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Saturday, March 27, 2010, 06:00 am PT (09:00 am ET)

Apple rumored to introduce iAd App Store service on April 7th

Apple's plan to muscle its way into the mobile advertising market in a direct challenge to Google could come as early as next month in the form of a service dubbed "iAd," according to a published but vague report on the matter.

Citing an unnamed executive familiar with the plans, MediaPost claims that Apple chief executive Steve Jobs has been touting the upcoming service, rumored to launch April 7th, as "revolutionary" and "our next big thing" amongst his inner circle. No further details were reported.

Still, it's expected that the service will leverage assets and personnel acquired by the iPhone maker in its January buyout of mobile advertising firm Quattro Wireless for $275 million. The acquisition came on the heels of a $750 million purchase of rival mobile ad firm AdMob by Google, which reportedly outbid Apple on the deal.

When asked about the company's acquisitions of Quattro and the Lala music service during the company's first quarter earnings conference call, Apple's chief financial officer Peter Openheimer said, "In terms of Quattro and Lala we acquired Quattro because we wanted to offer a seamless way for developers to make more money on their apps, especially free apps. We acquire companies from time to time for their technology and talent, that's why we do it."

Apple has never run an ad business before, but it has also never really had a captive platform to sell any advertising before either. The company briefly flirted with adding banner ads to its Sherlock search app a decade ago before abandoning the idea. Since then, it has focused on selling its own applications and its iTunes media partners' content as ad-free rather than chasing the idea of ad-supported media models.

This, however, enabled Google to remain focused on creating an open source smartphone monoculture around its own Android mobile operating system that would allow it to track and target mobile users with advertising. The search giant's goal is to expand its advertising monopoly into mobile devices and become the next Microsoft of smartphones, except that it will be collecting revenues for ads and paid search results rather than licensing software as Microsoft had.

For its part, Apple operates the world's fastest growing mobile platform and retains a tight relationship with its iPhone developers, who can currently only publish their apps through iTunes. By offering these software makers integrated advertising services, its believed that Apple can get started in the mobile ad business and quickly catch up with Google's own fledgeling mobile efforts.

In a report published back in January, people close to Apple's Jobs said the company co-founder hoped to "overhaul mobile advertising in the same way they had revolutionized music players and phones." Details were again scarce, but it was speculated that Apple could rely on user data collected through iTunes and the App Store, along with geo-location technology due to GPS in the iPhone, to create targeted, local advertisements that would be more relevant to consumers. The company could also utilize gimmicks, such as having users shake their iPhone to win a prize.

"Some developers have profited by embedding ads in their apps, but the payments tend to be insignificant since the ads are usually smaller, less effective versions of their Web banner forms," the report said. "According to a source familiar with his thinking, Jobs has recognized that 'mobile ads suck' and that improving that situation will make Apple even harder to beat."

"Apple has a vault of valuable data that can help drive an ad business," the report added. "It knows precisely which apps, podcasts, videos, and songs people download from iTunes; in many cases it has detailed customer information such as credit-card numbers and home addresses. That gives Apple a chance to blend advertising and e-commerce in new ways, particularly after the acquisition of Quattro."

For Apple, the market and opportunity already exists, which should allow the company to focus primarily on execution. As of 2007, the company said it had more than 500 million active iTunes Store account holders, a figure which has surely grown substantially since then. It's bounty? A mobile online advertising market worth $2 billion annually and growing.