Apple leverages iTunes account data to create targeted iAds

Apple's iAds for its iOS mobile operating system could have an advantage over competing advertising networks in creating targeted ads, due to extensive data found in users' iTunes, App Store and iBooks purchases.

Apple collects "standard targeting options" from customers through its digital storefronts, with 150 million active iTunes accounts collecting a history of downloaded applications, movies, songs, TV shows and more. That data could help Apple create more appealing and effective advertisements, giving the company a leg up on the competition, according to a new report from Bloomberg.

Author Adam Satariano wrote that Apple doesn't share information on individuals, but it does allow companies to advertise in "buckets" of applications that meet a targeted demographic, based on the tracked characteristics of its users.

The report used the Dove Men+Care soap campaign as an example. One of the first iAds to appear when the service launched last week, it has been targeted toward married men in their late 30s who have children.

"Relying on the music, videos and apps that customers are downloading from its iTunes, App Store and iBooks helps Apple sketch a behavioral profile that can be paired with appropriate promotional messages," the report said.

iAds aim to provide richly interactive ad experiences inside developers' apps, providing them a 60 percent cut of the advertising revenue. The hope is the advertisements — noted by the iAd logo in the corner — will be more compelling to users, because they don't have to leave their app and launch a browser to view them.

Advertisements act more like full-blown applications, complete with features like videos, interactive games, and the ability to find information such as local stores or product availability.

An Apple spokesperson told Bloomberg that the company is just getting started, and partners are expected to ramp up campaigns as the year goes on. Advertisers are expected to jump on board with seasonal marketing campaigns including back to school and the holidays.

"We're just taking our first few steps," spokeswoman Trudy Miller said. "We'll work our way up to walking and running as this year progresses."

Apple has said that it expects its iAd service to represent half of the mobile advertising market by the end of 2010. Before it was launched, Apple had secured commitments for more than $60 million in advertisements over a six month span, with partners including AT&T, Best Buy, JCPenney, Nissan, Sears, Target, and Walt Disney Studios.

While demographics and data from iTunes accounts will be a major selling point for iAds, Apple also allows users to opt out of data collection as well. Users can visit oo.apple.com on any device running iOS 4 and Apple will allow the user to opt out of data collection for iAds. Those who visit will receive the message "You have successfully opted out."

Apple plans to use iAd as a program to incentivize App Store development, and does not expect to turn a great profit from its new advertising business, made possible due to the purchase of Quattro Wireless for $275 million.