Apple's iAd Debuts as iPad Sales Hit 450,000

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(Reuters) – Apple CEO Steve Jobs showed off a new smartphone operating system on Thursday that features an advertising platform to compete with Google’s, and revealed stronger-than-expected sales of 450,000 units for the iPad.

The iPhone 4.0 software will be available on Apple’s hugely popular smartphone this summer, complete with a number of upgrades, including a long-awaited multi-tasking capability that allows the use of several applications at once.

A version of the iPhone’s operating system is also used on the iPad, and the latest generation of software will come to Apple’s new tablet computer this fall.

The new advertising platform for the iPhone and iPad — dubbed iAd — marks Apple’s first foray into a small but growing market, and is sure to please the thousands of application developers who make their living off those devices, providing them with a new revenue stream.

The iPad’s early sales impressed analysts, many of whom expect 1 million units to be sold in the quarter ending June, and roughly 5 million in 2010, though estimates vary widely.

“We’re making them as fast as we can. Our ramp is going well, but evidently we can’t quite make enough of them yet so we’re going to have to try harder,” Jobs said, noting iPad sellouts at Best Buy stores.

The electronics giant has staked its reputation on the 9.7-inch touchscreen tablet, essentially a cross between a smartphone and a laptop. It is helping foster a market for tablet computers that is expected to grow to as many as 50 million units by 2014, according to analysts.

“I think it’s pretty impressive, five days almost half a million units, and it shows there’s still pretty good momentum behind the first day,” said Gartner analyst Van Baker.

Despite critics who question whether a true need exists for such a gadget, analysts expect Hewlett-Packard, Dell and others to trot out their own competing devices this year.

Since the iPad went on sale on April 3, users have downloaded 600,000 digital books and 3.5 million applications for the device, Jobs said. There are already 3,500 apps available for the iPad.

“It was above my expectations, frankly,” said Joe Clark, managing partner of Financial Enhancement Group, referring to iPad sales. “The day the original Apps Store launched it was a game change for the iPhone and it will do the same eventually for the iPad.”

At a media event at the company’s Cupertino, California, headquarters, Jobs said Apple had so far sold more than 50 million iPhones, the smartphone that competes with Research in Motion’s Blackberry and Motorola’s Droid.

That implies that the company sold 7 million or more devices in the March quarter, which would be above many analysts’ forecasts.

MOBILE AD WAR

Apple is expected to launch the fourth-generation model of its iPhone, which was introduced in 2007, later this year.

Pancreatic cancer survivor Jobs, looking thin but energetic, introduced the iAd mobile platform, which he said had the opportunity to make 1 billion ad impressions a day on tens of millions of Apple mobile device users.

IAds will allow applications developers to use advertisements in their apps, pocketing 60 percent of the revenue. Apple will sell and host the ads.

Jobs harshly criticized the current manner and look of mobile advertising, particularly search ads. He promised that iAds will foster more engaging advertising that will not pull users away from the content within apps.

NEW ARENA

Tim Bajarin, president of consulting company Creative Strategies, said it was a dramatic shift in thinking about the delivery of mobile ads, and an obvious move by Apple to set itself apart from Google Inc, which made its name on search ads.

“It’s very clear that Jobs believes that ads in the context of apps makes more sense than generic mobile search,” he said.

Apple’s entry into the mobile ad arena had been widely expected. This year, it paid $270 million for Quattro Wireless, an advertising network that spans both mobile websites and smartphone applications.

Google, which already sells advertising on smartphones, agreed to buy mobile ad firm AdMob late in 2009. U.S. regulators are examining the deal’s antitrust implications.

Jobs said Apple was also in the hunt to buy AdMob before Google “snatched them from us because they didn’t want us to have them.” The comments were just the latest hint at the rift that has emerged between Apple and Google, which were once allies but now compete in a number of arenas.

Research group Gartner expects the mobile advertising market to expand by 78 percent to $1.6 billion in 2010.

Jobs also said the new operating system will include support for multi-tasking — addressing a perennial consumer complaint — allowing users to switch between several programs running simultaneously.