Last week, Steve Jobs announced that 60 million iPhone apps had been downloaded, averaging 2 million per day. While there are questions of whether these stratospheric download numbers translate to equally impressive usage numbers, some wondered how those apps will monetize (particularly the very popular free ones). The overwhelming case for most online applications, whether those featured on Facebook, or those syndicated through widgets throughout the blogosphere, is through ads. So how exactly do ads on iPhone apps work?

For the most part, ads on iPhone apps seem to mimic the formats we’ve come to know via more traditional online browsing on PCs. A relatively non-intrusive banner typically shows up at the top or bottom of the open screen. (I have yet to see an app that forces a “pre-roll” ad before the app runs)

However, with the relatively slow data transmission speeds we see on iPhones (even those lucky enough to enjoy consistent 3G connectivity) and a clunkier way of shuttling between different browser windows and applications (the iPhone does not allow apps to run in the background, so exiting an app to visit a Website will shut down the app), user engagement with ads is a far more disruptive event and much less likely to happen among those users who don’t want their workflow or play interrupted.

Branding opportunities remain, though, especially on a new platform where novelty of the medium commands users’ attention. And hypertargeted ads tailored so well to a user’s needs might also perform well enough to cross the “interruption chasm”.

There are already several ad network/platforms available for iPhone apps. Here’s the current list of offerings:

• Crisp Wireless – currently creates banners + microsites; used by the New York Times and Washington Post apps
• PurpleTalk – allows creation of customizable text banners; features ad exchange “Partner Network”
• AppLoop – claims to be the first real-time, location-based mobile advertising network
• Pinch Media – widely-used ad network on dozens of iPhone apps
• Medialets – offers CPM, CPC and CPA advertising run natively through iPhone apps
• AdMob -offers rich-media (video-, map- and Apple App Store-integrated) banner ads on iPhone apps; also has an impressive list of signed clients

How do iPhone app ads work?

Although the solutions are different in terms of how they render in an app and what the engagement and payment models are, they typically comprise clickable banner ads, which either link to an iPhone-optimized microsite, a Web page, or, in the case of AdMob’s banners, even video, map or App Store integration.

Here’s an example of Crisp Wireless’s ad for Westin Hotels on the New York Times app:

The banner shows up towards the bottom of the front page of the app, and is, at least in this case, visually contrastive.

Clicking on the ad takes you to this microsite, with several information and engagement options.

The click-to-call link allows you to directly call Westin for more information about their package deals.

Here is a demo by AdMob that demonstrate how ads are rendered in the app, how they engage with the user, and make use of other iPhone functionality, including GPS:

AdMob (1m57s)

This entry was posted on Thursday, August 21st, 2008 at 11:31 am and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.