Apple launches ad system for mobile devices in race with Google

In a direct attack on Silicon Valley rival Google Inc., Apple Inc. unveiled its new mobile advertising system Thursday and promised to deliver a new generation of compelling interactive ads to its devices.

Chief Executive Steve Jobs announced Apple’s iAd advertising network as one of a raft of features coming later this year to its iPhone, iPad and iPod Touch line.

By building an advertising system into its products, Jobs said, Apple is hoping to tap into a nascent but potentially lucrative market: the growing number of consumers who are picking up a cellphone when they want to access the Internet.

Analysts predict that within five years, more users will access the Internet from mobile devices than personal computers, which could translate into billions of dollars in sales of phones, software and services.

Spending on mobile advertising in the U.S. last year was about $416 million, and it is expected to climb to more than $1.5 billion by 2013, according to research firm EMarketer. Online advertising generated $24 billion last year, the firm said.

That has led to Apple and Google racing against one another to build competing mobile advertising platforms. Their goal is simple: Whether people are reading on computer tablets at home, talking on cellphones in the car or listening to music players while walking down the street, advertisers can always reach them.

What such marketing campaigns will look like, or how they will let people interact with media-rich ads, is still in the early stages. At Apple headquarters in Cupertino, Calif., Jobs showed some examples of what was possible with ads for the upcoming “Toy Story” movie, Nike Air sneakers and Target: The ads more closely resembled small, touchable multimedia games than traditional static Web ads.

Even before the launch of iAd, Apple had a substantial head start in the mobile marketplace: The company sold more than 85 million iPhones and iPod Touch players in the last three years. That success has attracted an army of software developers, who have built 185,000 applications for Apple’s hand-held devices.

Users have performed 4 billion application downloads since the earliest became available in 2008, Jobs said.

“Search is not happening on phones,” Jobs said, in a direct jab at Google.

“People are using apps, and this is where the opportunity is to deliver advertising.”