Apple iAd program to monetize iPhone apps with interactive media

Tied into iPhone OS 4, Apple's new iAd program will allow developer to include richly interactive ad experiences into their apps and earn a 60% cut of the advertising revenue.

Described as "a new form of mobile advertising designed by Apple to deliver the interaction and emotion currently lacking in the mobile space," iAd is conceived to be a way for users to explore rich content ads right within the app that is presenting it, and without being dumped into a web browser.

How mobile ads are different

"If you look at advertisements on a phone, it's not like on a desktop," Jobs explained. "On a desktop, its about search. On mobile, search hasn't happened. People aren't searching on their phones. People are spending their time in apps."

Jobs was alluding to the fact that Google makes nearly all of its revenues from paid search placement on the desktop, not the more familiar banner ads and AdSense links that are more visible on the web. In mobiles however, there's no real market for paid search because people aren't doing lots of searches. They're involved with apps, and so banner ads is all there is, at least for now.

"Developers [who create free apps] need to find a way to start making their money," Jobs said. "A lot of developers turn to advertising - and we think these current advertisements really suck."

During its presentation of the new ad network, chief executive Steve Jobs noted that when you click on existing iPhone mobile ads, it yanks you out of the application you're running and launches a web ad. This prevents people from clicking on ads more often.

In response, Apple has designed a means for providing interactive and video advertising content without ever leaving the app. Apple will sell and host the ads under a 40/60 split, with app developers getting the larger slice of the ad revenue.

HTML5 content (no Flash)

Jobs said ad content would all be rendered in standard HTML5, and could be developed using any tools the ad agency wanted to use. Ads have access to much of the same APIs as apps, including Location Services and some level of accelerometer access. Asked about the prospects of Flash and Java for iPhone 4, Jobs said, "uh, no."

Apple demonstrated an HTML5 ad for Toy Story 3. The ad allows user to view characters, videos, posters and downloads, play sound clips, and even play a self-contained game within the ad. The user can then leave the interactive ad and return to the app they were previously using.

A second ad example for Air Jordan shoes allows users to build custom shoes, view the history of the product, find a nearby store, and even build a custom dorm room, all within the interactive ad experience.

"We don't know much about this advertising thing." Jobs said during the question and answer period following the event. "We tried to buy a company called AdMob, and Google came in and snatched them because they didn't want us to have them. We bought a smaller but still great company called Quattro."