iAds finally launches today – what it means for mobile advertising

At the start of April, Steve Jobs publicly confirmed that Apple would be launching its very own advertising network. From the very first moment, iAds was surrounded by controversy – and the launch later today won’t shake any of it. We look back at the history of iAds so far, and what it will mean for the mobile advertising industry.

What is iAds?

With the launch of the iPhone, Apple popularized both mobile applications and the use of smartphones to browse the internet. Since then, a lot of companies have been working to make money advertising through both those channels. Not being one to be left in the cold, Apple bought out a mobile advertising company called Quattro Wireless in January. The two companies then got busy developing a way for Apple to make money from the advertising that it had made possible. The result was iAds – a marketing network that will serve ads to iPhone, iPad and iPod Touch.

What does it do?

iAds will use information collected from your device to serve you targeted ads. Honestly, it’s not much smarter than other ad networks – but the big bonus is that it allows advertisers to use native iPhone functions, the same way an application does. Rather than just serving a display banner ad, iAds will allow you to embed a fully functional game (or any other app) into an ad space.

Apple is also using iAds to get into bed with huge brands. By mid-June, Jobs was claiming that Apple had booked $60 million in advertising deals already – including deals with massive global companies like Unilever.

Controversy?

Apple has been using iAds as a blunt weapon in order to get what it wants. There have been two major grievances based around the ad network so far:

No Flash: the iAds network will not support any Flash creatives. This is part of Apple’s continuing campaign to get rid of Flash altogether, and get everyone using the web-based standard HTML5. But not everyone is happy with the decision to ignore Flash – Mobile advertiser Greystripe offers a service called iFlash, that will run your Flash creatives through HTML5, allowing you to get around the Apple block. After iAds was announced, sales on iFlash rose by 200%. As you can see, a lot of advertisers are used to creating rich-media ads with Flash, and don’t like being forced to change.

Banning other ad networks: the most controversial aspect of iAds was Apple’s decision to block “non-independent” ads from the network. What that means is that ads from 3rd party agents can’t appear on iAds. A brand, advertiser or publisher has to deal directly with Apple. The problem here is that Apple is basically banning all of its competition from sending ads to iAds. It is saying “if you’re owned by one of our competitors, you’re not allowed on iAds”. This has been seen by many as a direct attack on the main competitor to iAds – the AdMob network, which is owned by Google. It’s not just bad news for Google though – there are a lot of companies out there that make money by serving other peoples ads to iAds, and Apple is screwing them all over.

This move was so blatantly anti-competitive that it attracted the attention of the Federal Trade Commission. The FTC has launched an investigation, but it could be some time before any resolution is reached. In the meantime, iAds will be raking in the money that it has blocked other companies from making.

What we think?

I think it’s a foregone conclusion that iAds is going to be successful. The advertising potential for both iPhone and iPad are colossal. And by kicking everyone else out of the room, Apple can keep all the profit for itself. Now, that’s a situation that probably won’t last all that long – I can’t see the FTC ruling in favor of the third party ban. But for those first few months it’s going to be gravy for Apple.

The thing is, that move almost certainly wasn’t about money. It’s about Apple reminding everyone who the big dog in the room is. As iAds launches today, Steve Jobs is looking the rest of the mobile advertising community in the face and saying “this is our world, you’re just living in it”.