There’s been building work going on on that side of Covent Garden for ages now, so it’s refreshing to see a teasing use of the temporary fixture. Apple Store, coming soon I guess?
Are we entering a new era of credible and sustainable mobile monetisation or is this just a consumer-phobic strategy to make loads more money? Whilst I’m in no doubt this could have a positive effect in developing the mobile economy, Apple and its new iAd stakeholders need to be careful not to “over-commercialise” the mobile domain.
Source : WARC
SAN FRANCISCO: Apple’s mobile advertising platform, iAd, has now officially launched in the US, and is expected to deliver a “powerful” impact for the brands that seek to connect with their customers in this way.
Unilever, Best Buy and Chanel are among the corporations that have committed to spending a collective $60m (€48.3m; £39.8m) on this new system, alongside Nissan, Citigroup and Sears.
The collected expenditure of these firms is expected to account for almost half of all the advertising revenues delivered by this emerging channel in America during the final six months of 2010.
Apple is also rumoured to building a unique pricing model, with the intention of charging companies a minimum of $1m apiece for employing iAd as part of their campaigns, although this strategy is not likely to be implemented until it is rolled out internationally.
The manufacturer of the iPad and iMac has argued that the specific strength of the iAd service lies in its combination of video and interactive features, which thus exploits the emotional punch of television commercials and the engagement levels of the web.
“It’s early days, but we are witnessing the birth of a market,” said Jonathan Nelson, head of Omnicom Digital.
Christophe Cauvy, digital director at the McCann Worldgroup, added: “This is very powerful. It’s a no-brainer that’s going to work.”
Babs Rangaiah, vp, global communications planning at Unilever, further predicted that the impetus generated by Apple’s entry into this category could result in the expansion of the mobile advertising sector as a whole.
“The learning we will get from this will give us a great competitive edge over time. We are going to keep using mobile in a big way,” he said.
There are currently an estimated four billion active mobile connections worldwide, vastly outnumbering the total of fixed-line broadband subscriptions – just one indication that many consumers primarily log on to the internet via this route.
PricewaterhouseCoopers, the consultancy, has forecast that mobile marketing budgets will more than triple from $2.2bn in 2009 to $7.7bn in 2014, when this medium will take a 7.4% share of online ad sales.
While agencies and their clients have expressed enthusiasm for the possibilities offered by iAd, which will open within a small amount of applications on the iPhone and, later, the iPad, it has proved less popular with the developers that create apps for these devices.
Apple will produce, sell and host the entire inventory available through this programme, but will keep just 40% of the returns garnered from this process, with developers pocketing the remaining 60%.
Speaking at the launch of iAd, Steve Jobs, Apple’s chief executive, said: “It’s all about helping our developers make some money with advertising. We think most mobile advertising really sucks. We thought we might be able to make some contribution.”
However, the initial emphasis on high-end brands effectively excludes a majority of applications, and developers have also raised criticisms that Apple is essentially blocking off their use of AdMob, the mobile ad network operated by Google.
Such is the level of concern that US regulators are being urged to investigate whether Apple has constructed a “walled garden” which third parties will find it difficult to access.
“Limiting our choices, especially by eliminating the largest mobile ad network out there, is definitely disconcerting,” said Justin Siegel, chief executive of Mocospace, a social network for mobile phone users with 12 million members.
Data sourced from Financial Times; additional content by Warc staff, 02 July 2010
I’m bitter-sweet when it comes to Apple. On the one hand I quite simply adore their products and genuinely feel my everyday life is better as a result of using them. On the other hand however, I have this constant guilty feeling that I am feeding a company massive profits, above and beyond what should be deemed acceptable. With the semi-global release of iPhone 4 today, hoards of Apple fans are queuing outside stores eager to get their hands on the fourth generation handset and despite retail prices starting at a whopping £499, people really don’t seem to be put off by what many a grandparent would consider, “a massive waste of money”.
So just how much are Apple making from all of this? And how do the networks stand to benefit? The story might not be quite as clear as you think..
Original article found HERE
Last week, Apple overtook Microsoft as the world’s most valuable technology company. How has it managed to be so successful? Pundits love to say “innovation”, but if you go beyond the generic answer and break down the specific steps in Apple’s business model, an intriguing picture emerges.
For marketers, this long journey once again reinforces the ultimate advantages of building brand. Your consumers are numerous and price insensitive. Your profits are huge. Your differentiation is ensured. Your retailers are humbled and controlled. And your business, as Apple ably demonstrates, thrives.
