January 5, 2010
Apple isn't saying. Quattro posted a blog that told their current customers not to worry – normal business operations would continue. So, I am speculating a bit.
The first questions I've fielded are, "Does Apple want to go head to head with Google?" or "Does Apple want to sell advertising?" At a high level, I believe businesses stick close to their core competencies. Apple sells hardware, software and some content. Google sells advertising. Well, mostly. There are about 4 billion cell phones worldwide and about 1 billion PC's. New Internet connects (and page views and advertising growth) will come from mobile. Mobile is high growth. PC's are a bit commoditized. My cell phone costs more than my last netbook or notebook purchase. Go figure.
Our mobile marketing foreast for the US shows revenue growing from $391M in 2009 to $1.3B in 2014 provided there aren't any game changers. Game changers? Anything that would dramatically impact the amount of inventory or the value of it. The Apple iPhone, for example, dramatically altered the number of page views or inventory in mobile. The Android phones are helping as well and gaining momentum. These numbers are US-only – growth in mobile globally has been dramatic as well and will continue to be. In the US alone (see my colleague Charlie Golvin's blog) smartphone adoption grew from 11% at the end of 2008 to 17% at the end of 2009. This is significant because a lot more browsing and application downloads happen on these phones than more basic ones. A cut of this revenue would add some to Apple's bottom line, but very small at least in the next few years.
My running hypothesis? Attractiveness of their platform. There are many phenomenal elements of the iPhone, Android, Blackberry, Palm, Symbian, and Windows platforms. What consumers LOVE among other features are the applications. Each of these platforms has to offer an attractive environment to developers. Apple just announced 3 billion downloads. Part of the reason they got there was great selection/applications. Many of these were likely free downloads. Long term, developers need a path to profitability. They can share revenue with Apple by selling applications in iTunes. They can offer free downloads and then upsell customers later on better versions of their applications. Advertising offers another revenue opportunity. To date, this has been in the hands of third parties – most notably Admob which was just purchased by Google pending FTC approval.
I can list a few reasons to bring or integrate ad targeting and serving capabilities into the handset. Could provide a more clear opportunity for developers to generate revenue from their applications. Up until now, various third parties would have competed to have their code included. Deeper integration with the handset could provide better analytics and targeting (location, browsing behavior, purchase behavior) capabilities (= higher value inventory) going forward. It could be a defensive move – if Apple has no play and the Admob acquisition goes forward, Google is the primary beneficiary of ad revenue generated from Apple's platform – of which we know there is a lot. They are often ranked the top platform for mobile Web browsing.
We won't know for sure until both parties talk about the deal. These are just a few ideas.
I don't think this is the last announcement we'll have this month from a handset OEM claiming they have a solution to help advertisers, merchants, application developers, media companies, etc. do better targeting –