Rory Maher, CFA: rmaher@tbiresearch.com
Until iPad applications reach large audiences, initial sponsorships will remain fairly immaterial. As a result, traditional media companies will need to rely on subscriptions to drive material revenue in the near-term (we don't see them making much money from subscriptions either). Specifically, we made calls to various advertisers and found that: - The charter sponsorships much-discussed in the press are reasonably-sized buys, but still very incremental.
- Agencies are taking a "wait-and-see" approach so if audience doesn't grow quickly the dollars will not continue to flow.
- Consumer-Packaged-Goods advertisers are sitting on the sidelines and won't have much interest advertising on iPad apps until they reach sizable audiences.
All of this means traditional media companies will need to grow large audiences for their iPad apps quickly if the new device is going to drive enough incremental revenue to boost profitability. Since we're likely years away from the iPad reaching a mass audience (if that ever happens), these charter deals alone will not be enough to revive most struggling media companies. CHASE PAID ABOUT $1 MILLION FOR ITS NEW YORK TIMES SPONSORSHIP Here are the details of the Chase Sapphire charter sponsorship of the New York Times iPad app: - About $1 million.
- Exclusive 3-6 month deal.
- Part of a larger media commitment.
The sponsorship incorporates a number of different inventory, 100% share-of-voice, and some interactive features. While this number is respectable ($1 million to sponsor an app noone has seen yet isn't bad), it certainly won't be enough to sustain any softness in print advertising during that 3-6 month period. As a point of emphasis, the $1 million in sponsorship is equal to about 0.04% of the New York Times Company's overall annual revenue. AGENCIES ARE HOPEFUL, BUT ARE NOT DIVING IN YET Agencies we spoke with said there is a lot of hype around the iPad and many of these initial sponsorships are meant to demonstrate their commitment to the iPad initiatives and the overall mobile space, not necessarily to drive strong ROI. In addition, interest from clients has been very strong, with one agency remarking how it reminded them of the interest to get placed on AOL back in 1999 (of course, we all know how that ended). However, agencies have indicated they understand these deals are not viable currently since the audience is very small. Media buyers will be looking for significant audience growth the next year when considering further buys. CONSUMER PACKAGED GOODS COMPANIES NOT COMING TO THE TABLE YET
Consumer Packaged Goods (CPG) advertisers need to reach massive audiences in single buys. Agencies have indicated to us that until they can achieve this scale on the iPad, CPG advertisers will remain on the sidelines. Some have indicated mobile ad networks are trying to incorporate iPad inventory into larger iPhone network buys, but this is in the early stages. As a result, it will be a while before these large advertisers start to spend meaningfully on iPad applications. To be sure, CPG is only 6% of total online advertising. However, the largest categories - Retail and Finance (about 40% of total online) - typically buy direct-response inventory, and branding inventory to a lesser extent. This would make CPG advertisers more meaningful to a branding buy (like those sold on iPad apps) than originally indicated in the overall IAB #s. 
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