Following the launch of the much vaunted iPad, the computer maker is turning its attention to mobile advertising and is set to go head to head with Google.
Apple wants a bite of the new core market
This week may prove to be Apple's biggest yet, one that will pit it firmly against its Silicon Valley rival Google. By now, most people will have heard about the iPad, Apple's latest mobile tablet device. It was launched in the US on Saturday to much acclaim and demand, with more than 300,000 units reportedly sold.
But it is the events surrounding a hastily announced briefing tomorrow by Apple that may give a clearer picture of the company's long-term strategy. Although company watchers widely anticipate Apple to release the latest version of its iPhone operating system, speculation has mounted that it will also disclose details of its upcoming mobile advertising platform. Tentatively dubbed the "iAd", Apple appears to be entering a market that is still in its nascent stages, dominated by no single player - not even Google.
Right now, placing advertisements on one of Apple's touchscreen devices - the iPhone, iPod Touch or the iPad - is not easy. Flash, the proprietary software code owned by Adobe and responsible for most of the advertising on the Web, is not allowed to run on any Apple mobile device following claims by Steve Jobs, the company's chief executive, that it is "too buggy". The mobile advertising market has turned out to be a mix of different, yet basic, schemes.
Whether using an iPhone, Google's Android or Research In Motion's BlackBerry, to advertise on a mobile device, without sending a spam text message, a static banner link is the simplest and most cost-effective option. The promise of a targeted, location-based advertising model has been advocated for years but has not yet reached a tipping point of industry-shaking proportions. The market is estimated to be worth as much as ?8.4 billion (Dh41.9bn) in 2014, according to recent research by the Swedish analyst Berg Insight. Given the popularity of the iPhone, it is a segment that Apple has wanted to tap into for some time. The iPhone leads all smartphone devices in worldwide mobile advertising impressions with about 50 per cent of the market compared with 24 per cent for Android devices, according to AdMob, a mobile advertising network that Google bought in November for US$750 million (Dh2.75bn).
Owning the entire value chain - from device to operating system to software to the advertising platform - gives Apple a new window of opportunity, one that could be as significant as the iPad itself. Reportedly, Apple executives have called the iAd the company's "next big thing". In early January, Apple gave a hint of its mobile advertising plans by purchasing Quattro Wireless for $300m. Quattro, another mobile advertising network, offers marketers location-centric advertisements and information that enables them to target specific customers. In theory, the more you know about your customers - where they are and what they are doing - the greater return your marketing campaign can yield.
Pairing both Apple and Quattro has led some experts to believe that the iAd will create a more effective location-based advertising platform, fully integrated into the computer maker's mobile devices and the programming code needed to create applications for its devices. In 2008, Apple registered a patent for a device that would control how advertisements are displayed on an operating system, and turn the content or application off if a user was found not to be paying attention to an ad. This is yet to be developed, but analysts think this could become one of the company's initiatives.
Taking the concept one step further, adverts could be targeted to users by letting Apple determine a customer's characteristics by monitoring the applications they use, the music they listen to or the videos they watch. Whatever moves Apple make in the advertising world, they will be shadowed by what advances Google, the undisputed leader in the online advertising world, come up with. Apple's Quattro acquisition was largely completed in response to Google's purchase of AdMob. That deal, which is still under scrutiny by US regulators, gives the search engine giant a significant headstart in providing rich, contextual advertisements on a wide range of mobile devices.
AdMob has spent the past few years courting numerous mobile application developers for iPhone and Android devices to provide a better-looking advertising model, one that goes a step beyond simple text-and-click ads. Along with the AdMob acquisition and its existing search advertising business, Google is ready to take a significant lead in this space, too, following a patent it was issued for designing a scheme to serve ads dynamically based on a user's location.
As the internet world turns, the online strategies of Google and Apple have increasingly become positioned at opposite poles. Apple, under the steady hand of Mr Jobs, has opted to create beautifully designed devices that are a joy to use - but it strictly controls what applications are allowed to operate on them. Google, on the other hand, has embraced an openness solution, allowing everyone - from device makers to software developers - to jump on its bandwagon and adopt its Android programming language free, in exchange for more people viewing their adverts.
The impact of Apple's "walled garden" approach may make its advertising ambitions difficult to achieve compared with Google, says Yousef Tuqan Tuqan, the chief executive of Flip Media in Dubai. "Given their efficiency and the size of the market they work in now, in terms of what iPhones represent, they've become somebody that seriously needs to be contended with," Mr Tuqan said. "What is interesting now is that they've become the Goliath as opposed to the David. If you look at the mobile platform, because [Apple] has created the marketplace, because they have created the framework and user base, developers are now creating for the iPhone rather than any fragmented devices.
"But I question how they're going to do it because when people access content on their iPhones, they're accessing content through other people's applications or searching the Web." The media frenzy and positive reviews stemming from last week's iPad release has buoyed Apple's fortunes. But its potential forays into a new line of business will serve as a key indicator of the company's plans to grow and innovate. Whether it will succeed, however, will depend on how Google or other players such as Microsoft, and even popular websites such as Facebook, push back against Apple's advertising ambitions.