What is Steve Jobs up to? First he disses mobile search and now is implying that Apple is in mobile advertising mainly out of the goodness of its heart. Seriously?

Earlier this week at The Wall Street Journal?s D| All Things Digital conference, the Apple CEO said that the company?s new iAd mobile ad network was created mainly to help the iPhone developer community make money via in-application ads.

?People are using apps way more than they are using search,? Mr. Jobs said at the D8 conference in San Francisco. ?So if you want to make developers more money, you?ve got to get the ads into apps.

?But the mobile ads we?ve got today rip you out of the app,? he said. ?That sucks, so Apple has figured out a better way to do that.?

What?s happening?
After buying mobile ad network Quattro Wireless for $270 million in December, the industry was convinced that Apple was set to dominate the mobile advertising space.

The launch of Apple?s iAd mobile ad network confirmed that notion.

Apple now plans to charge $1 million for in-application iAd packages and $10 million for launch campaigns, steering the industry to believe Apple was going for the big bucks in mobile ad dollars.

However, Mr. Jobs? utterances at the D8 conference knocking mobile search and claiming mobile advertising is not going to be a money-maker for Apple ? along with his dustup with Adobe over Flash ? is cause for some serious head-scratching: What?s going on?

?I don?t know,? said Neil Strother, Kirkland, WA-based practice director at ABI Research.

?It could mean that Apple doesn?t plan to make money, but if it does, that?s a good thing,? he said.

If it is not search or mobile advertising and Apple is more concerned about helping its developer community, then is that not tokenism? 

Maybe not.

With about 6,000 iPad applications and 200,000 for the iPhone and iPod touch in the Apple App Store, the total number of applications available is about 206,000.

The growth of the number of available applications in the App Store emphasizes just how loyal developers are to Apple, regardless of the company?s much-panned approval process.

The iPhone operating system will continue to tickle developers and the company knows that.

Consumers show unwavering loyalty to Apple products and developers are going to continue to follow the money. And where Apple?s application-led mobile kingdom is concerned, there is plenty of dough to go around. 

?I think fundamentally Apple is in the device manufacturing business and that?s the company?s main source of revenue in the mobile space,? said Noah Elkin, senior analyst at eMarketer, New York.

?With the popularity of the apps on the iPhone, iPod touch and now the iPad, Apple realizes that apps are the big thing on its platform,? he said. ?That said, providing developers the ability to make money through better experiences with ads on apps is a logical step.

?Apple is not in the music business, but it does sell music, just like Apple is not all about mobile advertising, but it is supporting it on its devices.?

As for tokenism and not taking care of advertiser and agency interest, Mr. Elkin disagrees.

On the contrary, advertisers and agencies are going to benefit from iAd, though it is meant to help developers monetize their applications.

Ad agencies will be involved in the creative execution, Mr. Elkins said.

Apple?s logic is that advertisers will reap the benefits of the results of their ads on its platforms. ABI?s Mr. Strother concurs with that notion. 

?It could be that [Mr.] Jobs sees that through ad-supported apps the advertiser gets to a target audience and has a chance to interact with that audience on Apple devices,? Mr. Strother said. ?And the developer gets paid for his app.

?So the needs of the advertiser-agency are met, and the app developer gets paid,? he said. ?In terms of search, the process of going to the App Store is a form of search and users download paid or free apps that interest them, and so this reduces the need to find something by a degree.

?What I think [Mr.] Jobs means on search and Google is that Apple has not gone head-to-head with a search engine like Google has.?

Who?s first?
Traditionally, mobile ad networks have placed the advertiser front and center, serving the needs of publishers and developers as well.

Apple?s strategy is vice versa. Apple is placing developers first, meeting the needs of advertisers indirectly.

?In the mobile ecosystem, every mobile ad platform or network has to make a choice about who they are going to put first,? said Mack McKelvey, senior vice president of marketing at Millennial Media, Baltimore, MD. ?Some put publishers at the top of the list, some put developers or carriers at the top.?

