USA Today Delays Charging for IPad App, Putting Ad Sales First

Does This Sound Like Early Days of the Internet to Anyone Else?

by Nat Ives
Published: June 21, 2010

         

NEW YORK (AdAge.com) -- USA Today isn't ready to start charging for its iPad app after all, at least not for another 90 days and probably not before next year, saying the ad revenue is outweighing the potential circulation revenue from readers.

The reasoning sounds a lot like publishers' thinking in the early days of the internet as they decided to chase big audiences and ad revenue by posting their news for free.

"It's generating so many impressions, and we have such advertising demand for this that it would be a very poor business decision right now to put up a pay wall," said David Hunke, president and publisher of USA Today.

Paid Content reported earlier today that USA Today had delayed its plan to charge.

USA Today had been planning to start charging consumers for its app after an initial 90-day phase during which presenting sponsor Marriott got all the ad space. But the free app has been downloaded more than 538,000 times so far, and advertisers are eager to appear there, Mr. Hunke said.

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Four advertisers are taking the place of Marriott for the app's next 90 days of free: Barnes & Noble, Chrysler, Coca-Cola and Capital One. In theory USA Today could switch to paid at that point, but it's more likely to wait much longer than that.

"My new horizon on this is to take a look at the first of the year," Mr. Hunke said. "We're clearly going to make some decisions at that time about how much is free, how much is premium."

"In the end we certainly want to find a way to be paid for USA Today's content in digital delivery," Mr. Hunke added. "That's still a belief. But I don't think we know enough yet."

Many newspaper publishers now think they made a mistake when they went free on the web, relying too much on unreliable advertisers and cannibalizing print sales. Some are thinking about charging for some content on the web, but of course by now face competition from countless free news sites -- including almost every other newspaper's.

Many publishers also think the iPad is a chance for a do-over. If they just charge from the beginning, the reasoning goes, consumers will never become trained to expect free news on this platform. The New York Times is developing a paid app to go along with the pay meter for its website next year, but in the meantime has released a free app that only includes a small portion of its coverage.

Pandora: IPad Will Be a Bigger Ad Platform for Us Than iPhone

CHICAGO (AdAge.com) -- Mobile devices have been a boon for web music service Pandora, but with its big, portable screen, Apple's iPad gives it something the other platforms don't: more real estate for display advertising.

A Lexus ad appears in Pandora's iPad app.

The music service is now offering display ads on the iPad to sponsors, in addition to its banner and audio ads, and now has three big takers in Starbucks, Lexus and Budweiser. When clicked, their ads open up a new page but don't interrupt the music. While all three marketers advertise with Pandora on other platforms, the iPad offers a richer media experience, and the company is hoping it can improve on an already-high 3.4% click-through rate.

Pandora now has more than 30 million users on mobile devices -- and 50 million across all media -- and the company is hoping to accelerate usage by way of the iPad. Pandora founder Tim Westergren noted that the company is signing up about 100,000 new mobile users each day. "It's just exploding for us," he said. "And on mobile devices, the advertising -- particularly advertising with video -- has been really effective."

Costs rise
While useage explodes, so do Pandora's costs in the form of royalty payments to the labels. Mr. Westergren recently said Pandora's total revenue in 2009 was $50 million, including one profitable quarter, but that it paid $28 million that year to SoundExchange, the non-profit which collects royalties on behalf of the labels. That figure does not include royalties to music publishers.

Pandora has raised more than $57 million since it launched as a web music innovator in 2000, over five rounds of funding.

The challenge is to keep the ad revenue growing ahead of music consumption, which is where the iPad comes in. Apple's tablet platform is "particularly exciting" for Pandora, Mr. Westergren said, because of the way consumers engage with it. He explained that the iPad is a device consumers carry around their houses, even more so than a laptop. When listening to music, users are more likely to stay engaged with the screen, he said, as they once were with liner notes of records. "I would anticipate, as an advertising platform, it's going to be even more potent than the iPhone," he said.

Pandora incorporated advertising into its web service in 2006, and added banner ads to its iPhone platform in late 2008. Two months ago, it began running audio ads as part of the free radio service within its iPhone application, a key innovation because consumers aren't necessarily looking at their phones while using the service.

