When Apple introduced its iAd platform back in April, it promised to raise the bar for rich media mobile display advertising. To show off the platform’s capabilities, Apple demonstrated an ad for Disney’s “Toy Story 3,” complete with games, video and in-ad purchasing. So with iAd now poised to finally reach the iPad, it seems fitting that Apple would once again turn to Disney to debut the larger-format ads on its larger-format device.

Because iAd won’t officially roll out for the iPad until early next year, Disney’s “Tron Legacy” iAd has the limelight all to itself, just in time for its blockbuster release on Dec. 17.

The ad itself, activated from a typical iAd banner, is visually stunning. Like its “Toy Story 3″ predecessor, it comes complete with trailers, a theater locator and character profiles as well as a helpful explanation of the film’s convoluted plot (helpful for those who cannot remember back to or did not see the original “Tron” of 1982). The ad also enables viewers to purchase the movie’s soundtrack from iTunes without leaving the ad.

It’s a tour de force, and although by no means the first interactive rich media ad for the iPad, it is nonetheless an impressive harbinger of what is to come in terms of tablet advertising. Moreover, the “Tron Legacy” iAd is very much in line with a trend I noted in a previous post, which is, the combined effect of bigger screens and richer, more engaging ads, including video, is slowly changing consumer attitudes toward advertising on mobile devices.

Nielsen’s research among connected device owners suggests that iPad owners are more receptive to ads than other mobile device owners, particularly when the ads contain video and other interactive features. These findings square with the general purpose of the device. After all, the iPad shines when it comes to video and multi-media consumption.

But even if mobile device users are becoming more receptive to advertising, how much time they are willing to devote to viewing ads is still an open question, especially when much of the more useful content, such as trailers and showtimes, are readily accessible through other means. To the extent that brands that have built iAds have been willing to comment on the record, they have indicated satisfaction with metrics such as dwell times and interaction rates.

Apple has made no secret of the fact that it expects mobile users to reach content such as movie trailers through applications, including in-app advertising, rather than search engines, so it may be a question of finding the right balance between the richness and layers of the ads and the amount of time marketers demand from their target audience. At the very least, if some early reviews are to be believed, the “Tron Legacy” iAd might very well be more entertaining than the film itself.

A rave review in The New York Times of the motion capabilities of the Microsoft Kinect system for the Xbox 360 game console got me thinking about the ups and downs of the video game industry, and how social and mobile gaming fit into the overall picture.

Despite the Times’ enthusiasm about the Kinect box, most of the news from the traditional gaming industry has been bleak. According to NPD Group, in the first three quarters of this year US video game software, hardware and accessories revenues were down 8% compared with the same period in 2009 – and last year revenues were down 8% from 2008.

Nintendo posted its first half-year loss in seven years. And Viacom announced it’s selling the once-hot Harmonix unit, developer of Rock Band and creator of Guitar Hero. Harmonix had been pulling down Viacom’s earnings for several quarters, including a $260 million write-off in the most recent quarter.

Against this backdrop, social and mobile gaming look especially promising.

eMarketer’s short-term forecast of ad spending on social gaming is pretty aggressive. In the US, we’re expecting ad spending to hit $192 million in 2011, up 33% over 2010. And the non-US growth curve is significantly steeper at 160%—though the dollar amounts are lower.

Keep in mind that estimates of advertising on social games don’t include so-called “offers.” These are lead-generation pitches from marketers such as Netflix and Blockbuster, or surveys that reward participants with virtual cash for social games. According to ThinkEquity, these offers accounted for 47% of US social gaming revenues in 2009. Direct revenues from virtual goods made up some 44% and the remainder came from pure advertising.

On the mobile front, eMarketer expects US revenues to reach $1.5 billion in 2014, from $850 in 2010. Most of the revenue will come from paid downloads, but advertising’s share of the total will grow to 12.3% in 2014, from 6.5% in 2010. Dollar-wise, ad-supported gaming will bring in $186 million in the US in 2014.

It’s no wonder game developers, entertainment conglomerates and Internet giants are diving into social and mobile gaming. Electronic Arts acquired Playfish for $300 million, plus another $100 million if Playfish meets pre-established performance criteria. EA also bought Chillingo, the maker of the popular game app Angry Birds. Disney purchased Playdom for $563 million plus a $199 million earnout. And Google acquired social game maker Slide for $179 million and mobile gaming specialist Social Deck for an undisclosed sum.

Consider also that the granddaddy of social gaming companies, Zynga, was just valued at $5.51 billion, topping EA’s valuation of $5.16 billion. This makes Zynga the second largest video game company, behind Activision Blizzard, which is estimated to be worth $13.9 billion.

Zynga has some 210 million active users, including 62 million on FarmVille alone. Its 2010 revenues are projected at $525 million, and it’s raised $350 million in private capital so far. Most of its action happens on Facebook.