But Apple does not style itself an ad network. Based on Mr. Jobs? recent comments, it would seem that advertising is not the company?s primary or its secondary business.

If anything, Apple is in the mobile application business, other than the fact that it is a device maker.

?I don?t understand what the big mystery is,? said Brennan Hayden, vice president of Wireless Developer Agency, East Lansing, MI. ?They are doing their best to create great products, with a goal to achieving a certain experiential elegance that is frankly expected of their products by their very loyal customers.

?They will always need to make hard choices to achieve that sense of elegance,? he said. ?If we knew all the reasons behind those choices, we could all build Apple products now, couldn?t we?

?Certain companies and people go their own way ? it isn?t all upside, but we should all be grateful such companies exist. It is the only way to get truly new things.?

That unstinted adulation does not sit well with one particular mobile ad network.

?Apple?s mobile advertising strategy is right and wrong,? said Paran Johar, Los Angeles-based chief marketing officer of Jumptap. ?The focus on rich media and targeting to drive engagement is very much in line with what we have been focused on since our inception.

?Their pricing mechanism, though very innovative, is getting a great deal of pushback from advertisers,? he said. 

Money, money, money
IAd is Apple?s way of helping developers to monetize applications.

The company?s aim is that iAd will encourage more developers and marketers to climb on board the iPhone application bandwagon.

Ad networks place advertisers at the heart of their strategy because at the end of the day, ads placed and media bought makes money for the networks.

Indeed, if it was not for Apple?s love for developers, the company would probably see no need to even have a presence in the mobile advertising space.

?[Apple is targeting] a combination of streams ? devices such as traditional PCs/laptops, iPhones, iPod touches iPads, and future ones we don?t know about,? Mr. Strother said.

?Apps and advertising, too,? he said. ?So, it?s not any one thing, but the aggregate.?

Some might say, however, that Mr. Jobs is underestimating the power of iAd.

According to Bernstein Research analyst Toni Sacconaghi, the iPhone will account for 45-50 percent of Apple?s revenue by 2011.

Apple is able to woo consumers to its iPhone operating system devices due to the huge popularity and buzz around the App Store.

In his analyst brief, Mr. Sacconaghi said that the companies with the best application stores are going to be able to sell the most devices.

Mr. Sacconaghi also believes that developers will earn more than $800 million in 2011 from the iAd network.

When it comes to where Apple is going to be making its big bucks, Jumptap?s Mr. Johar believes it is for the company to decide. 

?But ultimately, an open approach is in the best interests of advertisers because they only care about reaching targeted audiences, not specific devices,? Mr. Johar said.  

Basic instinct
WDA?s Mr. Hayden said that Apple has three bases it needs to cover in the advertising space.

?And advertising isn?t something, frankly, I think they have had very long to anticipate, relative to the need for execution that recent market developments have brought forward,? Mr. Hayden said.

?There is a lot of complexity and, frankly, I see some of what they are doing as attempts to reduce the complexity of the problem,? he said.

Mr. Hayden said that the role of the application-based advertising ecosystem is something Apple has inherited indirectly. He doubts Apple ever anticipated the size and scope.

Furthermore, Apple?s attempt to turn its iAd platform into almost a premium sponsorship opportunity, rather than a marketplace, serves this purpose.

However, the content business is definitely something Apple has planned for quite some time.

Relationships with major media companies and content publishers are critical for that.

?I see the Quattro purchase as being more about this ? access to all of those premium Quattro publishers, rather than strictly developers,? Mr. Hayden said. ?[Also], because the iPhone has been such a huge draw for audiences, advertisers and publishers, they have a rather prominent place in the mobile advertising space.

?Frankly, I doubt they have much interest in this space the way most other pure-play mobile players do,? he said. ?This lack of interest isn?t a problem for the major agencies, who will continue to serve their major brands quite comfortably in the context of a $1 million iAd buy. They must love that.?