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Report: App advertising could attract $8 billion in five years

by Phil Hornshaw

Ads in apps are big business, so much so that Media News Daily expects to see the mobile advertising industry score as much as $8 billion in the next five years.

Already, it’s expected that more than $300 million will be spent on app ads by the end of the year, and there’s plenty of space for more. One in five computing devices can use mobile apps (and receive advertising), according to Media News Daily, and that’s expected to be more like three in five in half a decade.

Apple’s taking notice. It recently started rolling out its iAd service, a program that puts advertising in apps and uses all the functionality of the iPhone. Clicking a banner ad takes the viewer to something like an interactive game full of information about the product. When the user is done, they click out of the ad and wind up back in the app, as if they never left. Check out this video for the Nisan LEAF to see an iAd in action.

Companies using iAds are really happy with it, according to a story that appeared on the Los Angeles Times’ tech blog in August. Nisan told the Times that time spent with its LEAF iAd was up to 90 seconds per user, about 10 times as much as Nisan usually gets with an Internet ad.So that means companies like Dictionary.com are getting more money per ad in their apps, and Apple gets a huge cut – 40 percent per iAd.

Forbes even thinks that if iAd is really successful, it’ll drive up Apple’s stock price. But Forbes also predicts the price of advertising space to decline simply because there’s so much real estate out there – Apple has claimed there are 250,000 apps in the App Store right now, and literally hundreds or thousands of new ones show up every day.

It amounts to a situation in which a new $8 billion advertising industry doesn’t seem that far-fetched. But the bottom line is, expect to see more apps with more ads, because clearly, they have our attention. Media News Daily says we’ve already spent $1.5 billion on paid apps.