Analyst: iAd looks to be Apple’s next billion-dollar business

invisibleSHIELD case for iPad“As part of Apple’s refresh of the iPhone operating system software, the company last month unveiled the iAd mobile advertising platform,” Eric Savitz blogs for Barron’s. “iAds could be a boon to app developers, giving them a new way to generate revenue for free or low cost application sold in the App Store.”

“Bernstein Research analyst Toni Sacconaghi this morning took a close look at the economics of iAds, and concludes that this could turn out to be a substantial business for Apple – and soon,” Savitz reports. “‘iAd’s unique value proposition is that it can serve interactive, multimedia advertisements within apps; moreover, these ads are likely to be highly targeted based on location, intent and demographics,’ he writes in a research note.”

Savitz reports, “Sacconaghi sees big potential. He estimates FY 2010 run-rate iAd revenue could be over $800 million for Apple by the end of FY 2010; that includes an estimated $550 million in annualized revenue from apps, and another $265 million or so for ads placed in videos, newspapers and other media… Given his view that Apple’s installed base of iPhones and iPod Touches will likely double by the end of FY 2011, he says iAd revenue from iAds in apps could likewise double, which would mean a run-rate existing FY ‘11 of more than $1 billion – or more than $1.6 billion, if you assume a similar doubling for media iAds.”

Full article here.

15 Comments

  1. My eyeballs are not for sale & don’t intend for them to be. I will gladly pay for content (or apps) in order to AVOID ALL ADVERTISING. There is way too much of it and it’s damn annoying.

    Note to Advertisers:
    1-Click to Flash is wonderful. It blocks tons of useless bullshit that wastes bandwidth, my time and CPU/GPU cycles encoded in Flash.
    2-I gladly buy TV via iTunes to avoid advertising and in program lower third supers that annoy the living hell out of me and plan to continue to.
    3-I never click on ads on any webpage I look at. If I want to see what cars Porsche is selling I can go over to the Porsche website, same for all other advertisers.
    4-When scanning favorite websites I forward articles through Instapaper and avoid all BS advertising. I highly recommend Instapaper (Paid Version).
    5-When ads appear on my radio, I mute the sound. The ads follow a common break formula. Same for the little TV I watch live.
    6-I use Video Podcasts for Rachel Maddow and Keith Olbermann from MSNBC and they are the complete program without a single ad.
    7-Apple does not advertise heavily and makes unobtrusive TV ads. It seems to be doing a great job for Apple- maybe you could learn something from them.
    8-I hate advertising and have no intention of responding to any of your ads.

    Have a nice day.

  2. @NotMy………..

    I concur in your sentiment, but it doesn’t change what drives the media world. All the pay-for-content options out there (I am a big iTS purchaser also) haven’t changed the overall desire of producers to reach consumers. If anything, it has sharpened the knife. In fact, that’s what iAds is all about: sharpening the knife.

  3. Not My Mac/iPhone/iPod Touch/iPad/Apple TV:

    Before you get so carried away with yourself…you do realize (don’t you?) that ads are mainly going to be used in free apps, to afford a developer cost covering revenue that is essentially lost with free aps?

    Soooooooooooo, if you don’t like ads that much either buy all your software and apps or accept that you’re probably going to pay by watching the adds.

    No free lunches, pay the man.

  4. @Not My Mac/iPhone/iPod Touch/iPad/Apple TV

    Should I construe your high recommendation of Instapaper (Paid version) to be an endorsement of a product for sale on this public forum??

    Owweeeee!!! My eyes are burning!!! And here I was trying to avoid ALL advertising too. 🙁

  5. @breeze

    Do you give out free lunches?

    If so, please put me down for one every day.

    Do I get to pick what I want? Will you make sure it’s hot? Oh, and will you deliver? It would suck if I had to go pick it up.

    Thanks.

  6. My post above. I will gladly pay for any content that keeps ads out of sight. Instapaper has a free app that is ad supported and a paid app that isn’t. & no, it’s not my app- just a face.

  7. I think developers will create free apps with iAd, and many will add an in-app purchase option that will give you an ad-free version.

    Some users will pay extra to avoid the ads, but I think most will tolerate the ads. They will take up some space, but it’s not like TV commercials (or those “pre-roll” ads on YouTube) that play whether you want to see them or not. The user has the choice to view the full ad or not. It’s more like the sidebar ads on MDN (or even ads in print magazines and newspapers); they are mostly ignored. But they allow web sites like MDN to exist and make money, because a small percentage will click (or touch) the ad.

    And Apple is keeping strict control and running the iAd system, because Apple does not want things to get out of control, with the ad “teasers” taking up too much space or processing power, or have ads that are tacky or offensive. Remember, the developer is just making space on the apps screen available and gets paid for it; Apple does the rest of the work.

    iAd will enable many more free apps to be developed, because the developers will be able to to justify the time and effort put into creating free apps.

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