Saturday, September 11, 2010

iAds might both “fail” and “succeed.”

I just read an interesting blog post by Mac developer Manton Reece titled I hope iAds fails (via DF).

He makes two very good points:

  1. “If you are not paying for it, you‘re not the customer; you‘re the product being sold.”
  2. “I don‘t want to see ads in my apps, and I don‘t want Apple to ever lose even a little of what it means to be a product-driven company.”

I agree wholeheartedly with the sentiment, but I think he’s missing an important part of the picture.

When Apple first announced its iAds advertising program, I joined the nerd herd and assumed they were trying to head Google off at the pass. Google clearly thinks that in-app advertising is going to be a big deal, and as the dominant advertising-engineering company (AdEng? AE?) they want to control that market. Google paid $750 Million for AdMob, a company pursuing exactly that aim and one which Apple reportedly also wanted to buy.

Yes, that would be a terrible outcome for users and indie developers alike. If people get used to ad-supported apps, it will be much harder to sell small apps, and small apps are the foundation of the ecosystem. And, of course, the user experience will be severely degraded for most types of application.

But I now think that’s unlikely, and I further think Apple is on to something more interesting (and arguably more innovative) than Google’s subtlety-of-napalm approach to advertising.

There are, I believe, three interesting scenarios where in-app advertising is essential to the very concept, and by no means a bad thing for users. Whether it destroys user experience in these cases depends on the interaction design, not the concept itself.

First: Apps that are really about shopping.

Take, if you will, BabyCenter. Here is a web site that is sort of about community (an online network of people expecting or having or raising children). Maybe it’s even good at that. But this is undeniably also a site that aims to aggregate people who need and want to buy stuff of a certain sort. The web site makes it very clear that this is what they’re about, and they even have an online store of their own. There is nothing wrong with this, and BabyCenter is very open about it.

How should a BabyCenter App make its money? By charging people to download it — people who, after all, are just as likely to go there because they need stuff as for any other reason? Or should they help connect eager purchasers to eager sellers? (The BabyCentrists have two iPhone apps in the App Store already, one paid and one free, but no BabyCenter app per se.)

Have you looked at LookBook? There’s a concept that would be great as an iPad app, and it would be almost criminally negligent to exclude the advertisers. And for their demographic, it’d be smart to make it a free app: the kids need to save money for clothes!

There are many more, but you get the idea already. Some things are simply about shopping, even if they might be complexly about something else too.

Now the question is: what sort of ads should those be? Should they be high-quality, unobtrusive, Apple-style ads? Or should they be ugly, creepily prescient, Google-style ads?

Second: Apps that are ads themselves.

More and more Hollywood movies, TV shows, and other entertainment products have supporting apps these days. It seems to be the horrifically bloated interactive Flash site of the new era. And the kids, apparently, will download such stuff.

It seems obvious that the ad-as-app should also have in-app ads. You already have the brand loyalty, since after all they downloaded your ad-as-app. Why not make an extra buck selling them something else?

The only catch is that you probably don‘t want to sell your competitor‘s stuff. I assume Apple will give you some control over that.

This category of app may seem superfluous, but remember when you were young and fannish yourself. There‘s nothing new about hawking and extra bauble to the already-sated shopper.

Third: Newspapers and Magazines.

Of the three areas where I see in-app ads as essential, one stands out as both obvious and difficult: ”print“ ads.

Consider this: you can subscribe to the New Yorker for under a buck an issue. They sell about a million copies each week. And this would be completely unsustainable without ad revenue.

I think the App Store gives us a chance to finally have high-quality magazines on portable devices, and I‘m impressed with some of the early efforts (cf. Popular Mechanics). But even though I‘m happy to pay for them, I can‘t imagine that business working without ads.

That‘s the obvious part. The difficult part is that, thus far, nobody has made this work. I would even argue that it has not worked for magazine web sites, though the Wall Street Journal has apparently done pretty well with a subscriptions-and-ads model.

