Essay: The Apple Threat to Online Advertising

The following essay is also my column this month on Forbes.com.

Caption: Safari's new Reader view could rob publishers of page views especially if it finds its way into iOS devices

Watch Out: Apple May Aim To Reshape Online Advertising

Apple, without a doubt, is creating a massive sea change in how we interact with digital content. Note that I didn’t say “the Web.” This is because the millions of iPad and iPhone users spend more time within Apple’s walled garden of apps rather than in a browser. However, there’s a potential dark side to the millions of Apple devices being sold and it should give every marketer pause.

If you look just below the surface of all the hype around the iOS devices (the iPads, iPod Touches and iPhones), there’s a dirty little secret. Apple might be positioning the platform as a Trojan Horse that reshapes digital advertising as one man—Apple CEO Steve Jobs—thinks it should work. While this messianic zeal benefits users, it could conceivably create a competitive moat for Apple and its partners.

Jobs has more than a passing interest in online advertising. He co-authored a patent filing in 2008 called “Advertisements in Operating System.” Now Apple has put into place systems that handicap existing dominant formats like rich-media ads and interstitials.

Case in point: Safari. On June 7, the day Apple unveiled the new iPhone, it also shipped Safari 5. The browser, available for both PCs and Macs, has a feature called Reader that neutralizes multipage articles and interstitial ads by giving the user the option to read an article in a new clean view that strips away all but the text of the article.

A primary benefit of the new Reader view is that it allows a user to consume a multipage story without having to endure multiple clicks, interstitials and a new set of banner ads. This sounds great but it may rob publishers of ad impressions.

Now, granted, no one is saying that Safari is a powerhouse. It has a minuscule 10% share, according to Net Applications. However, keep in mind this feature is found only in the desktop version of Safari today. There’s no reason why Apple wouldn’t bring Reader to the growing armada of iOS devices—which commands an 60% share of all mobile browsing, according to Quantcast. The end result may be that more publishers will flock to the App Store and iAds.

Equally troubling is Apple’s posture toward rich-media ads. In the April open letter “Thoughts on Flash” Apple and Jobs clearly outlined why they are not allowing Adobe to push forward with its plans to bring the technology to the iOS ecosystem.

Most of Jobs’ arguments were primarily based on technology issues and user experience. Ads were only mentioned briefly. However, if you read between the lines, there may be another motive. Apple could be trying to pave the road for the success of iAds. (Disclosure: Edelman, my employer, is Adobe’s PR agency.)

The takeaway here is that as iOS devices grow in popularity, the platform encourages advertisers to increase their iAd budget and/or develop their own apps. This benefits developers and iAds advertisers. Now, I’m no lawyer, but it’s conceivable that if the iOS platform one day achieves any kind of dominant position the way Windows has, this may be viewed as an anti-competitive move.

No single company will ever control the Web. However, as Apple’s power grows and it begins to push into advertising with new formats, it must not put up roadblocks to other formats as it has done in the case of Flash or could do with its Reader view. Pressure from CMOs and others in the industry like the Association of National Advertisers and the IAB will ensure that even as Apple devices gain share advertisers will have the same freedom of choice in how they advertise in the post-PC age that they did in the previous era.

Comments

[Daniel]

While I appreciate that apple's actions may potentially hurt publishers, I think it is important to admit that interstitial, multipage articles, etc just plan suck. They are are a sign of the inherent laziness on the part of the publisher who care more about padding page views than delivering a excellent customer experience. Now granted they are being graded on page views but is not the publishers (along with advertisers) who create the grading system? Why aren't they trying to solve this? I don't know if Apple will succeed in their attempts but at least they seem to be putting the clients (experience) first.

[Steve Rubel]

I cant disagree. They aren't liked. But they drive revenue.

[Tim Cohn]

"...users spend more time within Apple’s walled garden of apps rather than in a browser."Doesn't sound mathematically possible. Where did you get that particular piece of data?

[Mimyre]

Nice pne...Keep oit up...obs calls it as he sees it and reacts accordingly. If Flash wants to be on iOS, before it does anything else Adobe first needs to organize itself and put out a decent product just like every other technology company in the history of the industry. The market will decide Apple's success; meanwhile, advertisers need to think more, produce less, and evolve even the barest modicum of user empathy if they want to understand their place in this new world.

[Steve Rubel]

Tim, Jobs mentioned it during the iads roll out.

[seekgeek]

Forget "potential" monopolies - the real monopoly when it comes to digital advertising currently resides with Google. We should welcome some competition!

