Speculation is rampant on the heels of some surprising moves by Apple in recent months regarding a secret interest in mobile advertising.
A patent application filed by Apple a few months ago finally made its way into the public eye, and it’s contents signal a possible shift in the way Apple could monetize its hardware and software products in the future. The patent outlines what the company calls “enforcement routine” software, or in other words, a means for Apple to integrate advertising into its products that users couldn’t skip.
The patent even outlines the fact that consumers would have to verify that they’ve watched or listened to an advertisement before gaining access to the functionality of the hardware. For example, a user couldn’t access their iPod until they’ve successfully watched the required advertising and pushed a series of buttons to verify to the device that the ads have been watched in their entirety.
Beyond the ambiguity surrounding the patent application, it’s come out recently that Apple did indeed talk to AdMob about a possible acquisition before it was snapped up by Google. Sources close to the company have revealed that it wasn’t only AdMob that Apple had its sights set on, but that it’s “talking to everyone” in mobile advertising about potential deals.
The fact that Apple is gaining interest in mobile advertising, combined with its recent patent application, signal the possibility of Apple introducing ad-supported hardware in the future. If the company could subsidize its historically high-end products with advertising, drastically reduced prices or even free hardware could easily be a possibility.
The iPhone is a prime example. It’s no secret that iPhone users prefer free apps to paid apps – around 9-to-1 to be exact – and a majority of those apps are monetized via in-app advertising. Apple has undoubtedly taken notice of the success and revenue being generated by this model, and could be taking steps to get in on the action itself. Since AdMob is the undisputed leader in iPhone app monetization, it makes perfect sense that Apple had a key interest in the company and its technology.
If Apple were to introduce integrated advertising into the iPhone, and make the ads un-skippable and verifiable, it could potentially offer a very-low priced iPhone alternative, or even a completely free iPhone. Instead of generating revenue via one-time hardware sales, Apple could potentially make recurring revenue from each user via on-going advertising that would equate to much more than the original $200-$400 per device they sell today.
It doesn’t stop there, Apple could use this model to subsidize the cost of iPods, OSs and even the highly anticipated Apple Tablet that’s due out in the near future. While this is all still speculation, it would make a lot of sense, and give Apple a completely different business model to build upon- one that has proved very successful for other certain (Google) companies.