It’s official. Apples new operating system called OS4, due to be released for iPhone and iTouch in the summer of 2010 and for iPad later in the year, will support an advertising platform dubbed iAd.

Here’s what Wall Street Journal has to say about this:

Apple Fights Rival Google on New Turf

By YUKARI IWATANI KANE And EMILY STEEL

Apple Inc. is stepping up its rivalry with Google Inc. by adding its own advertising system to the next version of software that will power its iPhone, iPad and other mobile gadgets.

Apple Chief Executive Steve Jobs said Thursday the new operating system will include an advertising capability, dubbed iAd, that allows developers of the programs available in Apple’s App Store—many of which are free or cost 99 cents—to include ads in their software.

Apple will sell the ads, with developers who create the apps getting 60% of the revenue of any mobile ads, and Apple taking the remainder.

The debut of iAd is likely to pose a challenge to existing companies that serve up ads in mobile devices, such as AdMob Inc., which Google announced it would acquire last year for $750 million. That deal is currently facing scrutiny from regulators.

Mr. Jobs, speaking at an event at the company’s Cupertino, Calif., headquarters, took direct aim at Google when he noted that people are increasingly accessing the Internet on phones rather than search engines. He said ads inside apps were a more attractive way for companies to advertise on phones compared with traditional search ads, an area dominated by Google.

“People aren’t searching on a mobile device like they are on a desktop device,” said Mr. Jobs.

Apple’s new system could end up helping Google defend its acquisition of AdMob. Even as the Federal Trade Commission weighs whether to challenge the deal, Google has been arguing that mobile advertising is a nascent and competitive field. Earlier this week, a Google spokesman referenced Apple’s expected entrance into the market in a statement defending the deal’s competitiveness.

“This is more evidence of how quickly mobile advertising is evolving and growing,” said a Google spokesman Thursday after Apple’s iAd announcement. Apple is “going to be a strong competitor for sure,” said an AdMob spokeswoman.

In addition to iAd, Apple announced several other new features with the new iPhone system, called OS 4. One new feature that users have long asked for is multi-tasking, which lets people run multiple apps at the same time. In one scenario, someone could listen to Pandora Media Inc.’s Internet radio or make calls on Skype Ltd.’s Internet phone service while surfing the Web and checking email.

The software will be available for the iPhone and iPod touch in the summer and the iPad in the fall.

Apple and Google have been increasingly overlapping on each other’s turfs. Apart from mobile advertising, the two are also competing in the mobile-phone space and Internet browsing, among other things.

Mr. Jobs said Thursday that Apple was interested in acquiring AdMob before Google snatched the start-up. Apple ended up acquiring smaller rival Quattro Wireless in January.

Mr. Jobs said its ads would reach a huge audience base. Apple has so far sold 85 million iPhone and iPod touches, and it estimates that each user spends about 30 minutes a day using apps. “This is a pretty serious opportunity and it’s an incredible demographic,” he said.

Apple will continue to allow outside ad services to place ads in apps, though such ads often redirect users to a Web site when clicked. Mr. Jobs stressed that iAd would let users access ad content without leaving the original application, though existing ad services companies say they already offer this feature.

Overall, the mobile ad market remains small. Marketers have been slower to buy mobile ads than expected, largely because consumers aren’t visiting mobile Web sites in meaningful numbers and the process of creating mobile ad campaigns is technically and logistically challenging. Research firm eMarketer predicted about two years ago that mobile ad spending would be $2.8 billion in 2009, but more recently said that U.S. advertisers only spent $416 million on mobile ads last year—a fraction of the $22.4 billion U.S. online advertising market.

Ad executives said many pieces of iAd are available through other providers. “There are several third-party ad-serving companies that are serving ads within the apps. There is no new technology being announced here,” said Ian Schafer, chief executive of New York digital agency Deep Focus.

App developers, however, appeared enthused about iAd. Sam Altman, CEO of location-based social-network services company Loopt Inc., said he would likely keep his relationships with existing ad networks but expected iAd to be his first choice because of the likelihood that the higher-quality ads would generate higher revenues. “I was amazed at how good the iAds looked,” said Mr. Altman.
—Jessica E. Vascellaro and Scott Morrison contributed to this article.

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