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Can iAds Help You to Monetize Your App?

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Jeffrey Hughes, author of iPhone and iPad Apps Marketing: Secrets to Selling Your iPhone and iPad Apps, considers how Apple's iAd platform will change the face of advertising on the next generation of apps.

As iPhone users await the next release of the iPhone OS 4, most are probably thinking about its multitasking and gaming hub capabilities. But if you're a developer, no doubt you're also thinking about iAd, Apple's new mobile advertising platform, and wondering if it's right for you. Here's a little background info about the iAd and its upcoming rollout.

iAd is Apple's new platform (based on its purchase of Quattro Wireless) to display advertising within iPhone and iPad applications sold on the App Store. According to Steve Jobs, iAd promises to provide a new revenue opportunity for developers and a whole new user experience viewing ads. For example, ads will show videos and other interactive features. While the "new user experience" remains to be seen, iAd is definitely going to change the playing field for advertisers and developers. Advertisers reportedly may have to pay upwards of $1 million dollars to leverage the new ad platform, which means that Apple will begin by targeting large corporate advertisers. Apple is going to become like the Super Bowl of mobile advertising, with primetime viewing on the iPhone/iPad platform going to the highest bidder.

Apple is also introducing some fairly restrictive policies for third-party mobile ad companies that want to continue using the iPhone/iPad mobile platform. For example, as quoted in Apple's new developer's agreement, Apple is restricting the use of software in an application to collect and send device data to a third party for processing or analysis. This means that a developer using a non-iAd mobile advertising platform won't be able to gather usage data and send that data back to the mobile ad company. It appears that iAd will be the only platform that can allow that kind of capability. If this is the case, Apple will essentially minimize the effectiveness of other mobile ad technologies, while providing its own platform with a key advantage when selling ads. This change also has consequences for developers who want to use analytics to gather usage information from their users to build better apps. Without usage data, some developers fear that they won't know which features need improving on their apps and which features to remove. According to recent reports, Apple will not allow usage data gathered outside of the iAd program under any circumstances.

As a developer, you may be pushed into using iAd for your mobile advertising platform; Apple will offer a clear advantage, as its ads will most likely be sold for a higher price than those of competing mobile ad vendors. You'll have to decide whether you want to get into the action by displaying ads in your applications at all. If you participate in the iAd program, you'll get 60% of the revenue generated, while Apple takes 40%.

Apple plans to roll out the first ads developed internally, working with a few select outside corporations that want to be the first to advertise on this platform. This could be for several reasons:

  • Apple likely wants to ensure the quality of the first ads that are displayed with its new technology. Having tight control out of the gate will set the bar for future advertising and help Apple to ensure its success to an audience of millions.
  • Apple has decided to utilize HTML5 technology in the development of iAd advertisements. In sharp contrast, nearly every ad agency around the world currently uses Adobe Flash for ad creation. If they're not familiar with mobile ad creation using HTML5, agencies will have to retool to use this new technology. Due to its greater level of experience with HTML5, Apple may be developing the first ads on this technology internally.

Can iAds help you to monetize your app? The answer is yes, but the same old questions remain for you as a developer. Can you make more money selling your app on the App Store, or are you better off creating a free app from which you can generate ad revenue? Some developers have found success by building free apps with ads. Their strategy is to make money by selling ad space on the app and then generating huge download numbers. And I mean huge downloads! You'll need tens of thousands of downloads to generate any sizable revenue from selling ads, regardless of the platform you choose to use.

Companies that want to advertise on this newly emerging mobile platform can utilize mobile ads and bid on ad placement, as with Google AdWords. This approach can be profitable for you as a developer if your apps achieve significant downloads and lots of users click through on ads displayed by your app. Some companies have achieved considerable success by developing a free app and posting ads in the app. You'll have to analyze what you think ad revenue will generate, versus what a paid app will generate. This has been a subject of great debate among developers, some saying there is no revenue in ads for the developer and others saying that such revenue exists. Like other mobile ad platforms, Apple may tend to give the best ads to the best app developers. This means that the apps generating the most downloads will get the best ads. The best apps with the best ads will generate the most ad revenue for Apple—and the developer.

We all will have to watch how the iAd show unfolds. It's going to start with large advertisers utilizing the best apps on the App Store. Over time, we're likely to see more and more ads being created, which in turn will open more opportunities for developers to place ads in their apps. You'll still need to decide whether creating a free app is the right approach for you, and then measure the success of downloads—as compared to selling your app for a price.

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