Hugely popular
According to the company, 70% of users who have downloaded any app to a mobile device have downloaded Pandora. The company's biggest advertisers now include MasterCard, McDonald's, Purina, Walmart, Sprint, Target and Ford.

In the launch ads, Starbucks promotes its "however you want it" Frappuccino by developing a playlist to match a user's beverage preferences. Budweiser is promoting Bud and Bud Light Lime through a partnership with Pandora's festivals page.

"As the exclusive festivals page sponsor, Budweiser gives Pandora users a destination within the application to connect with some of the biggest music festivals of the year," Mark Wright, VP-media, sponsorship and activation at Anheuser-Busch said in a statement. "Additionally, by extending Bud Light Lime's summer-themed stations to the iPad application, users will have a new platform to enjoy the summer state of mind year-round."

Lexus is advertising its LFA model, which revs its engine to a speed that shatters a champagne glass.

IPad's Early Adopters Are Gazing at the Ads -- for Now

NEW YORK (AdAge.com) -- It's early days for advertising on Apple's iPad, but advertisers running campaigns on the device over the last four weeks say people are watching -- and a lot more than your typical rich-media web ad.

A Pointroll iPad campaign for Ford's Lincoln brand.

Much of that can probably be explained by the fact that the iPad's early adopters find just about everything on the device -- including the ads -- a curiosity. The question is whether those rates will stay high once the novelty of the device wears off.

Gannett-owned ad technology company Pointroll has placed four iPad campaigns so far, including ads for Ford, Unilever, Marriott and Target within the iPad edition of USA Today, part of its parent company, and the communications app TextPlus. Pointroll says interaction times for ads on the iPad are averaging about 30 seconds. Click-through rates have been between 0.9% and 1.5%, six times the benchmark for click-to-expand ads on the web.

That's both an indictment of web advertising in general and the click-through specifically as a measure of performance, but it is giving marketers another reason to continue to experiment on the iPad beyond the halo effect of being "first" on a hot new device.

"We're approaching it as a trial," said Scott Kelly, digital marketing manager at Ford Motor Co. "This is all new territory and we are in experimentation mode."

Early iPad advertisers are eager to experiment with the new platform to see how campaigns perform and how best to approach it, either directly through publishers -- as was the case with the Pointroll campaigns -- or as a network ad buy via iAd, which is launching in July.

"Should we do an iAd, go direct to the publisher or wait for [Google's] Android to do the same thing?" Mr. Kelly said. "We want the targeting and the interactivity of the big screen where you can do 360 [degree] views and videos -- we're just trying to find the most economical way to do that."

Ford hasn't yet committed dollars to the iAd platform, but it is considering it. Key is the ability to create an ad once to use on many platforms, which is complicated by different formats and technologies, namely the iPad, which doesn't handle Adobe's Flash, the dominant technology for web ads.

"It challenges us to come up with ads that are more personal, because there is less tolerance for interruptive ads," Mr. Kelly said. Notably, ads on Pandora's iPad app don't stop the music, allowing users to look and continue to listen, if they wish.

Catherine Spurway, Pointroll VP-advertising and marketing, said the company is encouraging marketers to think of the iPad as a another device in their marketing plans, one that moves the internet beyond the PC.

"What is unique about the iPad is they are truly the most tactile device, with a larger screen where you are actually moving the content with your hands, not a mouse or keyboard," she said. "This is a more immersive experience than the lean back of TV or the lean forward of the PC. You are part of the content."

The company believes it will also make ads for the iAd platform, but have yet to get clarity on. It would appear to have an inside track given it serves TBWA's rich-media ads for Apple on the web, but execs there say they haven't been given clarity on the topic.

Regardless, advertisers will be able to access the iPad through the publishers themselves, which is how all advertising on the platform exists today.

"We're also looking forward to seeing how iAd pans out," said Pointroll CEO Jason Tafler. "Its rich-media capabilities, like tying geolocation and its accelerometer into ads, are really interesting and we're eager to incorporate those and start running ads with iAd as well hopefully in the near future."