to pay based on cost-per-thousand impressions or cost-per-click. Apple would not comment on rates.