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By Laurence Knight
Business reporter, BBC News
Apple chief executive Steve Jobs has placed himself head-to-head with rival
Google in the budding mobile advertising market, by announcing a new iAd
advertising platform to be rolled out this summer.
The announcement follows Apple's purchase in January of mobile advertising
network Quattro Wireless for $300m ( 196m), demonstrating that Mr Jobs is happy
to put his money where his mouth is.
Yet the mobile advertising market remains tiny, and the acquisition price paid
for Quattro is small change for a company currently valued at over $217bn.
However, analysts say that the potential for mobile advertising is huge and it
could transform mobile commerce. Investment firm Piper Jaffrey is predicting a
total in-application market for advertising of $700m by 2013, of which iAd
could capture $380m.
Nascent industry
"Mobile advertising currently is at a very nascent stage, and the sector's
revenues are totally eclipsed by other forms of advertising," says Ben Wood,
analyst at technology consultants CCS Insight.
"However, there is no doubt that these companies view advertising as the
business model of the 21st century."
Mr Jobs's thinking is that mobile advertising can be tailored to the individual
users needs and interests, in much the same way that Google has been able to
use data from users of its search engine and gmail accounts to target
advertising.
"The mobile is a very personal device," adds Mr Wood. "You can almost say that
it gives you a market segment of one."
Apple could use the mobile phone user's physical location as a hook for
advertisers - for example Mr Jobs cited a Nike advert incorporating a nearest
store locator. But information about a user's interests can also be gleaned
from the applications they choose to purchase.
The Apple head says that he wants to help developers make money with higher
quality advertising so that they can keep their free applications free. "What
some of them [developers] are starting to do is put mobile ads in their apps "
says Mr Jobs. "And most of this advertising sucks."
Opportunistic timing
Steve Jobs's announcement comes at a time when rival Google's own mobile
advertising initiative has become hamstrung by the US anti-trust authorities.
In November, Google outbid Apple to purchase leading mobile advertising company
AdMob for $750m.
"Google came in and snatched them because they didn't want us to have them,"
said the Apple head. Admob already operates on Apple's handsets.
Most of this advertising sucks
Steve Jobs, Apple CEO
However, Google's plans immediately ran into trouble as the Federal Trade
Commission chose to review the deal. Months later, a decision is still pending.
"This gives Apple a first mover advantage," says Mr Wood. "Although Apple has a
fraction of the experience in advertising that Google has today, Google knows
they are a formidable competitor."
Flood of new apps
The iAd initiative also seems designed to provide a fillip to the growth of new
applications for Apple's handsets.
The Apple chief executive said that 60% of the advertising revenues raised will
be passed onto the application developers, creating a major new financial
incentive for programmers to generate new functionality for the iPhone, iPad
and iPod touch.
"The revenue sharing opens the floodgates for a lot more free applications,"
says Mr Wood. "This is an extremely astute move by Apple. I would expect both
the number and the quality of applications to grow much more rapidly because of
this."
The rivalry between Apple and Google will partly be decided by the direction
that mobile phone technology takes in the future.
Apple stakes its future on the continuing development of applications as the
main forum for mobile software, whereas Google expects applications to be
supplanted by a web browser that gives users access to the entire internet.
Which technology wins out may depend on whether Apple's control of its content
proves to be a plus, because it ensures the quality of its applications, or a
minus, because new software is more easily available on the web.
Story from BBC NEWS: