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Clash of Titans: Apple vs. Google

What the duel between Google and Apple’s operating systems means for brands

June 27, 2010

– Joan Voight via ADWEEK

No question, placing ads or branded apps on mobile phones promises
to be the Next Big Thing. The problem? People have been saying that
for the last three years. Or, has it been five.

For mobile marketers, the hurdles are still everywhere. First,
there’s market penetration. Even though it might look like
everybody and his uncle has a smartphone, the truth is that less
than a third of Americans (30.6 percent) are mobile Web users,
according to eMarketer. So while brands like the idea of wireless
marketing — nearly 65 percent said they plan to invest in mobile
apps this year, also per eMarketer — they have reasons to be wary,

According to eMarketer, U.S. mobile
ad spending is forecast to be a relatively skimpy $593 million
through the year (up from $416 million in 2009). And a study by
Worthington, Ohio-based BIGresearch released late last year
revealed that 52 percent of Americans consider mobile advertising
to be an invasion of privacy — and that number is growing.

There are also technical issues. For instance, when Dockers decided
last year to reach fashion fans via their smartphones, it had to
create two different mobile initiatives: one for the iPhone and one
for the BlackBerry. (The iPhone had an interactive,
motion-sensitive ad that ran on game apps; the BlackBerry, which
sponsored the launch of the Pandora Radio app, offered users a link
on the app to a coupon on its Web site.)

But new technologies and devices are paving the way for marketers
to be both more efficient and more effective in the mobile space.
As a result, mobile marketing seems to be getting closer to the
promises made in 2002, when the first BlackBerry hit the market,
for a powerful new revenue stream that could change the way most
companies market their brands. Today, researchers at Borrell
Associates in Williamsburg, Va., predict that mobile could well
account for up to 60 percent of online advertising in the next five

It seems the Golden Age of Mobile Marketing is approaching fast.
But its entrance is being accompanied by a dustup at the gates: the
rivalry between Google and Apple over advertising on the former’s
open-source Android (the upstart Google purchased in 2005) and
Apple’s proprietary iPhone-based operating systems. But the
question of which will be bigger and better is perhaps less
important to marketers than a clear sense of which operating system
will be the best platform for their brands. While some say Apple,
with the introduction of iAd, which allows
video/interactive ads to be placed inside apps, will lead companies
to the promised land, others claim they can see the future — and
apps are not in it.

To understand what this all really means, however, we first need to
scan the smartphone landscape.

In Q1 2010, the number of smartphones sold worldwide jumped 49
percent from a year earlier to 54.3 million units, per technology
research firm Gartner. Sales of Android-based phones increased a
staggering 707 percent in North America (more than a dozen vendors
use the Android OS on more than 30 different devices), with more
Android smartphones shipping in this country during the first
quarter than iPhones. NPD Group found that Android phones took a 28
percent share of the U.S. market for units shipped in Q1, ahead of
Apple at 21 percent. (A version of the iPhone operating system is
also used on the iPad, which was not counted.) Globally, however,
the iPhone operating system was still ahead of Android by more than
3 million units during the first quarter.
Race for penetration aside, Apple is ahead in the swagger
department, and not just because its iPhone and iPad tablet have
added sizzle to the industry while also being highly user-friendly.
Now, Apple is using its iAd mobile-advertising platform to sell
interactive ads embedded in the iPhone’s apps.

“With cool new stuff … Apple is driving clients to allot money
for mobile, and making them eager for a mobile marketing strategy,”
notes Alexandre Mars, head of mobile at Publicis Groupe and CEO
of  mobile marketing agency Phonevalley.

But Apple’s iAd platform isn’t cheap. It computes its prices both
on CPMs (cost per 1,000 views) and click throughs. A campaign with
a 1 percent click-through rate, for example, has a CPM of about
$30. Other mobile ad networks usually charge one or the

Insiders say that four of iAd’s inaugural clients will spend up to
$10 million each — more than some clients’ entire digital budgets.
(Earlier this month, Apple reported that it sold iAds to brands
including Nissan, Citi, Unilever, AT&T, GE, Target and Best

Google, on the other hand, offers
inexpensive search, banner and expandable video ads and analytics
tools for various phones. For instance, AdMob (which Google not
only uses, but recently acquired) charges, on average,
a $10 to $15 CPM and doesn’t add costs per click.

Higher costs aside, however, some say Apple’s strategy could juice
up the entire mobile industry — raising both ad rates and quality
simultaneously. According to Tom Bedecarre, CEO of agency AKQA,
Apple is reaching out to leading ad agencies (including his own) in
hopes of securing about a dozen inaugural advertisers willing to
spend over $1 million each.

“Apple has a clever strategy to feature iconic brands like Target,
Nike and Gap to generate solid case studies supporting mobile
marketing spending,” says Bedecarre. To date, there have been few
such notable case studies. “The creative messages in these
inaugural ads will be tweaked and optimized by Apple to ensure
quality, to remove any bugs and to give iPhone owners a quality
experience with brands they admire,” he says.

Bedecarre adds that if Apple’s plans work out with category-leading
brands, it could have a trickle-down effect. Because the
experimental nature of mobile advertising still causes many
companies to look warily on spending money in the space, successful
case studies “will help legitimize mobile ads for the whole
category,” he says.

