Apple's iAd Helping Rivals

Apple Inc.'s iAd interactive mobile ad service is having an unintended impact on rivals: It's largely helping their businesses by generating broader advertiser interest in mobile phones and gadgets.

Apple Chief Executive Steve Jobs unveiled plans for the iAd service during a product event in April.

When Apple launched iAd last July, some industry executives worried that they would lose mobile advertising business to the Cupertino, Calif., company. Competitive concerns were sparked after the July rollout of iAd included commitments from top brands such as Unilever PLC and Nissan Co. to pay $1 million or more to have interactive ads placed inside iPhone and IPod touch apps.

But instead of losing business, ad executives say Apple's entry into the market is giving them a boost. That's because iAds has gotten big marketers to pay attention to mobile advertising in the first place

Apple has "brought sexiness to mobile ads," said Carnet Williams, chief executive of San Francisco-based Sprout Inc., which helps create and deliver interactive ads. Mr. Williams said it has gotten roughly four times as many calls from publishers and agencies since Apple turned the spotlight on iAds.

Until recently, the mobile advertising market was a small fraction of the $25.1 billion U.S. online advertising market, according to researcher eMarketer. Now that's changing as Apple has joined pre-existing providers of interactive mobile ads, such as Google Inc.'s AdMob unit, in offering ads that let consumers play a mini-game or interact with the ad without having to leave or the close the app they were using. Google said during its third quarter earnings call that mobile advertising is adding $1 billion annually in revenue.

Some ad executives say Apple's foray into mobile advertising particularly spurred marketers to boost their spending in the broader category. And not all those dollars are being allocated from digital budgets, with some coming from more traditional ad spending like TV or direct response, said Phuc Truong, managing director at Mobext, a mobile ad agency owned by French ad company Havas SA. Its clients include Sears Holdings Corp., regional McDonald's Corp. co-ops, and Exxon Mobil Corp.

Alexandre Mars, head of mobile for Publicis Groupe SA, adds Apple's cachet with big brands has helped legitimize the entire market. "The mobile marketing business is different now," said Mr. Mars, noting that none of the other mobile advertising companies could have attracted the interest that Apple has gotten from top brands.

Yet many ad agencies and brands find Apple's rates too high, giving competitors like Google, Medialets Inc., Crisp Wireless Inc. and 4INFO Inc. an opening to grow their businesses by offering cheaper rates to do similar things. People familiar with the matter have said Apple requires a minimum $1 million iAd commitment, but rival agencies said they can put together an ad campaign for as little as tens of thousands of dollars.

"A seven-figure mobile media spend historically has been few and far between, so if we're able to create a beautiful unit similar to the iAd but without the spending commitment, that's always a good alternative," said Mr. Truong.