What’s in it for marketers? Quite a bit. There are many ways in which companies can tap into revenue streams associated with social games:

Branded virtual goods. These are rampant in the virtual gaming ecosystem, but to give one example, 7 Eleven partnered with Zynga to create a YoVille Big Gulp, a Mafia Wars Slurpee and FarmVille vanilla ice cream. 7 Eleven gets a cut of the revenue that consumers spend on these virtual goods

In-game billboards. Many companies are inserting their brands into the gaming space. For instance, Honda advertised its CR-Z in Cie Games’ Car Town.

Sponsorship banners. In one of the more clever examples of this kind of brand advertising, National Geographic overlaid its logo on the pitch of the soccer-themed game Bola.

Branded games. Companies are also creating their own games, following the advergaming model in the traditional video game world. One example: a Hello Kitty game.

I’m not ruling out a resurgence in console gaming. After all, this industry has had an impressive track record of reinventing itself. It did it in 2006, when the Wii led a new generation of hardware consoles. And it did it again a couple of years later, when music-themed games were all the rage.

But if I were a betting man, I’d put my money on social and mobile gaming. That’s where all the gaming action seems to be these days.

I understand why entertainment giant Disney bought social game developer Playdom. I also understand that sometimes it’s better to buy than build, and this is probably one of those times for Disney. Disney president and CEO Robert Iger stated it clearly when he told BusinessWeek: “You don’t get the kind of growth we want by building from the inside.”

What I’m wondering is whether Playdom was worth the $563 million price tag that Disney plunked down — which will swell to $762 million if Playdom meets predetermined performance benchmarks.

Now, you might say that a few hundred million is a drop in the bucket for Disney. After all, this is a company that had $36 billion in revenues and almost $6 billion in profits in FY 2009. And Disney paid $8.1 billion for Pixar in 2006 and $4.2 billion for Marvel last year, so nosebleed acquisitions are nothing new for Mickey’s team.

Perhaps more to the point, Disney just unloaded Miramax for $660 million, so you could say it “swapped” an aging art-house film unit for an up-and-coming social game developer. Disney made a handsome profit on Miramax, which it bought for $80 million in 1993.

But the fact that Disney can afford this hefty price for Playdom doesn’t mean it makes good fiscal sense. Electronic Arts snapped up Playfish for a comparatively reasonable $275 last year — and Playfish is bigger than Playdom.

Disney is gambling on Playdom’s ability to outmatch its competition, which includes Playfish and the grandaddy of social game makers, Zynga. But Disney is also betting that social gaming won’t die off as a passing fad, and that Facebook and other social venues will continue to support these games. (If it weren’t for Facebook’s massive scale, Zynga would not be anywhere near where it is today). These are some pretty aggressive gambles.

The price tag of this deal reminds me of other notorious acquisitions of the past decade, some of which crippled their buyers: Time Warner/AOL, AOL/Bebo, News Corp./MySpace.

The latter deal didn’t seem so overblown while MySpace was riding the crest of a popularity wave during its acquisition in 2005. Of course, that was before Facebook blew it out of the water, both in user growth and advertising sales. Facebook is expected to top at least $600 million (though recent estimates put the number closer to a billion) in advertising revenue this year, while ad revenue to MySpace is expected to decline 21% to $385 million, according to eMarketer estimates. At this point, MySpace seems like an albatross for News Corp., which on multiple occasions has had to fend off rumors of a fire sale for the flagging unit.

This underscores the risks of paying top-dollar for flavor-of-the-moment properties. It’s all fine and good if those properties can retain their cool and appreciate over time. But very few do. Remember Bebo? It pioneered many of the same concepts that made Facebook successful today, and look where it ended up.

Or take Disney’s own purchase of Club Penguin for $350 million in 2007. The kids-oriented virtual world failed to meet performance benchmarks that would have sweetened the deal, and traffic to the site has been declining. Barring a stunning turnaround, it’s not looking like Club Penguin will go down in history as one of Disney’s corporate coups. Given the steep price Disney is paying, we may be saying the same thing about Playdom—another company who makes its money selling virtual goods—a few years from now.

Image courtesy of Facebook.

I admit I wasn’t expecting to be bowled over by the arrival of Hulu Plus. But even considering my low expectations, the official unveiling of the service leaves me underwhelmed. The service will carry a price tag of $9.99 per month, for which subscribers will have access to multiple seasons of older TV shows no longer on the air, as well as all episodes from the current seasons of many shows on the participating networks (NBC, Fox and Disney/ABC).

Hulu CEO Jason Kilar told PaidContent that Hulu Plus will be “incremental and complementary.” Maybe. But even if this service delivers the extra bit of revenue Hulu needs to achieve its holy grail of becoming cash-flow-positive this year, the company won’t hit a home run until it shifts the cost/value proposition in favor of the latter.

