New York: Good news for the news business: US companies are paying newspapers and magazines up to five times as much to place ads in their iPad applications as it costs to advertise on regular web sites.
This doesn't mean Apple's tablet computer will live up to its hype as a potential lifeline for the media industry. Online ads still generate a small fraction of news companies' advertising revenue, and it's an open question whether print ads will return to what they were totalling before the recession.
But early evidence suggests that the iPad is, at least, offering publishers a way to get more money out of advertisers than they otherwise would. That bolsters their hope that portable touch-screen computers could start turning the economics of digital advertising in the favour of publishers.
"I think it will redefine publishing and also redefine how advertisers connect with our audience," said Lou Cona, Executive Vice President at Conde Nast Media Group, the privately owned publisher of such magazines as Vogue, GQ and Wired.
Still, a lot will need to happen for publishers before the iPad and imitator tablet computers become a significant source of income.
For one thing, media applications will have to become compelling enough to keep people engaged for longer periods. That's especially true if a publisher wants to charge for a news application, because free articles on the Web are just a few taps away on the iPad's browser. Expect media companies to hold back more material from their free websites and offer it exclusively in tablet applications.
Also, tablet computers will have to get into many more readers' hands, but without becoming so mundane that advertisers are no longer willing to pay a premium for what now is rarefied space.
There are many reasons publishers don't make as much online as in print. While newspapers and magazines offer a limited supply of ad space - the number of pages they publish, online space is virtually limitless. Advertisers who don't want to pay full price can give their money to online ad networks, which get discounted rates on leftover slots that publishers can't sell.
That supply/demand equation hasn't played out yet on the iPad. In iPad applications such as USA Today's, there's a finite amount of space and no ad networks are in the mix. And the application gives advertisers new possibilities.
A reader can click on Courtyard by Marriott's USA Today ad and then, with a flick of a finger, scroll through images of the hotel's updated lobby design. Another tap and a high-definition video appears, full of happy hotel guests.
Jason Fulmines, director of mobile products for USA Today's corporate parent, Gannett, says the newspaper is charging Marriott about $50 (Dh183.6) for every thousand times, or impressions, the ad appears. The average rate for USA Today's regular website is less than $10 (Dh36.7), he said. In the printed newspaper, the cost per thousand impressions on a full-page colour ad that runs nationally is $103 (Dh378)
Fulmines declined to say how many impressions USA Today is promising on the iPad or how much ad revenue it projects from the iPad this year.
The newspaper's markup on iPad ads appears to be common. Phuc Truong, Managing Director of the mobile marketing company Mobext US, said publishers have been asking two to four times the usual rate of online advertising.
Aside from paying higher rates for each iPad ad, advertisers are willing to increase their overall spending with given publications. That has been the case at The Wall Street Journal, said Brian Quinn, the newspaper's Vice President and General Manager for Digital Ad Sales.
"Out of the gate, there was an exuberance about this," he said.
There's no guarantee publishers can keep this going. For instance, one reason JPMorgan Chase & Co. leapt at the chance to sponsor The New York Times' application for the first 60 days was the opportunity to showcase its Sapphire credit card to early buyers of the device. That card is aimed at the top 15 per cent of earners, and people who bought the iPad (for $499 (Dh1,832), at least) presumably have extra cash.
Chase is impressed by what it's seen on the iPad, but for reasons that cut both ways for publishers.
The good news, according to Chase Sapphire General Manager Sean O'Reilly, is that the company's ad is getting clicked on about 15 per cent of the time that it pops up. Even if that's partly because people are fumbling with the touch-screen navigation, it's a surprisingly high figure; the average ‘click-though' rate for an online display ad is about one-tenth of a percentage point.
Put another way, 84 per cent of people never click on a web ad in an average month, according to Gian Fulgoni, chairman of comScore, a company that analyses internet behaviour.
The trouble is that some publishers hope the iPad will help break advertisers' addiction to concrete metrics like this.
Online advertisers have been ruthless about seeing a return on their money. They've thrown out an industry maxim, ‘I waste half the money I spend on advertising, I just don't know which half."' Companies gather information on every step of the process, from the moment someone clicks on an ad to the point of purchase. They don't want to shell out for ads that don't pay off.
Publishers, want to return to the days when advertisers paid high prices for a big, eye-grabbing colour ad in a newspaper or magazine that readers spent a lot of time with. Conde Nast says the average reader spends 60 minutes with each monthly issue of its magazines' iPad applications.
The average visitor spends just 2.1 minutes per month at Vanityfair.com and 3.8 minutes per month at GQ.com, according to comScore. "We're looking to prove engagement in terms of hours not minutes," said Scott Dadich, Creative Director for Wired.
