Tomorrow Apple will host a media event on its own turf to show off the latest features of iPhone OS 4.0. iPhone OS is the software that powers the iPhone, the iPod touch and now the iPad, it's a major software platform with hundreds of thousands of developed apps and is deployed upon millions of devices worldwide.
Tomorrow's announcement looks like it will be more important than originally perceived, at least for developers pockets and Apple's coffers.
It all starts back in January, Apple acquired a mobile advertising firm known as Quattro for a reported $275 million, an acquisition that came on the heels of Google's purchase of AdMob for $750 million.
Let's now jump ahead to claims from MediaPost that Apple CEO Steve Jobs has been referring to a mobile advertising service from the company as "revolutionary" and "our next big thing" and due for release on April 7th (not far off).
So what do we have so far? Apple purchases a mobile advertising company and a major publication puts credence to rumours that Apple is likely to launch a mobile advertising platform. But there is more, Apple all but confirmed the existence of this platform and what it intends to do with it at the last financial earnings conference call.
If you've ever listened in to a financial results call you'll know the layout well. Apple execs Tim Cook, Peter Oppenheimer and a usually quiet treasurer Gary Wipfler start off by reading out statements covering how Apple has performed over the previous fiscal quarter. After that, questions are put out to analysts and members of the media. A large majority of these questions are skirted around in politician style but every so often some juicy tidbits pop up.
It all got interesting when Mark Moskowitz for JP Morgan asked the Apple team about Apple's strategy in regard to Lala and Quattro (question and answer truncated for precision):
On the longer-term strategy, could you give us an update in terms of the recent acquisitions of Lala and Quattro? How should investors think about Apple’s longer-term strategy? Will it be only content and device driven or could we see more of a services type flavor longer-term? Any help there would be greatly appreciated.
Peter Oppeinheimer Apple's Chief Financial Officer replied (emphasis mine):
In terms of our Quattro and Lala acquisition, we acquired Quattro because we wanted to offer a seamless way for our developers to make more money on their apps, especially those that are providing free apps. We occasionally acquire small companies from time to time for their technology and talent. That is why we do it.
If that wasn't enough to cement Apple's plans for a mobile advertising platform, the subject popped up again 10 minutes later.
Chris Whitmore of Deutsche Bank was obviously intrigued by Oppenheimer's previous answer and goes onto ask how it will affect the relationship between Apple and Google:
I wanted to follow-up on earlier questions around mobile advertising in the application store. Specifically I am interested to understand what role if any you expect mobile advertising to have on your business model going forward? Can you characterize the changing relationship you have with Google as they have entered the smartphone space?
And again Oppenheimer answers (emphasis mine):
We work with Google in some areas and we compete with them in others. I think mobile advertising is just in its infancy. And with the great folks we have acquired and are going to be working with at Quattro, we look forward to providing our developers with a great opportunity from mobile advertising and that is what we know at this point.
Yet there is more, Whitmore didn't appear satisfied with what he got from that answer so asks a second question:
Do you anticipate mobile advertising as being a significant revenue earnings contributor going forward or is this primarily a similar strategy as we have seen in iTunes and the App Store to drive demand for your devices?
Oppenheimer fields:
No, we are in infancy and I honestly don’t know. We will have to see. We are going to work hard to provide the developers a great opportunity and we will see where that takes us.
All in all it appears evident that Apple plans to introduce a mobile advertising platform that will not only aid developers in making money on cheaper apps for the iPhone and iPad but also help grow the platform with the introduction of cheaper and higher quality apps.
Whether Apple will announce these plans tomorrow or wait until WWDC in June is of course all speculation but no one can argue that it's not going to happen and to that extent it will add further strain to the relationship between Apple and Google.
Content of fiscal call courtesy of Seeking Alpha. Full transcript for Q110 (PDF)