Apple TV could be the shot in the arm needed to finally wake up its mostly dormant advertising business iAd.
Apple declined to comment on this story when contacted by Business Insider.
Apple launched iAd, its mobile advertising sales division in 2010. At launch, Steve Jobs set out the bold ambition that iAd would capture 50% of the mobile advertising market. It has less than 2.6% of the US mobile ad market, according to eMarketer, and globally iAd does not even feature in eMarketer's top 10 mobile advertising companies in terms of revenue.
The momentum behind iAd has been building in recent months, however. Apple announced it was venturing into programmatic advertising for the first time, by partnering with companies including Rubicon Project, MediaMath, Accordant, Adelphic, and AdRoll.
The iAd division is also undergoing a massive expansion, bringing the total number of countries it operates in to 95.
And, according to The Information, Apple will soon let third party ad tech firms help advertisers target specific consumers by matching phone numbers, emails, and other data (similar to what Facebook offers.)
Apple TV could be transformative for the entire advertising industry
All of these steps are important if Apple wants to capture more of the mobile ad market. But if Apple were to pair iAd with Apple TV, that could be transformative. Not just for iAd, but for the entire advertising industry.
Recently I was speaking with Scott Gallacher, who is currently managing director of the Aston Group (which consults businesses including Facebook, Johnson & Johnson, and News Corp on digital) and formerly served as the director of online and partner marketing at British broadcaster BSkyB.
He sees Apple TV as the only market in which iAd could fit and easily outpunch rivals.
He said: "The [three tenets of the web] are communications, content and commerce. That's how the web works. And the one that has all three will win. And the only defendable ad budget there is, is the one that buys you sales."
For advertisers, Apple TV could potentially offer them the holy grail:
- The reach of TV. People may be watching TV in more different ways than ever before as the choice about when and where they watch programs expands, but content from broadcasters still commands huge worldwide audiences.
- Quality content. Advertisers want to associate themselves with the most premium, quality content. While online video is moving apace in terms of quality, TV broadcasters and networks still have the edge when it comes to programming.
- The ability to target very specific audiences. Apple has a wealth of first-party data about its customers, due to the fact that they register with their real details when they sign up for Apple ID and iTunes. There are more than 600 million iTunes accounts active today. You can't do that online advertising-style of specific targeting with TV currently - aside from some experimental services like BSkyB's AdSmart, which use the set-top box and registration data to determine who is actually watching the TV.
- Measurement. The benefit of having such a wealth of data isn't just down to targeting, it affects (in a positive way) what happens after an ad is served/broadcast too. Apple should be able to tell who was served an ad and what that individual immediately went on to do afterwards: That could include checking out the advertiser's website on their iPad, or tweeting about the brand via their iPhone.
- Commerce. For most iTunes users, it has become almost second nature to make micropayments using their iTunes accounts to buy apps, songs, ebooks, and so on. Apple TV could take away that pain point for advertisers in-between showing an ad and the user actually buying an item: They could make purchases directly from their TV. That's a very appealing call to action for an advertiser.
There are, of course, some caveats.
AP Photo/Paul Sakuma
Negotiations with broadcasters at home and overseas will be tough
Apple has found it notoriously difficult to arrange licensing deals to broadcast its content to date. It's one of the reasons why the original Apple TV streaming boxes didn't originally hit off: There just wasn't that much quality content on it.
While The Wall Street Journal reports that Apple has signed up heavy-hitters like CBS, ABC, and Fox, it appears NBC is not involved with the negotiations due to a long running feud with NBC parent company Comcast.
For Apple TV to really take off with consumers, it will need to provide a bundle that is equal or superior to cable TV. And without a partner like NBC, with its huge sports portfolio, it may have difficulty convincing people to sign up.
That's a battle that Apple will have to fight in every individual country it takes the new Apple TV to. That will be tough - most broadcasters are uneasy with the idea of letting other companies take control of selling advertising against their content. Back in 2011, the chief executive of European broadcaster RTL Gerhard Zeiler told the Royal Television Society's convention in Cambridge if he were to let other companies sell advertising against RTL's content he would "resign and let the mess be picked up by my successor."
So it might well be that the broadcasters still dictate the advertising that will run against their content on Apple TV. Apple might instead have to rely on more "native" forms of advertising rather than pre-rolls and mid-rolls - Like banners, text overlays, or ads that appear on the home screen for instance.
iAd and Apple TV advertising would require different skills
Apple hasn't lived up to its own ambitions for mobile advertising, let alone trying to take on broadcasters at their own game. Apple would need to hire in new talent. And that's not to mention that people paying for a subscription service probably won't be open to the movies and programs they choose to watch being flooded by ads.
Apple's iAd business itself is also somewhat contradictory to the rest of its business model. As my colleague Jay Yarow pointed out earlier this month in a well argued piece suggesting "Apple should kill its advertising business," Apple CEO Tim Cook has made a labored point of emphasizing time and time again that the company has strict privacy standards that - unlike Facebook, Google, or Amazon - doesn't use customer data in order to sell products or advertising.
iAd directly contradicts that. It may just make up an estimated 0.3% of Apple's total revenue now, but it could become a far bigger division were it to be paired with Apple TV. And that could become a pain point when it comes to Apple abiding by its core values.
Nevertheless, Apple TV shows what could be possible: Linking the targeted, measurable world of online with the reach and scale of television. For advertisers, that's a very exciting prospect indeed.