For Apple, Mass. move adds up to two firsts
January 05, 2010
Boston.com
For Apple, Mass. move adds up to two firsts
It’s buying Quattro, betting on wireless ads
In two firsts for computer giant Apple Inc., the company is establishing a presence in Massachusetts and going into the advertising business.
Apple, headquartered in Cupertino, Calif., has purchased Waltham mobile phone advertising company Quattro Wireless Inc., placing a big bet on the future of wireless ads in a fresh challenge to the Internet search giant Google Inc.
Quattro provides a platform for clients to place advertisements that appear on the Web browsers of Internet-connected devices like Apple’s iPhone. Ads can also appear inside “apps,’’ the small programs that run on smartphones. Users can download free apps that display news or weather information, along with ads that make money for publishers of the apps.
Mobile advertising is growing fast. Kelsey Group, a research firm in Chantilly, Va., estimates US companies spent $160 million on mobile ads in 2008. But the total is expected to reach $720 million this year and $3.1 billion in 2013.
Quattro was founded in 2006 with about $28 million in venture funds from several investors, including Highland Capital Partners, of Lexington, and Jonathan Kraft, president of the New England Patriots.
“They’re just a talented group of people,’’ Kraft said about Quattro yesterday. “Massachusetts needs more of these.’’
Quattro revealed the deal on its website yesterday. Apple declined to reveal details of the transaction, reportedly worth at least $275 million.
Quattro, which employs 150 people, will remain in Waltham. Its current chief executive, Andrew Miller, will become Apple’s vice president of mobile advertising and will report directly to Apple’s chief executive, Steve Jobs.
The last time Apple made a significant entry into an entirely new business was in 2003, when it launched iTunes. The debut of the iTunes online music store eventually made Apple the world’s largest vendor of digital music.
Apple does not break out revenues from music downloads, but as of January 2009, the company reported it had sold 6 billion music downloads since 2003. At an average price of 99 cents, that comes to revenue of $5.9 billion since iTunes was founded.
Roger Kay, president of Endpoint Technologies Associates Inc., in Wayland, said the Quattro deal underscores a dramatic shift in Internet usage.
“It’s clear that the trend is in the direction of using the phone as a principal Internet device,’’ said Kay, a trend ignited by Apple’s own iPhone. But the Web page banner ads or search keyword ads that have generated billions for companies like Google were designed for desktop computers and don’t translate well to phone handsets. Google reacted to the challenge last year by agreeing to pay $750 million to buy mobile advertising company AdMob. At the time, there were reports Apple had unsuccessfully bid for AdMob.
“Apple was left with one less choice,’’ said Neil Strother, an analyst at ABI Research. He said Apple may have acquired Quattro partly as a defensive reaction to Google’s AdMob deal, but the fast growth of the online advertising market would probably attract Apple in any case.
Other tech giants, like Microsoft Corp. and Yahoo Inc., could also seek to expand their mobile advertising efforts, he added.
The Quattro deal came as good news at one of the company’s main rivals, Jumptap Inc., of Cambridge. “We think this is great,’’ said Paran Johar, chief marketing officer. “This really validates the model for mobile advertising.’’
Johar said Jumptap has been approached by potential buyers and is open to being acquired if the price is right. But it is not actively seeking a buyer.
“Our focus,’’ he said, “is to build a business.’’
Hiawatha Bray can be reached at .(JavaScript must be enabled to view this email address).
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