Apple CEO Steve Jobs once famously said mobile advertising "sucks." Now, he's out to change that with the introduction of an ad network called iAd.
Apple, which bought mobile ad network Quattro Wireless for $250 million in January, plans to offer iAd to application developers. The ads will differ from many standard mobile banners because tapping on them won't cause users to leave the applications. Instead, brands can provide various interactive elements in displays that pop up over the application pages.
Apple said the approach "combines the emotion of TV ads with the interactivity of Web ads."
The ad network was unveiled along with the latest version of the iPhone operating system today at an event held at the firm's Cupertino, Calif., headquarters.
Apple plans to give application makers 60 percent of the revenue generated from iAds. The company will sell and serve the ads. Apple did not say how it would target placements or whether it would open the platform to other networks.
Jobs demonstrated several iAds, according to reports from the event. One was for NikeID, showing how users could tap to watch a video or customize a shoe. Another for Toy Story invites users to play a game or watch a trailer. A Target placement has an option for customizing a dorm room.
While Jobs hailed the ads as revolutionary, other mobile ad networks provide the ability to keep users within apps after they engage with ads. Medialets, a mobile ad technology firm that works directly with publishers, has done this since its inception.
The move puts Apple even more squarely in competition with Google, which is eying mobile advertising as one of its biggest future business opportunities. Google inked a deal to buy mobile ad network AdMob for $750 million, a deal that is drawing the scrutiny of the Federal Trade Commission. In addition, Google is competing with Apple through its Android OS and Nexus One phone.
"The No. 1 challenge is figuring out how to sell advertising," said Tom Foran, chief revenue officer at mobile rich media ad provider Crisp Wireless. "It's not as easy as generically they might think."
Apple will also compete with several established mobile ad networks, including Millennial Media and JumpTap. The platform is aimed at the thousands of developers that have flocked to build applications that run atop the iPhone.
While the 60/40 revenue split might appeal to many, it is likely to give large publishers pause, Foran said.
"It may not resonate with premium publishers who are abandoning ad networks online," he said.
See also: "iPad Changes Everything?"