Apple to Developers: Location-based Ads is our Turf, not Yours (& not Google’s).

Wow. Has the Apple vs Google death match caused Apple to potentially drain the number one ‘barrier to entry’ for Nexus One and other Andriod/Palm/BlackBerry smartphones?

Warren Buffet always looks for a moat that significantly bars new competition from entering the market.

To me, and many others, the App Store is that moat. While the others might catch up one day, Apple has over 200,000 applications (compared to maybe 20,000 Android ones?), which have been downloaded 3 billion times and I’m guessing generated over a billion dollars of pure profit for Apple. Recent reports have Apple capturing over 99% of smartphone application downloads which is estimated to have generated over $4 billion in revenue…of which Apple gets to keep 30%. (For those that don’t know…THIS is the real reason why Apple refuses to allow Flash to run on iPhones, iPods and the iPad…Flash would allow websites to sell and deliver applications straight from the web and avoid the App store, along with Apple’s cut.

So, Apple is sitting behind their castle walls, looking at the angry hordes on the other side of their moat and they decide to tell they front line troops that only the King gets medals and riches.

What am I talking about? Apple provided a Tip on their developer’s blog two days ago which talks about using their core Location Based Services API, so an application can determine ‘where’ it is being run. Why? So that the application can provide additional information, or targeted information at that very moment. Many, many marketing people, like myself, recognize how effectively local mobile Ads can pull someone past one door and into another if done right at ‘point of inquiry’.

Apparently, Apple recognizes this as well. Their tip either cautions or reminds developers, however, that they are NOT allowed to advertise within their own application. Apple believes that real estate belongs to Apple, not to the developer:

If you build your application with features based on a user’s location, make sure these features provide beneficial information. If your app uses location-based information primarily to enable mobile advertisers to deliver targeted ads based on a user’s location, your app will be returned to you by the App Store Review Team for modification before it can be posted to the App Store.

Only time will tell about this decision, but I feel Apple just took a significant revenue opportunity away from developers. I don’t see them turning around and providing Apple any real estate WITHIN their application (while it’s running) for a location-based ad where the developer won’t benefit. Instead, they’ll advertise their other product lines or typical impression ads that aren’t triggered by location. I think that means Apple, their developers and us end-users ALL LOSE…it’s a lose-lose-lose proposition.

Does anyone else see that leak in the moat? Maybe Apple has some iGum or an iFinger they could use to plug it?  Oh wait, Apple has already been using their iFinger application and it’s just been squarely pointed at their own developer’s community.   😉