Why is Steve Jobs trying to convince us that iAd is good for Apple customers?

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April 9 2010 5:08 PM

You're Getting More Ads, and You're Gonna Like It

Why is Steve Jobs trying to convince us that iPhone ads are a good thing?

Steve Jobs announces iAd. Click image to expand.
Steve Jobs announces iAd

You know what I want on my iPhone? Bigger ads. Every time I load up an app from Slate or the New York Times, I'm always bummed about the quality of the commercial messages. A typical in-app ad consists of a tiny graphic and some text. Some days I don't even notice they're there. I use the Epicurious recipe app several times a week, but I honestly can't remember if it carries any ads.

I've long been hoping that someone would address this obvious flaw. Wouldn't it be great if marketers could insert huge, full-screen spots inside our favorite mobile apps? Even better, what if there were ads that required me to type in my name, play a game, answer some trivia questions about laundry detergents, or otherwise interact with the marketer's pitch before I could go on to use the app?

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On Thursday, Apple made my wildest dreams come true. At a press event introducing the iPhone's new operating system, Steve Jobs unveiled iAd, a system that will allow app developers to insert ads that "combine the emotion of TV ads with the interactivity of Web ads." Jobs showed off a few examples of spots we'll soon start seeing in iPhone apps: One Nike ad took over the screen with a video. A Target ad asked users to design a dorm room with furniture from the store. A spot for Toy Story 3 lets you play a movie-themed game. When it places one of these ads in an app, Apple will get 40 percent of the revenue from the ad; the developer takes 60 percent.

Jobs says that iAds will fix what he considers the main problem with today's mobile ads—people don't like to click on them because the ads usually load up the Web browser, taking you out of the app you're using. Apple's iAds don't take users out of their favorite apps. Instead, iAds place the full-screen ad inside the app; when you're done "interacting" with the ad, you can go back to the app. To recap: Apple has solved the problem of users finding today's small ads too annoying to click on by making it easier for developers to create bigger, more-interactive ads that we'll likely have no choice but to click on.

I know I sound bitter about iAds, and I know I shouldn't be. I shouldn't even be surprised—the mobile advertising marketplace has been heating up for a year, and it was only a matter of time before big tech companies got into this game. Last year Apple and Google fought to acquire AdMob, which helps developers place ads inside their apps. Apple bid $600 million for the firm, but Google swooped in with a $750 million winning offer. Apple retaliated by buying Quattro, an AdMob rival, for $300 million. The Federal Trade Commission has expressed concerns about the Google-AdMob deal; it would give Google—the Web's largest advertising company—a huge share of the mobile advertising market. In an odd way, then, Apple's iAds announcement is both a worry and a boon for Google. On the one hand, Apple has just become a huge rival—now developers can buy ads through Apple rather than Google's AdMob. But Apple's entry also proves the market for mobile ads is highly competitive, increasing the likelihood that regulators will approve the AdMob deal.

For iPhone users, then, Apple's iAds announcement means only one thing: Because it sets up intense competition between Google and Apple to attract advertisers, we're likely to see many more annoying ads on our phones. There's an argument that this is good for us; a better marketplace for ads will bring more revenue to app developers and thus will lead to better—and cheaper—apps for us all. Perhaps that'll happen. But as we've seen on the Web, advertisers aren't always good at balancing visibility with usability. Many sites are clogged with annoying ads, which explains why ad-blocking software is so popular. Ad blocking isn't going to be available in our apps, and with the media industries so hard up for new revenue—and with so few of us expressing any willingness to pay for content ourselves—I doubt that newspaper and magazine companies are going to be able to resist stuffing their apps with ads. It's a bright future for advertisers.

While I understand the financial reasoning behind iAds, the move is still galling. Apple's move into the ad game highlights the many hypocrisies surrounding the locked-down App Store. In February, Apple banned "sexy" apps from the iPhone, including most apps that feature scantily clad women. The company said it did so in response to complaints from customers who considered the apps "degrading and objectionable." This seemed an odd justification at the time—Apple didn't kick out the Playboy or Sports Illustrated swimsuit apps, reasoning that they were from "well-known companies" and thus, apparently, less objectionable. But the iAds announcement further weakens Apple's claims that it's wary of customer complaints. iPhone users are bound to cry foul when they see their favorite apps launch "interactive" ads. How will Apple respond to those complaints? I'm betting we won't see apps blocked because they feature too many annoying ads.

I know I'm not breaking any news in suggesting that Apple sees every iPhone user as a never-ending stream of revenue. Apple doesn't just make money when it sells you a phone; it gets a cut of your cell contract, apps, music, books, and now even the ads inside the apps. At the same time, it is continuing to lock down app development; as part of a new developer agreement released Thursday, the company prohibited developers from using third-party programming tools to create apps, including Adobe's Flash and Novell's MonoTouch. Apple's rationale is obvious. iPhone customers are a captive, spendy bunch, and the company wants to make sure that all those billions go in its coffers and not to Google, Adobe, or anyone else.

I don't begrudge Apple any of this. If customers keep flocking to the iPhone despite bigger ads and ever more severe App Store restrictions, Apple has every right to profit. What bothers me is Apple pretending that iAds are a boon to customers—as if annoying ads, just like multitasking or threaded e-mail messages, are a feature we'd all been waiting for. Steve Jobs has figured out another way to make gazillions from the iPhone at the expense of his customers. Good for him. I just wish he wouldn't look so happy about it.

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