Apple Corners In-App Ad Market with Changes to Developer Agreement

Following the launch of its iAd advertising product earlier this month, Apple has made a number of changes to its application developers license agreement that could have major implications for the mobile marketing industry – seemingly outlawing the use of location-based targeting, third party analytics, and the use of rival ad providers within applications.

The new developers’ agreement states, “The use of location-based User Data for enabling targeted advertising in an Application is prohibited unless targeted advertising is the purpose of such Application (e.g., a geo-location coupon application).”

Perhaps more significantly, it adds, “The use of third party software in Your Application to collect and send Device Data to a third party for processing or analysis is expressly prohibited.” That clause would, in theory, forbid the use of third-party analytics services and cripple ads from rival networks within any application.

Apple acquired mobile ad network Quattro in December, and subsequently announced the launch of its own in-application ad product two weeks ago. It now appears the company intends to limit the ability for third parties to offer ad-related functionality through apps, despite the ecosystem that has emerged around that practice.

Apple itself has not clarified its intentions surrounding the revisions, but CEO Steve Jobs recently said the majority of mobile advertising “sucks,” and that his company’s ad solutions would be far more “imaginative and engaging” than what is currently on offer.

Peter Farago, VP of marketing for mobile analytics provider Flurry, said his company is seeking clarification from Apple, but had not received reply. “We believe this language will cause analytics companies and ad networks to change the way they collect some data. The main issues appear to be around device data collection, which our developer customers value, and which is necessary for ad networks to function,” he said.

Apple’s Quattro Wireless did not return ClickZ’s calls for this story.

As a result of its Quattro purchase, Apple essentially acquired all the assets it needs to sell, serve, and track its own ads within the application environment. Commenting on the revisions to the license agreement, Michael Becker, North America managing director for the Mobile Marketing Association said, “Apple appears to be doing what Apple does best. Creating a rich consumer experience by controlling the end-to-end value chain.”

Becker also expressed concerns surrounding the integrity of a model in which reporting and analytics would be handled by the same entity selling ad opportunities, stating, “Third party audibility is critical, and we’d like to see that happen through Apple devices. Right now it appears they’re saying they’re not going to allow that.”

If Apple does indeed prevent all data being sent to third party ad networks, the effects could be devastating for their businesses. Although in theory ads could still be injected into applications, a lack of data would make tracking and billing impossible, effectively rendering them useless.

Although competing operating systems – such as Google’s Android – are eating away at Apple’s dominance of the smartphone market, many mobile ad networks rely heavily on ad inventory from iPhone, iPod Touch, and now iPad devices. Speaking with ClickZ in February, AdMob’s VP of ad sales said, “Half of our page views come from apps.”

Google agreed to acquire AdMob in November, and with Apple and Google beginning to compete increasingly in the mobile market – both in terms of ad sales and handsets – it’s not surprising Apple may want to limit Google’s ability to sell onto its devices through those means. However, that purchase is yet to be cleared by the FTC.