The true cost of iAd

Despite all the buzz this week that the upcoming major update to the iPhone/iPod touch/iPad operating system was all about multitasking and APIs, the real story was iAd. Although multitasking-deprived Apple fans haven't been holding their breath for almost three years waiting for an advertising framework, the new mobile ad network is infinitely more significant to the future of the platform than the ability to run more than one app at a time.

In many respects, iAd is nothing short of a full frontal assault on Google. While Google's model for generating ad revenue from activity-linked behaviors has rewritten the rules of advertising over much of the past decade, the path for the mobile market has not been as linear. Desktops and laptops have more than enough bandwidth and screen real estate to easily accommodate subtle text-based ads (or not-so-subtle dancing-cow banners) without significantly disrupting the end user experience. Indeed, many users can become so engaged in a given service -- search, mail, productivity, mapping, whatever -- that they virtually ignore the presence of ad-containing boxes toward the edge of the screen. Even if they're aware of them, the delivery paradigm on a traditional desktop, evolved in recent years to a ruthless level of efficiency, is largely responsible for Google's meteoric corporate rise.

The desktop ad paradigm isn't portable

What works on a large screen that we often stare at for hours during the course of a typical workday doesn't necessarily work on a much smaller screen that we glance at quickly as we rush from one meeting to the next. On smartphones, there isn't enough room or time for end users to consume ads the Google way. So the industry's inability to date to concoct a formula that works now gives Apple just enough of a window of opportunity for its own formula -- namely, in-app ads.

Like everything in the Apple universe, however, this new capability comes with a cost.

But because I'm an optimist, I'll focus first on the good stuff. Developers will love iAd because it addresses a few of the key issues that have made coding for the iPhone something of a thankless process for many. Coders must first navigate an approval process that is still less transparent than it needs to be, and that consequently results in some submissions spending weeks or months in approval limbo. Once approved, their titles must fight for attention amid a vast, fast-growing sea of competing apps. The pricing model doesn't do them any favors, either, as average selling prices have dropped significantly since the days of packaged software.

Giving developers the newfound ability to continue to make money via their apps, while also moving beyond the sell-once revenue model that's so long defined the industry, is a sea change that could give developers additional reasons to stick with Apple, while resisting the lure of up-and-coming competitors like Google's Android.

There's a downside, too

Not everything is perfect in iAd-land, however. If developers are happy that they've got new opportunities to make money, then end users must certainly be dreading yet another incursion of advertising into yet another aspect of their lives.

Although advertisers in recent years have found ever more creative places to plaster their messages in the real world -- on police cruisers, on the back of subway tickets and even atop urinals in public washrooms -- nothing approaches the aggressiveness with which they've invaded the online world. Ordinary Web pages become riots of Whack-a-Mole, as end users try to squash unwanted and unwelcome pop-ups. Advertisers use non-standard interfaces to keep the ads displayed for a precious extra few seconds before the elusive close box can be found and clicked on. Workflow grounds to a halt as ever more intrusive ad delivery mechanisms take over what used to be pristine online ground.

What's annoying to the average end user on a 23-inch screen is infinitely worse on a smartphone. Not everyone has an unlimited data plan. For those who do not, the prospect of multitasking applications seamlessly sucking up bandwidth to fill the in-app advertising pipeline is frightening. For mobile users who've become accustomed to lightening their data load while on the go, they now face the prospect of data overages to support ads they never asked for and never wanted.

Even if they are on an unlimited plan, the annoyance factor is potentially much higher because all that background ad-related data transfer takes bandwidth away from the stuff folks are trying to get done, like messaging, mapping, and searching. Thanks to the newly-multitasking-capable iPhone OS v4.0, it's entirely conceivable that a few apps pulling down ad content could easily saturate one's wireless connection. Think about everyone complaining about 3G coverage in urban areas today. Now multiply the problem by 4.

Who owns your data now?

In-app advertising also opens up a veritable Pandora's Box of privacy issues, specifically around how developers will use location- and user-based knowledge to tailor what's delivered. Since the process, delivered within the context of a given application, is one level removed from the operating system, who's accountable for the inevitable privacy concerns that will erupt when a misbehaving developer configures a misbehaving app to cross a privacy/confidentiality line or two? I see a lot of finger-pointing between Apple and developers when the first headlines begin to filter out, as well as a lot of nervous iPhone owners wondering, just who has access now to the trove of supposedly private data in their pockets, and what do they intend to do with it?

I don't begrudge Apple's desire to level the mobile advertising playing field and use its iPhone-related successes to date to give it a leg up in its quest to join Google as a Web services powerhouse. Advertising pays the freight for a growing range of online services, and it would be naïve to assume smartphones won't eventually become advertising platforms in their own right.

But in rushing toward a monetized mobile future and going for Google's jugular, Apple needs to ensure it doesn't damage the cherished end user experiences that got it to its current market position in the first place. The iAd platform will succeed or fail depending on how finely Apple can balance the competing needs of its often divergent stakeholders.

Carmi Levy is a Canadian-based independent technology analyst and journalist still trying to live down his past life leading help desks and managing projects for large financial services organizations. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.