iPad, Advertisers and the Media

by: Diane Mermigas

Apple's (NASDAQ:AAPL) iPad and the new applications that can run on it could be a ticket to digital interactive revenues if content producers and advertisers are creative and smart enough not to get in their own way.

The angst over pay walls and how to generate revenues the conventional way with consumers and devices is proof of media's stubborn mindset. Apple's CEO Steve Jobs is giving publishers and video producers a universal path to digital's promised land.

Unlike smartphones and laptop computers, the iPad is all about interactive media. It is the latest innovative plateau in Apple's value-driven ecosystem. It is a hybrid device that takes touchscreen media consumption and monetization to the next level -- and the iPad apps are the ticket there.

The iPad will do for print and video what the iPod did for music by providing a new economic on demand framework that resets content and marketing values to reflect the expectations of digital users.

Even at the time of the iPad's April 3 launch, many content providers and advertisers were haggling over pricing that is going to evolve and change. Those onboard have yet to explore the possibilities for using interactivity to redefine their businesses and customer relations.

Advertisers and content creators must learn to use every inch of the vibrant slate, which will lead to profitable insights and transactions. Some media and ad players have begun to embrace this new paradigm.

Walt Disney (NYSE:DIS), in which Jobs is the largest individual shareholder, has announced an initial cache of free and paid apps across its Pixar and other filmed entertainment, ABC television and ESPN brand franchises.

Disney CEO Bob Iger was the first major TV producer to buy into Apple's iTunes downloads for the iPod five years ago. Now, its free Toy Story app and $8.99 Toy Story 2 app for the iPad demonstrate how to build interactive value around existing resources. They provide an array of immersive interactive activities -- from electronic finger painting and karaoke to games and voice-recorded reading with characters.

Newspaper iPad apps are led by The Financial Times, a publisher that is already generating profits by building interactive value around its core global business in a way that The New York Times (NYSE:NYT) and The Wall Street Journal (NASDAQ:NWS) only dream about. (Both have free iPad apps.) Amazon (AMZN and book publishers have quickly adjusted their pricing and terms to use the iPad to supercharge their e-book sales.

Blue-chip advertisers from Unilever (NYSE:UL) and FedEx (NYSE:FDX) to Toyota (NYSE:TM) and Chase are paying $75,000 to $300,000 for the first months on print publishers' iPad apps, according to The New York Times. But Hyundai (OTCPK:HYMLF) has gone the extra mile, promising buyers of its new Equus an iPad loaded with an interactive owner's manual and maintenance manager.

An early glimpse at top iPad apps and trends embrace the razzle dazzle you would expect on a 9.7-inch high-resolution display, from live sports, movies, television and video games to social video, financial graphs and eBay (NASDAQ:EBAY).

The pedestrian start of iPad apps is not as important as what promises to be their enterprising evolution. While the iPad reflects and continues to shape consumer behavior, the iPad apps will radicalize the value proposition of and access to print and video works in a way that shakes old-line media to its core.

The iPad launch is riding a wave of mounting evidence that the mobile Internet revolution (compared to prior tech cycles) is ramping faster, growing bigger and more global, and creating far more wealth than it destroys. The mobile Internet lags desktop traffic by nearly nine years now, but will be at least double the size of the desktop Internet by 2015.

Smartphones will out-ship global net books and notebooks for the first time this year, and will out-ship the global PC market by 2012, according to Mary Meeker, the dean of Internet analysts at Morgan Stanley. Cisco (NASDAQ:CSCO) reports that mobile Internet traffic will increase nearly 70% from 2008 to 2013.

The mobile Web and its apps promise wealth creation that could eclipse what entrepreneurial companies have realized. Apple's mobile devices, apps and ecosystem have driven $166 billion in wealth creation over eight years, Meeker points out. Google's (NASDAQ:GOOG) Internet search innovation has driven $186 billion in wealth creation over 11 years. Amazon's online shopping experience has driven $58 billion in wealth creation over 15 years.

The $8 billion that Apple has received in iTunes Store-related revenue since 2003 underscores how well digital content can be monetized. Consumer willingness to pay for the right content has pushed video subscriptions to comprise about half of the TV industry's total revenues. Still, advertisers spend a mere 8% on the Internet and less than 1% on mobile phones -- even as the time consumers spend with each skyrockets.

The iPad and its apps, as well as the e-tablets and applications they are sure to inspire, represent a new centralized showcase for interactive media and marketing that intersects with social networking and e-commerce.

By some analyst forecasts, the iPad will be 60 million strong and the definitive screen in 2015. Content providers and advertisers that hesitate today will wish they hadn't.

Disclosure: None