Adidas‘ decision to abandon advertising on Apple's iAd mobile network says a lot about how Apple’s battle with Google (GOOG) for control of online advertising could play out. Basically, the contest boils down to Google’s “Wild West Web” vs. Steve Jobs‘ “Walled Garden of Perfection.” Historically, digital media has favored the Wild West over potted versions of the web.
Apple has gone to impressive lengths to buck this trend. Jobs believes that the iPad and iPhone’s superior deliver system will convey more beautiful, more effective ads to users — and he will thus be able to charge a premium for them and, hopefully, dominate the mobile advertising market.
Google, on the other hand, has taken the opposite tack: Its products are ugly, but they’re free for users and cheap for advertisers. They’re functional and they’re everywhere. Google’s Android mobile operating system does 90 percent of what Apple’s does, but at a fraction of the cost to users or advertisers.
At stake is control of the ad-based operating system of the future. That OS will be mobile, obviously. Currently, it’s a race between Apple (and iAd) and Google’s Android. (Microsoft (MSFT) seems to be stuck with the PC market because no one in their right mind buys a smartphone that runs on Windows. In fact, once you’ve used Android, it’s tempting to ask, “Why can’t this run on my laptop and liberate me from Microsoft’s endless security patches?”)
We shouldn’t make too much of the Adidas’ pullout, but it does illustrate Apple’s strategic problem. Adidas balked after Apple rejected Adidas’ creative concepts three times, and there was a lack of transparency on ad placement and timing. Chanel has also given up on Apple. Of 17 advertising partners named by Apple in July, only five had ads running on iAd by mid-August. It would literally be quicker to advertise in a newspaper than on iAd right now.
Of more concern is the lack of a kit for ad developers. That sounds like just another problem for the tech department but it’s actually a corporate strategy problem for Apple: The company wants so much control and approval of the ads that run on its system that it creates a bottleneck for decisions that Google’s Android will never have. The market hates bottlenecks, and tends to route around them in the long run.
Check out an Android phone. Sure, the ad under my App Killer is currently suggesting I retain personal injury law firm Binder & Binder even though I haven’t been injured, but that’s not the point. People are spending money on Google’s mobile free-for-all.
The battle is playing out quickly. Ad traffic growth is up on Android while it’s plateaued on iPhone. Having said that, Apple’s share of the market is growing. It won’t be clear who wins until there’s a Nielsen-type company giving everyone the same data.
There are signs that Jobs understands that his Walled Garden bottleneck (don’t worry, I’m nearly done torturing this metaphor) is a problem. Apple is slowly loosening developer guidelines, allowing app makers to use software Apple doesn’t like. While one hesitates to agree with Yahoo! CEO Carol Bartz, on this occasion she may be right:
“That’s going to fall apart for them,” Bartz said about Apple’s iAd service. “Advertisers are not going to have that type of control over them. Apple wants total control over those ads.”
COMMENTARY: Google has always been about openness. Chromium and Chrome have always been about allowing developer's to do their thing. This is not the case with Apple, or should I say Steve Jobs, who controls everything. If you are not in, you are out. I find this kind of thinking a bit arrogant, but then again, some of you reading this post will say the same thing about me. I've already been called an "iPad hater".
What is all boils down to is advertising and keeping every last dollar of it.
Apple iPhone/iPad now have 250 million apps and counting, which is roughly more than twice what Android has. With those kind of numbers, the strong always win. iAd controls all advertising on all of Steve's "magical" devices, and you must play by the rules:
- Apple decides if they like your app.
- You must follow Apple's restrictive app submission procedures (see below). As far as I know there are no official guidelines for Apple apps. It's a sort of "we'll get back to you if we like it".
- Absolutely no adult-oriented apps. Oh no, Steve must think Apple evangelists don't like sex or live in a cave, impervious from all things carnal.
- Adobe Flash content doesn't run on the iPhone or iPad. Steve Jobs says he doesn't hate Adobe, that's it's the press' fault, and even had a heated conversation over Adobe when interviewed at the D8 Conference. Well worth viewing. See Steve Jobs Playboy Interview blog post. Steve, you hate Adobe, just say it. It's crappy, remember.
- App developer's are forbidden from embedding their own advertising into an iPhone or iPad app. That's grounds for immediate banishment. Steve is not about to let you skim advertising dollars from Apple.
- Online advertising networks must work through iAd. The networks are really pissed off about this, but Steve lays down the law.
If you are already an Apple app developer you play by the above rules. If you are unfamiliar with the Apple Store's submission rules, you can find it all on the App Store Resource Center.
If you want to reach the Apple audience of loyal evangelists, you have no choice but to play by iAd's advertising rules. You can find them all carefully laid out on Apple's iAd Network page. It is no wonder that Adidas dropped Apple.
Apple has relaxed some of its archaeic restrictions, but they are mostly designed to prevent a full developer rebellion. Here is a listing of recent Apple rule restrictions that came out in September 2010.
The Financial Times is reporting that US anti-trust regulators (which could mean the Federal Trade Commission and/or Department of Justice) are looking into allegations that Apple's mobile-advertising network iAd is a potential monopoly.
The major bone of contention are the terms and conditions that allow iAd to shut out advertising from rivals, such as the Google-owned "click-vert" network AdMob. Ironically, Google's recent purchase AdMob came about BECAUSE of Apple's own purchase, earlier this year, of ad network Quattro (which is at the heart of iAd); the Googsters were able to say "Hey, WE'RE not a monopoly -- our crosstown rivals in Cupertino have an ad network of their own!"
Apple is already being investigated for anti-competitive practices related to their marketing of digital music through iTunes, as well as their blocking of Adobe Flash from iDevices. But like those, the iAd investigation (which is still in its VERY early stages) must prove that Apple's policy is actually harmful to consumers -- not just rival suppliers -- in order to build an anti-trust case.
Courtesy of an article dated October 5, 2010 appearing in BNET