Another potential game changer: the quality of the iAds themselves.
When a user clicks on a banner ad within an app, he or she will see
the screen fill out with a variety of interactive options.
Essentially, says Richard Ting, ecd of the mobile and emerging
platforms group at R/GA, brands can create mini branded apps.
Clients can provide richer, more emotional experiences, giving them
and their agencies a simpler alternative to building out a mobile
app or mobile site platform, says Ting.

“Up to now, advertisers have not been able to have an Apple-like
user experience in an online ad unit,” explains Keith Johnston,
head of digital at Butler, Shine, Stern & Partners. “The iAd
offering provides more interactivity and more engagement than what
has been out there — an advantage for lifestyle brands.” The
agency plans to use the platform for sports apparel client Columbia
Sportswear later this year.

Some mobile marketing experts note that the iAd platform is a good
option for upscale, cult brands, as well as for advertisers that
have a reputation for innovation. Rachel Pasqua, director of mobile
at search marketing agency iCrossing, says iAd is well suited for
“brands with household names that are similar to Apple in spirit
and brand allegiance — for instance, a Whole Foods type of brand
that targets suburban moms who use smartphones.” Such an
advertiser, Pasqua notes, might want an in-app ad that would make
it easy to find stores, learn of events and check local inventory.
“If you want to reach the kind of person who reads the The New York
Times on the go, your ad on the NYT app has to be on iAd because
Android  doesn’t have it,” she says.

But what happens when the novelty wears off and the iAd platform is
no longer the shiny new toy of the digital marketing world? Some
say it might find itself limited to high-end niche brands. Amelia
Milo, director, media strategy and integration at Ansible,
Interpublic Group’s mobile marketing agency, says, “The Apple OS
has high barriers to entry for the average brand. [The cost is]
incredibly high and metrics aren’t even close to being normalized
this early on—certainly not enough to qualify for a brand seeking a
specific demo beyond ‘early adopter.’”

Also, there’s the question of how much longer consumers will be
enamored with mobile apps in general.

Some experts, such as AKQA’s Bedecarre and BSSP’s Johnston,
anticipate that consumers love affair with apps will continue.
“Applications create the opportunity for innovation,” Johnston
says. “They largely free people from carrier or network
limitations. They are unique experiences … tailored for specific
consumers and their needs. Why would they go away?”

But, Ansible’s Milo says, “we study the target audience’s mobile
persona, such as the devices and carriers they use and the content
they access, and then we present a solution — whether or not that
includes an app.”

And Publicis Groupe’s Mars (shown)
says apps seem less relevant when it comes to the marketing plans
of traditional, multinational brands. These corporations, he says,
are asking his agency “to build mobile Web sites so they don’t lose
the relationship with their end user when that user is mobile. With
the mobile Web the reach is there; with apps, the reach is not

Meanwhile, when it comes to Web-based mobile ads, Google’s
open-source Android can benefit advertisers. They get Google’s
distribution at an inexpensive price, along with the growing
potential of mobile search, including voice-, image- and
location-based searches. And many brands, such as teen retailer
Abercrombie & Fitch, are learning that most of their users are
on Android phones, according to iCrossing’s Pasqua.

But if Apple’s Achilles heel is its dependence on novelty and
control, then Google’s weakness is its complexity. Android has
multiple versions (1.1, 1.5, 1.6, 2.0, 2.0.1 and 2.1), which makes
it difficult for developers to create pristine experiences across
all devices, notes Milo. Because of the hardware differences and
desire to create apps with quality experiences across all versions,
developers say they don’t have the quality control that they’d like
and are becoming overwhelmed. Also, Android phones don’t prompt
users to update their software or apps as iPhones do, exacerbating
the quality issue.

But more importantly, when Google can compete with its own in-app
ads on the Android platform, the rivalry with Apple could shift
dramatically. And Google’s acquisition of AdMob does clear the path
for it to release an in-app advertising option similar to iAd, say
agency experts. Those ads, however, would still face the complex
technical issues. Also, a controversy is brewing over whether Apple
intends to exclude AdMob from the iPhone OS.

Mobile search certainly has huge marketing potential for Google,
but it’s still in its infancy, with most people searching the Web
on desktops and laptop computers.

For now, cult, lifestyle and innovation brands aimed at people who
use iPhones and iPads might be the best fit for the iAd platform.
Android might be a better deal for everyone else, say some experts.
In time, marketers will likely see Google offering in-app ads with
comparable interaction and immersiveness as those on the iAd
platform, and the iAd will likely be dabbling in mobile ads beyond

In the meantime, mobile marketers and their agencies will have to
deal with a battery of companies investing in smartphones and
mobile operating systems — including Nokia, Microsoft, RIM
BlackBerry and HP, the new owner of Palm.

From a consumer point of view, iPhone users will continue to see
ads from Google and other networks when they use mobile search or
cruise the Web, and iAd ads popping up on their apps. Android phone
users will see Google Web ads also, as well as inexpensive in-app
ads from sources other than Apple.

And who will emerge as “victor” in the Android versus iPhone OS
war? Most agency insiders seem to be betting on Google, with its
girth and advertising know-how. But they have been wrong before.

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