New Apple iPhone ad platform extends services — and raises questions

EL SEGUNDO, USA: The recent unveiling by Apple Inc. of its new iAd advertising platform extends the company’s array of inventive services for the iPhone, but also continues a distinctive collaboration-versus-competition dynamic between the giant technology trendsetter and its partner companies, according to iSuppli Corp.

“Thanks to the phenomenal success of the iPhone apps store and iTunes, Apple is in a unique position to partner with best-in-class companies and offer innovative services, products and apps to the market,” said Francis Sideco, principal analyst for wireless research at iSuppli.

“The launch of one of these services, iAd, is a result of Apple’s recent purchase of Quattro Wireless and points to what appears to be an emerging modus operandi being employed by Apple – namely, a pattern of initial amicable association between Apple and its partner companies that then turns into a competitive relationship.”

To be sure, the strategy has contributed to making the iPhone an unqualified success. In the smart phone market, Apple was the only player in the Top 5 to achieve a substantial increase and consistent gain throughout 2009, growing its share from 10 percent in the first quarter of 2009 to 16 percent in the final quarter.

In contrast, top-ranked Nokia Corp. saw only a 3 percent increase during the period and suffered a dip in the third quarter, while the share of No. 2 Research In Motion fell from 21 percent to 19 percent during the year. Rounding out the Top 5 were Taiwanese based HTC Corp. with 6 percent share and Motorola Inc. with a 4 percent share.

The figure shows the Top 5 smart phone brands and their share of unit shipments in the fourth quarter of 2009.Source: iSuppli, USA.

The iAd platform joins a host of major changes in Apple’s updated iPhone OS 4, operating system, including multitasking, apps folders for Apple mobile applications, improved mail functionality, iBooks and enterprise-related features for business users.

In the case of iAd, developers will be able to embed ads into their applications, allowing iPhone users to interact with the ad without leaving the app. Apple CEO Steve Jobs says iAd not only presents additional revenue opportunities for iPhone developers but also provides users with improved advertising quality and access to ads.

While iAd is the progeny of Apple’s acquisition of Quattro Wireless, Apple’s moves in the past have been less overt but nonetheless ended up pitting the giant against its former partners. For instance, Apple partnered with Amazon.com to allow the Kindle app to run on the iPhone. Within a year or two, Apple now has launched its own iBook store for eBooks and other electronic publications. Prior to that, Apple originally partnered with Google Inc. for search and mapping capabilities on the iPhone, but Apple within two years achieved in-house capabilities for those functions and now, with iAd, is going after Google’s highly lucrative advertising business.

As these developments illustrate, Apple is acquiring valuable domain knowledge that is allowing the company to enter into competition with some of its partners, iSuppli believes. And while Apple’s actions could be viewed as a reaction by the company to the moves of its partners, they also can set in motion possibly antagonistic relationships.

Should Apple continue to operate in this manner, the company might find it difficult in the future to form an association with best-in-class partners—connections in which friendly partnerships at the beginning alter and then deteriorate into aggressive rivalry.

Source: iSuppli, USA.