iPhone App Ad Networks: Post 1

Well, that was fast, it's been like, days since the iPhone App store goes big, and there's already talk about having an ad network sell ads on free and paid apps.

Well, there ISN'T an iPhone app ad network now. No, there are at least four. And in the next few posts I am going to tell you what I know about them and how (if) they are different from one another. And that doesn't include the add-ons in existence from mobile and widget networks.

You know, the NYT says there are at least 200 ad networks currently in operation, and the key growth sector in terms of both launches and in revenue growth (if perhaps not in total revenue) are vertical ad networks - offerings that focus on a key demo, target, or platform. Well, here are super verticals -- no, no, let's coin a term, hyper verticals -- a specialty area within a platform.

We have to ask ourselves why does a new ad network exist before we draw a conclusion about whether it (in this case they) should.

For any vertical, I ask the following questions:

1. Is there a way for a vertical to provide unique value to publishers and or advertisers that couldn't be provided by a more general network?
2. Is there a market in terms of advertisers ready to advertise? Trailblazing ad dollar categories is a tough way to generate a return in 2008.
3. Is the ad product itself advertiser valuable?
4. Is there specialty IP that the network can bring to the party to help advertisers and publishers better reach their targets and persuade them?
5. Do they have the bucks to fight the hard scrap to establish themselves enough to get bought or be viable businesses on their own?
6. Do they have the tech necessary to deliver a decent viewing experience?
7. Will Apple allow this? There is a more general way to ask this, but I thought I'd be clear.
8. Will consumers accept the model?

The answer, BTW, doesn't need to be yes to all. But most would be a good thing.

I started this analysis a little dubious. I mean, mobile advertising has been a toughish slog for the existing ad networks in the space. But one always needs to remember that mobile is definitely a category in which there are cathartic consumer moments -- those American Idol events that get people adopting new data services technologies that are important growth engines for the category and, by inference, the ad biz generatable in it.

Well, let's talk about mobile for a minute. The very generous people at Nielsen Mobile have made a white paper available entitled Critical Mass: The Worldwide State of the Mobile Web. In it are loads of tasty data treats, of which some of the topliniest ones are summarized in a press release Nielsen issued in support of the paper:

The US mobile Internet market, with 40 million active users, has reached a critical mass for mobile Internet marketing

The Motorola RAZR phones are the most popular phones among US mobile Internet users, while Nokia handsets lead the market in Europe and Asia

Unlimited data packages are increasingly popular with mobile Internet users. Today 14 percent of US subscribers access the mobile Internet with an unlimited data package, and 50 percent of data users say that they prefer the unlimited pricing model.

3G networks drive user satisfaction with mobile Internet, and these networks improve data throughput speeds as much as six times, compared with 2 and 2.5G networks

Advertising is becoming a common part of the mobile Internet experience. Today 26 percent of mobile Internet users view ads while using the mobile Internet.

Mobile Internet users are more receptive to mobile advertising than average data users

By all accounts, iPhone users are more likely to use the web than other phone users. This comes, I think from two key factors:

1. iPhone attracts exactly the sort of gadget geek that likes to experiment and is more likely to use her phone for more than just tawking.
2. iPhone is just so darned easy to access the mobile web with.

Lots of estimates are flying about on how many iPhone will be in use by year end. I like the number 20 million. It's aggressive but I think eminently achievable given the new price point and the coolness of the device itself, coupled with the dearth of equivalent devices (at least in terms of user experience.)

20 million is nothing to sneeze at, and given that the AppStore at Apple is already downloading bajillions of apps, there is ample evidence in strong consumer interest.

So here are what I think are the answers to my eight questions:

1. No.
2. Maybe. The ad biz is very trend driven, and I can see advertisers wanting to be active in mobile finding this model -- captive audience, graphic ad, good audience demos, reasonable entry price -- a great way to get started.
3. Yes. Graphical, attractive, captive audience.
4. Maybe. By providing deep insights into these users, these networks may offer a way to reach that elusive innovator/early adopter that is so critical to many advertisers. But interest is going to be very category specific I think - electronics, entertainment, perhaps auto, retail for GPSy apps. The challenge will be how to make it worth an advertisers while to deal with them for some mobile ad spend and to a more general mobile network for other mobile efforts they may want.
5. Dunno. Some may.
6. I think one can. Perhaps two, Not four. And not ten.
7. Not sure, but I think they're gonna want a cut before long.
8. I think yes as long as we don't get all ridiculous about how the ad works and how long they last. Consumers have been shown in a variety of research studies to be willing to trade ads for free access to mobile utilities and applications.

In the next few posts I'll be looking at several of these companies as well as exploring how the mobile ad networks already out there are addressing this opp.

Thanks for reading, and don't forget to write.