Why do you think that Apple, a company that makes most of its money by selling devices, is getting into the mobile advertising business? Unless you are privy to boardroom discussions, the mystery has yet to be unlocked. However, I have some ideas that may be relevant to the reasoning behind Apple's new business venture..
In my last post, I discussed my thoughts about the head to head competition that is brewing between Google and Apple - a result of Google getting into the smart phone business and Apple getting into the mobile advertising business. In that post, I concentrated on Google. Today, I will concentrate on Apple and the strategy in paying $275 million for Quattro; a mobile advertising network with about 7% of the mobile advertising market. Google, similarly, is in the process of buying AdMob for $750 million, which is estimated to have approximately 21% of the mobile ad market.
However, I believe that Apple's business strategy for acquiring Quattro is different than Google's business strategy in launching the Android mobile OS and its Nexus One smart phone, and acquiring AdMob.
My thought is that Apple’s venture into mobile advertising does two things for them:
- Creates a New Monetization Channel
- Maintains Leadership in Mobile Devices
Creates a New Monetization Channel: Quattro acquisition allows Apple to now participate in the revenue stream of advertising within its ever-growing catalog of Apps. Apple recently announced that over 3 billion Apps have been downloaded from their Apps store. The vast majority of those Apps are "free" and depend on advertising to support their developers. Those ads are provided by third party mobile advertising networks, such as AdMob and Quattro.The acquisition of Quattro will allow Apple to tap into the advertising revenue stream of these free Apps. If, as forecast, Apple launches a "tablet" mobile device, the potential for the advertising revenue stream will grow even larger.
Maintains Leadership in Mobile Devices: By maintaining its role in producing one of the most attractive devices for which developers to build applications, the acquisition will make it easier for developers to sell ads and make money. By also including Quattro’s SDK (software development kit) inside its primary application SDK, they will become the standard for App ads. Which means, developers can include a single universal SDK that would make their App compatible with all mobile ad networks, which becomes a standardized way of serving ads inside of an application.
Apple knows that, in addition to their technology, the Apps developed by third party developers are a major reason why the iPhone is so popular. Because the vast majority of the downloaded Apps are free, the mobile ads displayed are critical to the App developers.
Google wants to dominate the mobile advertising market. To do that it needs its Android mobile OS to be ubiquitous. It is not worried about making money on either the Android OS or the new Nexus One smart phone. It wants to continue making its money by selling online advertising. To do this in the mobile market it needs to dominate the operating system to allow it to better target advertising to smart phone users.
While each company is getting a new revenue source as part of its strategy, it's my belief that they are both laying the groundwork to maintain and increase their sales from their core businesses.
Only time will tell how right I am. What do you think?
Comments
Post has no comments.