Why Apple Bought Quattro Wireless And Is Getting Into Advertising

steve jobs pointing apple

Why did Apple spend $275 million on Quattro Wireless, a mobile ad network? The same reason it went after AdMob last year before Google outbid it, spending $750 million.

Here’s a condensed version of our Nov. 16 post, “Why Apple Considered AdMob,” updated for the Quattro deal.

Apple is trying to figure out new ways to make money off its iPhone app platform — and potentially from future devices, like the highly anticipated Apple tablet.

Mobile advertising is one obvious way for Apple to do that: It’s popular among publishers offering free apps, and will be integral to publishers that hope to offer digital magazines and newspapers on the Apple tablet.

So why is Apple getting into advertising? This is Apple we’re talking about.

While the idea of Apple running an advertising business (especially a sales force) is a strange one for us to contemplate, it’s not the dumbest idea we’ve ever heard.

Apple — as a for-profit entity — wants to make sure it can make as much money from its products as possible. And because iPhone users heavily favour free apps over paid apps — something like 9-to-1, we’ve heard — Apple wants to think about ways it can make money off free apps, too. It especially doesn’t want to completely cede this industry to Google, which is becoming increasingly competitive.

This is a big reason, we think, why Apple recently started to allow in-app payments in free apps, despite earlier reservations. (Apple gets a 30% cut from in-app commerce, just as it gets a 30% cut from paid app sales. See our separate feature about iPhone app virtual goods and in-app payments.)

Yes, it is weird to picture Apple running a sales force.

That’s not something it’s ever been able to do, except recently in its retail stores. So it seems that Apple’s interests in mobile advertising are about technology — at least, at first. We understand that Apple is interested in purchasing intellectual property, products, and people — and less the idea that it’s already purchasing an already-totally-functional ad network.

So how might this work?

  • Apple could purchase a mobile company specializing in iPhone ad technology. (Done! But not as much of an iPhone focus as AdMob.)
  • It could develop ad units and formats that it thinks are way better than the tiny banner ads already on the mobile Web.
  • It could build them into the official iPhone and Tablet SDK, let any developer add these ads, let any ad network or sales force in the world sell ads for them, and take a cut. (Maybe 10%? Or a little more?)
  • It could also put ad inventory into the iPhone app store, and let app makers pay to be featured. (Heck, Google does it for search results.) 
  • It could let publishers build these ad units into their mobile Web sites targeting iPhone users, allowing access to phone features that other ad types might not have — perhaps location, or phonebook data, or app data, etc.
  • It could do the same thing for the Apple tablet, supposedly launching this year. Or maybe the Apple TV set-top box. Or anything.
  • Because the iPhone does not run Adobe’s Flash — and who knows, maybe the Apple tablet won’t either — Apple could make itself the easiest (and/or best) multimedia ad play in town.

Don’t Miss: How iPhone Apps Are Raking In Cash From Virtual Goods

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