OPINION
iAd for the Win as iPhone 4's Biggest Blockbuster

While Apple (Nasdaq: AAPL) announced more than 100 new user features for its iPhone OS 4 that will run on iPhones, iPod touches, and iPads this summer -- in addition to adding 1,500-plus new Application Programming Interfaces (APIs) for developers to make it easier to build cool apps -- one new feature towers over all the others: iAd.

Sure, for some users, Apple's new multitasking implementation is big news, as is the ability to create folders and finally install home screen wallpaper, not to mention a more robust implementation of the Mail app. All of these features are nice iterative improvements to an already great phone, but in my mind, the only truly transformative new feature comes back to iAd.

Who Likes Ads?

Advertising is what drives much of the online experience -- let's face it, someone has to pay for all the content and development effort, and much of the revenue is driven by ads. And yet, who actually likes ads? In general, very few of us do, partially because they so often represent things we don't care much about. Then, when we finally see online ads that we do find enticing, we're very often directed to a lowest-common-denominator Web page. Only some advertisers actually work hard to build interesting and effective ads. I think part of the reason isn't a lack of technical ability on any given Web page -- I think the problem tends to be a lack of focus. Who's building? Who's deploying? Where are the targets?

In the world of search, Google (Nasdaq: GOOG) transformed online advertising by providing a conduit and strategy, and through ads that targeted interest via search terms and content matching, Google brings us a small measure of relevance. This works pretty well for the Web browser, but from the palm of your hand? Not so much.

I wasn't really aware of how much I personally ignore online advertising via searches on my iPhone until Apple CEO Steve Jobs mentioned it in his presentation to reporters last week. In fact, I'm far less likely to click on an ad on my iPhone than on my MacBook. Why?

"For lack of a more elegant way to say it, we think most of this mobile advertising really sucks -- and we thought we might be able to make some contributions," Jobs said.

Part of problem comes back to multitasking. On an iPhone, I'm less willing to take the time to go check out an ad, especially since I have to leave the Web page I was looking at, or the app I was using, if the ad was part of an app. Some developers created their own in-app ads to combat this issue, but until Apple stepped in, it was a scattered approach.

So What's Apple Offering?

With iAd, Apple is providing its developers with a new way to include in-app ads without having to create their own ads or secure contracts with advertising companies. For example, Google collects ad campaigns for advertisers and then allows Web site publishers to become part of the ad campaigns via a simple agreement with Google -- Google is the middleman, so to speak. With iAd, it seems as if Apple is the middleman, but in this case, the ads aren't just text or banners; they're interactive mini-apps. Plus, instead of being delivered via a Web page, the apps can be incorporated directly into apps themselves.

Meanwhile, Apple is interested in creating an iAd platform that encourages innovative advertising experiences that can deliver emotion, as Jobs noted in his presentation. He didn't define emotion particularly well, but another "e" word fits in fine: engagement. The ads are designed to engage.

Better Than a Hose

Let's put it this way: Old mobile ads were like garden hoses attached to sprinklers that have to be manually moved around the yard. iAds will be a lot more like a sprinkler system -- easy and effective.

Because iAd is in the iPhone OS itself, it can do interactive and video content, for example, without taking you out of the app -- and here's what's important about this: You can return to the app any time you want. In the demos Apple showed off, a user could tap on an ad for a movie, have the ad take over the screen and provide dynamic content. For example, in an ad for Nike (NYSE: NKE) shoes, the user could shake the phone to see a new shoe, and in an example for Target, a college student could use an app to design a dorm room and buy collegiate paraphernalia.

Once the user has had enough, perhaps even after making an in-app purchase, a single tap returns the user to the app their were in, at the same spot.

It's really slick.

I can tell you right now, I'll be far more likely to click on these iAds (once they start showing up this summer) than I would have on today's existing ads.

Huge Numbers

One key to advertising is volume, and this is true even when advertising is extremely well-targeted. Right now, there are 85 million devices running iPhone OS, and soon, Jobs said, their will be 100 million. Apple estimates that on average, a user spends 30 minutes in an app per day. If Apple's iAds platform delivered one ad every three minutes, that's 10 ads per day, which equates to 1 billion ad opportunities per day.

"This is a pretty serious opportunity," Jobs noted. "And it's an incredible demographic."

No kidding.

Meanwhile, Apple is setting the program up for success -- developers will nab 60 percent of the iAd revenue, and according to Jobs, most developers will be able to add iAd to their apps in just an afternoon.

"We think this is going to be pretty exciting," he said.

Me too. If Apple can get advertising agencies and developers on board to create compelling new ads, we'll all be in for a much improved mobile experience. '