Andrew Frank

Apple’s recent patent application to incorporate advertising into an OS as a potential subsidy is creating quite a stir:

• “Apple Prepares to Rock the Market with Hardware Subsidizing Program”
• “Apple applies for patent on OS with embedded advertising”
• “Apple Patents Ad-Supported, Subsidized Mac OS”
• “Gimme a minute — just two more ads before it lets me use the Finder again”

As with the Google music rumors, or the latest round of Apple tablet speculation, there seems to be more smoke here than fire: Apple files lots of patent applications, and, despite some loose reporting, this is just an application, there’s no guarantee it will be granted, and given that the innovation appears to be the use of advertising to subsidize an OS (which, at the end of the day, is just software), one might expect examiners to scrutinize it carefully, and look closely at some of the prior art in Zune, among others.

What’s interesting about this is the indication that Apple is thinking hard about advertising revenue, which is something we’ve been discussing on the media team for some time. On the one hand, as the rise of Android puts Apple and Google in more competitive situations, the power of Google’s ad-based revenue engine to subsidize innovation can’t be lost on Apple. On the other hand, there’s nothing Apple seems to hold more sacrosanct than its branded user experience, and suggesting that this could be sold to advertisers will clearly strike some as sacrilege. Apple may imagine it can leverage its success corralling app developers through an approval process with advertisers as well, but the difference is, for advertising to work economically, it needs to operate at much higher reach and frequency than app development.

Bottom line: Apple’s likely to experiment with ads, and there are many ways for them to do so – especially if they open up a publishing channel in iTunes to deliver print content to an Apple eReader… but an ad-supported OS carrying the Apple brand? With ads appearing at predefined times, blocking activities? Running a preroll after that iconic startup chime? Hard to imagine.

Still, if the patent issues, perhaps there’s some upside in licensing the IP to Android….