Handset vendor Apple entered the mobile advertising arena by acquiring mobile advertising network Quattro in January 2010 for a reported $275 million. The move follows Google's $750 million acquisition of rival advertising network Admob in November 2009.
In theory Apple now also has a distinct advantage over other rival advertising networks that serve adverts onto Apple's devices.
Through the iTunes and app store Apple has access to information about the type of applications purchased by their customers, how much they spend on applications, how frequently they download, and because the registration process for Apple devices requires the submission of profile data, some demographic data. Furthermore, Apple can innovate and be creative in the types of advertising units it makes available.
- Consequently, unlike other advertising networks, including Admob, Apple is potentially in a better position to provide superior ad targeting and attract a greater share of mobile advertising dollars directed to Apple's own devices.
- Apple's focused strategy will continue to reap benefits, as its mobile device installed base continues to expand.
However, Google will be better positioned to capitalize on the $23 billion mobile advertising market with its broader approach to cover all handset types.
With Google and Apple making acquisitions to enter the mobile advertising market, should competing handset vendors jump on the bandwagon? I believe they would be unwise to do so.
- A successful mobile advertising network requires scale across a portfolio of handsets and media. Or, in the case of Apple, exploiting the data they have about their customers (who advertisers perceive as an attractive bunch) along with the end-to-end control they have over the device and service delivery.
At this stage most handset vendors have very little information about their device owners to provide useful targeting, and consequently little value-add to advertisers compared to other ad networks that offer greater scale.
Conflict of interests with operator channel partners is another reason for vendors to hang back. Operators have their own ambitions to use customer data in order to provide mobile ad targeting and device vendors will encroach on this territory.
It's worth noting that scale does not guarantee success either. Nokia's experience in mobile advertising provides a cautionary tale.