iAds' Growing Pains: Irritation or Agony?
Sportswear maker Adidas has reportedly abandoned its plans to launch an advertising campaign on Apple's iAds platform due to Apple CEO Steve Jobs' insistence on maintaining creative control over content. Other companies are rumored to be grumbling over similar issues. Will Apple find a middle path that's comfortable for both the company and its customers, or will Google's new offerings swing in for the kill?
Oct 6, 2010 5:00 AM PT
Pressure is mounting on Apple from the outside -- and from within.
The company is rumored to have lost yet another major customer for its iAds mobile advertising platform: sporting apparel giant Adidas.
Scuttlebutt has it that Adidas pulled its ad campaign, worth more than US$10 million, because of dissatisfaction over the tight control Apple CEO Steve Jobs insists on exerting over the creative process for advertisements.
Earlier this year, Chanel reportedly made its exit on the same grounds.
Meanwhile, Google is stepping up the pressure on Apple -- it debuted a hyperlocal feature for its mobile ads platform last week.
Can iAds survive? Will the platform actually get the more than $60 million in ads Jobs boasted it had lined up for the second half of 2010, or will it crash and burn?
Goodbye Yellow Brick Road?
Adidas is the second major advertiser reputed to have fled the iAds platform because Jobs insists on creative control over ads displayed on it. Chanel, one of Apple's iAd launch partners, apparently flew the coop in August.
However, other advertisers, such as Nissan, are reported to be happy with the iAds platform.
Will more advertisers leave iAds? If they do, will that make it difficult for the platform to live up to Jobs' boast that clients have committed to taking more than US$60 million in ads for the second half of 2010? The Apple CEO made that comment at the Apple World Wide Developers Conference in San Francisco in June.
Meanwhile, Google is stepping up its mobile ad efforts, recently launching the hyperlocal feature in the Google Mobile Ads platform.
"The rumor is that Steve Jobs was exercising too much control over the ads and the content, but that works both ways," Andrew Eisner, director of community and content at Retrevo, told MacNewsWorld.
"Steve didn't get to where he is today by failing to exercising control over details about what users see and, in some respects, by maintaining high standards to deliver the Apple experience," Eisner pointed out. "On the other hand, perhaps he should start listening to people."
The solution is simple, Eisner suggested. "All it needs is for someone to tell Steve to back off a bit," he explained. "It could've been worse -- it could've been a systemic problem such as Adidas not liking the platform or not being interested in mobile."
Growing Is Grokking
The iAd platform's current woes are just "growing pains," Eisner remarked.
If that's the case, perhaps Apple may change its tactics over time.
"I think that, in the same way Apple has relaxed some rules with the App Store, it will do something similar here, because it'll get the message," Greg Sterling, founding principal at Sterling Market Intelligence, told MacNewsWorld.
That change needs to come soon, as Google may snap up disaffected iAd customers.
"I think Google's in a stronger position to make advertising work, and it knows how to work with advertisers," Retrevo's Eisner pointed out. "Maybe Adidas might find a more cooperative advertising partner in Google than it did in Apple."
Keep an eye peeled for any more departures from iAds, and examine analysts' reports to see whether they are scaling down their expectations for the contributions the platform may make to Apple's revenues in the future.
Patent Problems at Cupertino
Apple is facing another problem as well -- it has just lost a $625 million lawsuit brought against it by Mirror Worlds for patent infringement.
Mirror Worlds alleges Apple breached its patents in the Mac OS X's Spotlight, Time Machine and Cover Flow features for searching, automatically archiving, and displaying documents and images, respectively.
However, the case isn't closed yet: Apple has filed a request for an emergency stay on the verdict, which was handed down on Friday.
"It isn't over yet," Retrevo's Eisner remarked. "This suit may move into a more favorable court for Apple."
What will happen next is anyone's guess. The financial hit won't be too much of a burden to Apple, which is flush with cash. However, it may run into problems if it has to reengineer its technologies to get around the patents.
The iPad Rules Okay
On Monday, Apple began selling the iPad directly to consumers through Amazon.com and Target, further widening its reach.
On Tuesday, Colin McGranahan, retail analyst with Bernstein Research, reportedly noted that the iPad's debut outperformed those of other popular electronic devices, such as the original iPhone and the DVD player.
The iPad hit 1 million units sold in just 28 days, while the iPhone took 74 days to hit that mark. Only 350,000 DVD players were sold when it was launched in 1997.
McGranahan predicted that the iPad will surpass game consoles and basic cellphones to become the fourth-largest consumer product category in the United States next year. He pegged iPad sales at more than $9 billion in 2011.
That ties in with other analysts' optimistic expectations for the iPad.
The market seems to be appreciative of Cupertino and to have shrugged off reports of Adidas' departure from the iAds platform. Shares of AAPL rode a general market rally to close at $288.94 Tuesday -- up 3.7 percent and within spitting distance of their all-time high.