Apple Revs Up Mobile Ad Revenue

Apple's move into mobile advertising has been welcomed by analysts and could spell good news for investors.
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CUPERTINO, Calif. (

TheStreet

) -- With the launch of its new

iAd

technology,

Apple

(AAPL) - Get Report

is aiming to take a big bite out of

Google

(GOOG) - Get Report

in

mobile advertising

, a move which could spell upside for investors.

Analysts are already lauding Apple's launch of the

new iPhone advertising technology

as a masterstroke that can boost the company's earnings. One of the main thrusts of the iPhone 4.0 operating system that was launched by Apple CEO Steve Jobs Thursday, iAd has high expectations.

"It is our view that Apple's new mobile advertising platform stole the show and will be significant to the financial model," wrote Brian Marshall, an analyst at Broadpoint AmTech, in a note released on Friday. "In fact, we believe the iAd platform could generate an incremental $2.5 billion in revenue."

The analyst, who reiterated his buy rating on Apple and $280 price target, also predicts that iAd could add more than $1 to Apple's earnings per share during calendar year 2010. Prior to the iAd announcement, Broadpoint had expected Apple to earn $12.75 a share during this calendar year.

One of seven bizarrely titled "tentpoles," or key features, of iPhone 4.0,

iAd lets developers embed ads directly in applications

. Apple is thus removing the need to access ads via a Web browser, which it claims will help advertisers provide more personalized ads. The firm ran demos from the likes of

Nike

(NKE) - Get Report

and

Target

(TGT) - Get Report

at its iPhone 4.0 launch event to illustrate iAd's capabilities.

Although the multitasking capabilities of iPhone 4.0 attracted most attention in the run-up to Thursday's launch, Wall Street has also pounced on iAd's potential.

Charlie Wolf, an analyst at Needham & Co., described iAd as a "game changer" in a note released on Friday, heralding the ability to deliver ads wirelessly through iPhones. Wolf also maintained his buy rating and $280 price target for Apple.

Apple has tweaked its revenue sharing model with iAd. The company will share 60% of the revenue from ads with developers, slightly less than the 70% developer split for other App Store applications. Nonetheless, the iAd revenue breakdown is still seen as

comparing favorably with the rest of the industry

.

Despite this week's

song and dance

about iPhone 4.0's capabilities, the operating system will not be

available for the iPhone and iPod Touch until the summer

, although a preview version of the OS was unveiled this week. The new operating system will be offered on Apple's

iPad

during the fall.

Broadpoint analyst Brian Marshall is nonetheless bullish on iAd's long-term impact. When fully up and running, the mobile advertising technology could generate revenue between $300 million and $4.7 billion and earnings from 13 cents a share to $2.15 a share.

Marshall, however, is keen to know more details about iAd, specifically, whether pricing will be on be a per click, or per transaction, basis. Another pricing option, which is preferred by Broadpoint, would be based on each 1,000 impressions, or views of the ad, although Marshall says that Apple could even choose a "hybrid" approach combining all three.

Apple, which saw its iPhone shipments climb a massive 100% in its recent first-quarter results, also gave a broader business update at its OS launch event.

As of Thursday, some 450,000 iPads had been sold, according to Jobs, who explained that the company has sold a massive 50 million iPhones since the smartphone was launched in 2007. There are also 185,000 applications now available in the App Store, and some 4 billion apps have been downloaded.

Up to this point, consumers have largely driven Apple's iPhone growth, although the technology is said to be creeping into corporate America. Last month analyst firm Canaccord Adams also reported that

iPhone sales are coming in ahead of estimates

.

Apple's stock has been on a upswing fuelled by the recent iPad launch, and rose $1.32, or 0.55%, to $241.27 on Friday. This slightly outpaced the modest advance in tech stocks which saw the

Nasdaq

gain 0.4%.

-- Reported by James Rogers in New York

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