Let’s take the iPhone, and follow the stream of money from its origin of an initial consumer purchase all the way to the ocean that represents Apple’s incredible profits.
Our journey begins with a consumer who heads into O2, Vodafone or another network provider to purchase a new iPhone 3GS. If Apple was any normal company it would now expect to give away up to 15% of its revenues in margin for the retailer. But Apple’s brand strength combined with the latent threat of its own retail stores means it usually sells its products to retailers for virtually the same price as they will charge their consumers. That’s right – zero profit for the retailer. Apple can do this because it is a destination brand that every retailer wants and one that often confers lucrative peripheral sales.
But, amazingly, it’s even better than that when Apple sells its iPhone through mobile phone operators. Apple sells them the iPhone for about £400 and then they discount it and sell it on to their consumer for £190 plus a two-year contract. The contract is crucial for the operators because they will not make a profit on their iPhone consumer until month 16 or 17 of their contract.
Mobile phone operators like Vodafone and O2, which pride themselves on their marketing competence and brand equity, actually blew their own markets years ago. By offering the same phones as their competitors and killing their differentiation with promotional tariffs, these operators rapidly and efficiently turned themselves into commodities. Now they are paying the price with deals on the iPhone that mean they take all the risks while Apple gets all the immediate revenues.
So Apple enjoys £400 of revenues from each iPhone its operators sell. Obviously this is not pure profit. There are components in every iPhone that Apple must purchase from its suppliers. Thanks to a series of “teardowns” by geeks we now know that the most expensive component in an iPhone is the flash memory card that Toshiba sells to Apple for £17. It’s downhill from there and the total combined cost of all the components in an iPhone comes to a miserly £124. Buying power and economies of scale mean that Apple retains, at this point, a whopping £276 after all the parts have been accounted for.
Of course, these components must then be assembled. If you own an iPhone, take it out and have a look at it. About three-quarters of the way down the back you will see two sentences in a tiny, almost illegible font: “Designed by Apple in California. Assembled in China”. The total cost of this Chinese assembly is about £4.50. Apple is able to keep manufacturing costs low because the majority of iPhones are assembled by Foxconn at its enormous Shenzhen production plant. Foxconn pays its workers £200 a week and expects them to work intensively for hours, with no interaction with others and often with many additional hours of overtime expected at the end of each day.
About £227 out of every £400 iPhone sold goes into Apple’s profits.
The result for Apple is that 1% of its retail price for the iPhone covers its complete manufacture. The implication for Foxconn’s employees is less advantageous; more than ten of its young workers have taken their own lives so far this year and the company is now at the centre of a global ethics scandal.
The remaining £275 is still not profit for Apple. We must also account for the company’s selling, general and administrative (SG&A) expenses – meaning all its additional salaries, advertising and other operational costs. We know from its annual report that Apple’s current SG&A is 12% of revenues. So for each iPhone sold, we must now subtract £48. And there, finally, the journey ends. About £227 out of every £400 iPhone sold goes into Apple’s profits and eventually on to its shareholders in the form of a dividend.
Low manufacturing costs combined with even lower consumer price sensitivity mean Apple enjoys gross margins of about 60%. To put that in perspective – it’s in a league of its own versus formerly dominant manufacturers like Nokia (33%) and Sony Ericsson (8%). It’s a profit that even challenges the nascent rise of China as an economic superpower. Unless the Chinese can build their own brands, they will be forever constrained to do the bidding of foreign companies and to continue the low margin manufacturing businesses that have, as yet, dominated their industrial operations.
I am pretty close to Apple. I use one, I listen to one.. I even convinced my grandparents to get one.
And I’ll invariably be getting the iPad at some point in future.
But I did find the new promo video a tiny bit vomit inducing. And it seems that a few others in Internet land shared that sentiment..
genius.
I am fond of my Android powered G1. I like its integration with all things Google, I like Cupcake’s friendly interface…but that’s about it unfortunately.
I admit, I get massive bouts of iPhone envy whenever I step into the Apple store or happen to get on the Tube (everyone has one). So it’s nice to see bitchy little ads like this time to time. Sure, it’s tacky and a bit obvious but it made me get a little more excited about Android. If you can’t be bothered to go to the website - it’s something from Verizon, in anticipation of a new Android powered Motorola handset coming out in the US at the end of the year.