NEW YORK — Good news for the news business: Companies are paying newspapers and magazines up to five times as much to place ads in their iPad applications as what similar advertising costs on regular websites.
This doesn't mean Apple's tablet computer will live up to its hype as a potential lifeline for the media industry. Online ads still generate a small fraction of news companies' advertising revenue, and it's an open question whether print ads will return to what they totaled before the recession.
But early evidence suggests the iPad is at least offering publishers a way to get more money out of advertisers. That bolsters the hope that portable touch-screen computers could start turning the economics of digital advertising in publishers' favor.
"I think it will redefine publishing and also redefine how advertisers connect with our audience," said Lou Cona, executive vice president at Conde Nast Media Group, the privately held publisher of such magazines as Vogue, GQ and Wired.
Still, a lot will need to go right for publishers before the iPad and imitator tablet computers become a significant source of income.
For one thing, media applications will have to be compelling enough to keep people engaged for longer periods. Also, tablet computers will have to get into many more readers' hands - but without becoming so mundane that advertisers are no longer willing to pay a premium for what now is rarefied space.
There are many reasons publishers don't make as much online as in print. While newspapers and magazines offer a limited supply of ad space - the number of pages they publish - space online is virtually limitless. Advertisers that don't want to pay full price can spend their money with online ad networks, which get discounted rates on slots publishers can't sell on their own.
That supply/demand equation hasn't played out yet on the iPad. In iPad applications such as USA Today's, there is a finite amount of space, and no ad networks are in the mix. And the app gives advertisers new possibilities. A reader can click on Courtyard by Marriott's USA Today ad and then with a flick of a finger scroll through images of the hotels' updated lobby design. Another tap and a high-definition video appears, full of happy hotel guests.
Jason Fulmines, director of mobile products for USA Today's corporate parent, Gannett, says the newspaper is charging Marriott about $50 for every thousand times, or impressions, the ad appears. The average rate for USA Today's regular website is less than $10, he said. In the printed newspaper, the cost per thousand impressions on a full-page color ad that runs nationally is $103.
The newspaper's markup on iPad ads appears to be common. Phuc Truong, managing director of the mobile marketing company Mobext U.S., said publishers have been asking two to four times the usual rate of online advertising.
One reason JPMorgan Chase & Co. leapt to sponsor The New York Times' app for the first 60 days was the opportunity to showcase its Sapphire credit card to early buyers of the device. That card is aimed at the top 15 percent of earners, and people who bought the iPad (for $499, at least) presumably have extra cash. Apple says it has now sold 2 million iPads.
Wired might be the most aggressive magazine in trying to push the iPad's potential. Wired's app lets readers peruse the magazine the way they would in print, but with extra touches such as video clips or graphics that can be rotated with a finger swipe.
Wired's app costs $4.99 per issue, which brings up another wild card: whether publishers can balance methods of seeking revenue from readers and advertisers.
On the Web, most content is given away in hopes of luring the widest possible audience for advertisers. Publishers are eager to avoid repeating that on tablets, but charging for apps carries its own risks. There might not be enough readers willing to pay, which would reduce the audience that can be sold to advertisers.
Wired says its first effort is working out. One week after the app went on sale, more than 66,000 people had paid for it. In an average month, the printed magazine sells 82,000 copies on newsstands.