This has got me thinking. If you remember the iPad introduction, you will remember that Apple is very keen on the iPad being used as a platform for high-quality publishing. The New York Times had an app available at launch, but it turned out to be a strange and indecisive beast: the ”Editor‘s Choice“ offers very little content, and has highly obtrusive, poorly designed, in-house ads, and costs nothing even though this is the strongest brand in American periodicals.

I believe there are two big reasons why this hasn‘t yet worked out as planned. First, magazine publishers generally lack the technical expertise to make good technology choices (let alone develop software). Second, they have no idea how to approach the new ad market. Their traditional approach is simply too inefficient; and yet they are reluctant to cede any control.

Of these, the first problem will solve itself with time, as there are more people who can design and build a solid app. The Guardian, for example, has a good iPhone app and a good web site, even though they‘re not yet on the iPad.

The second problem, though, requires major partners for the major print media. Google has not yet established itself as a good partner for high-quality ads, and Apple is attacking that market as opposed to the long-tail advertising market Google effectively monopolizes.

It‘s starting to seem obvious, at least to me, that Apple is much more interested in using its ad platform as a profitable carrot with which to bring serious publishers to its devices. I think Apple believes the numbers will speak for themselves, and publishers will be happy with Apple‘s cut if it gives them Apple‘s quality. This is especially important for major lifestyle brands. And if they go in-house or switch to another ad provider later, Apple still wins, with more and better content on iPad.

If small publishers can also benefit from this, so much the better. And if people are going to put ads in random apps, Apple wants to at least have a shot at mitigating the user-experience failure and getting a bit of cash along the way. But I really do not believe Apple is trying for an ad in every app.

Plenty of room left for innovation.

Apple and Google are going to be the big players in app ads out the gate, but there is still room for innovation.

Apple doesn‘t play the long-tail game with any seriousness. And Google doesn‘t do aesthetic quality (in fact they are virulently indifferent to it).

That suggests one clear niche market. And because you can plug in ad content in apps though a variety of technologies, neither Apple nor Google can establish any technical barrier to entry.

Another place I see startups, or at least studios, emerging is around truly interactive ads. Call them ads-as-games. The iPad, and perhaps some day its competitors, give you an amazing level of creative freedom. And that means you can push boundaries, if you know how. The publishers don‘t know how, nor do the traditional ad agencies.

While some people will just churn out multi-platform content from their publishing workflow and use whatever is easiest or that, user experience be damned (cf. Wired), others (cf. Pop Mech) will try to lead the pack through innovation. And they will want advertising content that helps them keep that lead.

The danger & the seduction.

As a loyal Apple customer, I want them to stay focused on products, not ads.

As a potential app developer, I want the App Store ecosystem to remain healthy and profitable for independents who want to sell their best work to real customers.

But as a potential iPad publisher — I‘m thinking seriously about starting an iPad magazine for fun and profit — I want a one-stop shop if possible. I would have to deal with Apple anyway for all financials and metrics of the distribution process. I could save a lot of headache by just plugging into their ad network and having it all integrated.

I‘m still not sure that‘s any better for the consumer. I trust Apple to have high-quality ads, but I don‘t trust them at all to have depth. I definitely trust Google to have the depth, because they will find a way for Aunt Minnie‘s Tin-Can Cookie Cutters to get into the stream at $3 a click, but of course their quality will be uneven. I hope that innovative startups will bridge this gap.

I do think there is already a precedent for high-quality, ad-free, reasonably-priced paid apps in the App Store. And I think there is enough momentum behind that, and so much potential in this class of devices, that it will not be broken by ad-riddled crapware any time soon.

Thus I think it‘s possible, and maybe desirable, for iAds to "fail" in terms of undermining paid apps, while also succeeding for both Apple and publishers in helping finally port the print-magazine revenue paradigm to the digital world.

And I think there are other things besides traditional publishing that would benefit, and whose users would benefit, from a high-quality in-app advertising system.

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