So I imagine, like me, many of you are buying your new iPhones today or at least waiting with bated breath for the New World of the iOS 4.0.
Last week, I followed the WWDC keynote, and despite all the gadget and gizmo talk, there was one thing that stuck in my head. In fact, it haunted me as nothing has since I first wrote the business plan for Pegasus News in 2004:
150 million credit cards on file from people using iTunes and/or the App Store (and now the iBooks Store). 150 Million.
As Steve Jobs said, “We have 150 million accounts — we think it’s the biggest on the web. We’re number one.”
Interestingly, he then segued into a discussion of iAds, but there was no connection.
As someone who has been obsessed with transactional ad models for the better part of this decade, this presented both a tragedy and an opportunity. That night, after mulling the problem while floating in the pool with the pups, I toddled inside and fired off an email to sjobs@apple.com:
From Mike Orren <mike@mikeorren.com>
reply-to mike@mikeorren.com
to sjobs@apple.com
date Mon, Jun 7, 2010 at 8:49 PM
subject The half (of iAds) that’s wasted
mailed-by mikeorren.com
hide details Jun 7 (7 days ago)
Steve:
Congrats on launching another product I MUST have.
You can’t meet a group of ad folks without hearing the quote from legendary retailer John Wanamaker: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
My sole disappointment in your new offerings is that you have a golden opportunity to solve that paradox and are, for now, ignoring it.
Yes, iAds suck less than regular ads. I appreciate that, as that’s a goal I’ve focused on in my business for several years.
But at a million-dollar minimum, you’re missing most of the local market. AND you have 150 million credit card accounts from people who would love to save money transacting with local businesses.
Do you want to provide a marginally better experience for major brand advertising? Or do you (and your developer community) want a piece of 150 million cups of coffee, shirts, bowls of spaghetti, etc.?
As someone who has focused my life on local commerce, I can tell you that the future of local is transactions. And no one is better positioned to change the world by helping small business than Apple is.
To my surprise, the reply came quickly:
from Steve Jobs <sjobs@apple.com>
to “mike@mikeorren.com” <mike@mikeorren.com>
date Mon, Jun 7, 2010 at 9:36 PM
subject Re: The half (of iAds) that’s wasted
mailed-by apple.com
hide details Jun 7 (7 days ago)
What would you do if you were us?
Sent from my iPhone
By then, I was drinking wine on the couch with April, which meant a tacit commitment that I was in the no-work zone. But I couldn’t help myself. I banged out a reply on my iPhone:
from Mike Orren <mike@mikeorren.com>
to Steve Jobs <sjobs@apple.com>
date Mon, Jun 7, 2010 at 10:04 PM
subject Re: The half (of iAds) that’s wasted
mailed-by mikeorren.com
I’d launch a parallel iAds program focused on SMBs. It would be a lite, self-serve, but easily prefabbed version of iAds. It would target based on geo- and/or relevance data from apps– only offers that we know are relevant and therefore wanted. It would fill every piece of inventory not claimed by Big Brands.
Revenue from a % of deals bought through the iAds store (which doesn’t exist today, but would be better than Adsense with about a month’s worth of effort).
I’d use local relevance data across all local and nonlocal apps to solve the last mile problem that has plagued and tantalized local publishers since the first low-baud modem.
The big point is this: You have more credit card numbers than anyone. How are you going to use them to make it easy for me to buy locally? The fact that you have my info and with two clicks I can buy makes me more likely to purchase apps and music. Why not enchiladas and coulattes?
iTunes.
AppStore.
iAds.
DealStore.
Every ad a wanted ad*, or damn close to it. If that’s not world-changing, I don’t know what is.
• quoting Jeff Jarvis, but pushing a Platonic ideal that any publisher, Apple included, should be seeking.
—————–
Mike Orren
Sent from my mobile
The next day, I thought some followup was warranted:
Mike Orren <mike@mikeorren.com>
reply-to mike@mikeorren.com
to Steve Jobs <sjobs@apple.com>
date Tue, Jun 8, 2010 at 9:19 AM
subject Re: The half (of iAds) that’s wasted
mailed-by mikeorren.com
hide details Jun 8 (7 days ago)
One more thing:
Here’s some scenarios of what I have in mind:
Sally owns an Italian restaurant in East Dallas. She had a party booked for tonight, with a prix fixe menu and now is stuck with more lasagna then she sells in a week. She logs into her iAds account, where she’s previously uploaded her logo and menu and a more general special. She replaces that with a one-night deal of all-you-can eat lasagna, salad and desert for $5. Everyone who logs into a location based app within 5 miles and with iAds enabled gets pushed the opportunity to buy the deal through the iAds store with their iAccount that is used for apps and songs too. Everyone who buys shows their phone with a unique code that Sally can enter on an iPhone or laptop to verify the purchase. Apple takes its cut and pays Sally the difference. She’s out nothing up front. Then, she reverts to her usual 10% for iAds customers. The customers may share a rating of the business or special in-app.
Even better: iTunes Genius knows I listen to a lot of Willie Nelson. People who like Willie also like Rodney Crowell. I have none of his music. Rodney’s playing at The Granada Theater in Dallas. Day of show the theater opens up the 50 remaining tickets for 80% off. (At this point, it’s perishable inventory and they’re happy to get another bar tab in the door.) iAds pushes me an offer for the show and takes the lion’s share. Or, offers me the ticket free with the purchase of a Rodney Crowell album through iTunes.
Maybe I’m playing a bowling game on my iPhone– I can get an offer from a local bowling alley, encouraging me to bring the game into real life again bought through iAds. If there’s no local bowling alley on board, then show me the Toy Story 3 ad again.
At higher levels of integration, an Angie’s List app could not only recommend a local plumber, but allow me to take advantage of a special from one of the recommended plumbers, again transacted through iAds.
The possibilities are staggering. And you already have the engine to easily sell to your users and deliver a cut to the publisher (or retail outlet).
The point is ths: The local ad market is moving to a transactional model, but it is extremely fragmented. No one else will deliver the kind of experience Apple does (and therefore a high enough sellthrough). And almost no one else is positioned to scale with that many credit card holders conditioned to buy with two clicks. Almost no one has enough scale such that the offers can be “bought not sold.” This is what Google and the other ad networks want to do through the phone, but they aren’t nearly as well positioned to transact.
And, most importantly, you can make people’s lives richer by connecting them with local businesses and getting them to go out to do and see things would have otherwise missed.
And wouldn’t it be amazing if the iAds provided enough value and savings over a year to pay for your phone?
Unfortunately, I never heard back. In the meantime, I’ve had more time to think on this, and while I can debate whether or not it’s a good idea for Apple to have as much power as I propose, the undeniable case is that they can. From the dawn of the InterWebs, through AdWords, to Groupon, and towards the future– we are moving closer and closer to a transactional model that is about moving perishable inventory by putting deals in front of the right engaged people at the right time.
The big hole in most of these sorts of business models, as was the big hole in the plan, cribbed from my 2004 bizplan draft, in my final email to Steve is this — you have to have a tremendous number of people (read: credit card numbers) ready to transact with a click or two. Apple is the only media company delivering ads who has that, at this scale.
I don’t know what they’re thinking about in Cupertino today. Maybe it’s how many physical devices they can sell. But I don’t think that is, or should be, the endgame. I’d hope they’re thinking different. Because no one has ever had the opportunity we they face now.