[DannyHopwood]

This has been on the cards for sometime. It began to bubble when Schmidt left Apples board back in 2009. I reckon he saw something (not just Apples venture into related Google products), but a potential business plan that came in direct conflict with the Google monopoly.I welcome the competition."ads as a whole really, really, really suck" - but they still provide the backbone of most companies and lie inherently in any proprietary technology, site, network etc. Apple know this, Jobs "sees it and reacts accordingly". I'm sure he'd appreciate one more revenue stream to support his single technology revenue stream currently in place.In terms of Flash....maybe Apple just have their own ideas on this.

[Alex Schleber]

+1 Evan. I've argued same for a long time: The effectiveness of sidebar or header ads (including Adsense) is going down all of the time, as users either train themselves (unconsciously) to ignore them, or block them outright with browser plugins.The only think that makes any sense, and incidentally is also a solution for Steve's worry here, is to 1) Offer only things **that make sense in the context of what people were already doing**, i.e. in this case reading content with a certain topic, etc. 2) Make a custom offer that is inserted into the BODY of the content, at or near the end (E.g. if I am reading Steve's post here I don't want to see a random car or soda ad, but an offer for a whitepaper on online advertisement might work).More detail here:http://businessmindhacks.com/post/is-advertising-failing-on-the-internet

[Tim Cohn]

Thanks Steve... still sounds like hyperbole because there are an estimated 1.8 billion people on the internet and roughly 50 million Apple devices albeit with 225k apps.

[Kristen Miller]

IMHO all this 'apple bashing' just sounds like sour grapes. It seems that advertisers, competitors, and other revenue oriented entities want to tear down the walls of Apple technology because it's 'unfair' that Apple should be protecting the user experience from their garish invasion. Apple has been based since it's inception on designing technology with the COSTUMER in mind, and that has been the crux of their success. All those companies that are looking to invade that 'walled garden of Eden' are doing so with a complete financial motive - they want to get their hands on those consumer dollars, and bullox to how the it soils the user experience. They expect 'Joe Sixpack' to roll over and take it like he did with television commercials, but that's not the way the world works any more and they are pissed about it. People have a choice to get get away from invasive advertising, and Apple is helping them retain that choice. Personally, I have an EXCELLENT user experience with all my Apple technology, and will defend that experience from money hungry greed driven wolves given any opportunity. But, we know it's not to last - our numbers are much lower and it's only a matter of time until Apple is overrun by law suits and drug down into depths along with IBM. Where is Harrison Bergeron when you need him?

[Samir]

Great writeup. Apple's reader seems to be something that the consumer would like. If a feature like this becomes more mainstream in other browsers, ad networks will have to find new ways to target audiences.That said, a lot of what Apple is doing seems to be anti-competitive. It will be interesting to see how advertising turns out if/when Apple gets big enough.

[Daniella Santos]

I agree with you in terms of how Apple affects a lot of online advertisers, publishers and the like. Others may react negatively because they are affected of the rapid growth of Apple. But of course there are people who believe programs and product created by Apple gives them their desired satisfaction they do not get from others.

[Chris Sparno]

Seems like there have been add-ons to strip ads available since the introduction of ads on web pages. They are annoying, and even Apple is insane to think I would want to click on an iAd, regardless of how engaging it is. I find it amusing that all of a sudden, because Apple has included a feature in Safari 5 that has been available everywhere else as an add on, they are now the bad guys for blocking ads with Reader. Really? Oh and can we stop using the meme "walled garden" already. Its as tired as the term "vetted" was during the Clinton/Obama primary.

[Jorin Cowley]

I just use Readability, It does the same job and makes it easier to read.

[elmas]

It’s Apple’s prerogative to set the terms for software development on Apple’s own products. Disagreements among competitors are settled on the free market by persuading individual customers that a particular product will satisfy their own needs. Over time, technologies succeed or fail accordingly. Gasoline engines win, steam engines lose. VHS tape wins, Sony Betamax tape loses. CDs win, cassette tapes lose. Some businesses make money, others go bankrupt.Now, however, reports indicate that there's a real war between Apple and Adobe—not with guns and bombs, but with the politer kinds of physical force that government regulators wield: fines, penalties, and jail terms. Adobe, it is rumored, wants to force its way into Apple’s devices by threat of prosecution for violating America’s antitrust laws.Will antitrust enforcement give Adobe the revenues it couldn’t earn on a free market? Stay tuned …

[Andy, SEO Company]

Hi,i just came from your eariler micropersuasion blog and i must say there's a wealth of information in that blog. I was amazed at how many uses (35!) of rss could there be.anyway, coming back to this topic, yes, apple's clearly a formidable player and could someday redefine how online/mobile advertising is done. just look at what they have done to Adobe Flash, and how iPhone is eroding every other maker's share.

[HuangEdison]

A typical look at does reflects your wealth, status and ability..

[mike]

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