Here are some specific steps that would help:

• Either lower the total fee to somewhere on the order of $7.99 or offer a “lite” version for, say, $4.99 per month.
• Reduce the ad load in the paid service. The Wall Street Journal reported today that Hulu Plus will run “as many ads as the free version of Hulu.” As a consumer, if I’m paying $10 a month for content, the first thing I expect is to see fewer ads than in the free version of the same service. In fact, I’d go further and argue that a $10 subscription should guarantee NO ads, a la HBO.
• Go deeper in offering content depth and exclusivity. I realize there are contractual obligations that preclude the level of access that consumers would like to have, but $10 should net something more than a deeper catalogue of back episodes of shows that are mostly available on the free service. One attractive possibility might be a live broadcast of a season premiere or season finale, or at least a shorter delay between broadcast and streaming for select content (say, 2 hours instead of 24).
• Hurry up and line up other content providers, starting with CBS. I expected CBS to be part of the Hulu Plus launch announcement, but so far the network is MIA from the service. The only media companies supplying content to Hulu Plus are the joint venture partners: NBC, Fox and Disney.
• I realize getting Viacom on board will be a stretch, but I hear incessant grumbling about the absence of Comedy Central from the Hulu lineup.
• Hulu on the iPad/iPhone has been a long time coming, but support for other devices and operating systems (Android, PS3, Xbox 360) needs to happen ASAP to build critical mass. Hulu’s “guided tour” of Plus suggests the service will be available on PS3 in July, while the rumor mill suggests it will be available on Xbox in early 2011.

I know this is an invitation-only “soft” launch and some of the things that I (and probably millions of other consumers) would like to see will happen over time. Still, I can’t help feeling a sense of disappointment, and I suspect I’m not alone.

Whether Hulu Plus can successfully monetize the 58.9 million people who watch full-length TV shows online in the US is anyone’s guess. Online video viewing in general is shifting to longer form content (and with it, online video advertising dollars), and Netflix has proven that viewers are more than willing to pay a subscription fee for an excellent online video service—actually, an excellent ad-free online video service. The question is whether Hulu Plus’s video archive will be “excellent” enough to overcome customer qualms with advertisements and sustain long-term growth. So far I’m not convinced.

Comcast has spent much of the past two years maneuvering against Hulu. In January 2008, the cable giant pre-empted Hulu’s long-rumored debut by launching its own free, ad-supported online TV venture, Fancast. This year, Comcast and Time Warner partnered for a service they call TV Everywhere, which essentially means free online video content for current subscribers to either company’s cable package.

Now comes news of Comcast’s imminent purchase of 51% of NBC Universal, which is a 30% stakeholder in Hulu. This begs the question: What impact will the Comcast-NBCU deal have on Hulu?

Some bloggers have theorized that Comcast will try to kill Hulu. Read my lips: it won’t happen.

Comcast knows a good brand when it sees one, and Hulu has carved out a comfortable space as the go-to destination for online TV content (much as YouTube has dominated the user-generated video space pretty much since its inception). According to comScore, Hulu ranked second among US online video properties by videos viewed in October. The site was also in the top 10 as ranked by unique viewers. Not bad for a relatively new site. Fancast, by contrast, doesn’t show up on any credible lists of top video destinations.

It’s in Comcast’s best interest to nurture and shape the Hulu brand rather than abandon it and push a nonstarter (Fancast) in people’s faces.

It should also be noted that Comcast will have only a minority stake in Hulu. The other partners in the venture–News Corp. and Disney–will flex their muscle in any decision over what happens to the site. GE, which will still own 49% of NBC, won’t be muzzled, either.

That said, it’s likely that Comcast will nudge Hulu further in the direction it is already leaning: toward a paid-video experiment that will likely involve a portion of the content on the site.

News Corp. chairman Rupert Murdoch has been a strong proponent of paid models for his other online properties (notably the Wall Street Journal), and he and other Hulu principals have made noise about tinkering with transactional monetization on the popular video site. Having Comcast whisper over his shoulder will only embolden Murdoch to pull the trigger on this plan.

Look for 2010 to be the year when Hulu and YouTube start charging for some of the content they’ve been offering for free. Apple, too, is rumored to be shopping a TV subscription service that would carry premium content for $30 per month to the consumer.

How will consumers react to these experiments? Unless it’s ultra-premium content (live broadcasts of top-rated shows or feature films) consumers are likely to revolt against any plan that charges them for something they have been getting for free.

Update: Comcast CEO Brian Roberts and COO Steve Burke briefly discussed what the deal will mean for Hulu after the sale was officially announced this morning. From The Wall Street Journal:

“We see, with more distributors and more technologies, what consumers want. We want to be part of delivering to them,” Mr. Roberts said. “The reality is consumers want electronic distribution. Some of it, they want it for free. Some of it, they want it in subscription, and some of it, they want it pay-per-view.”

He said there are no plans to alter Hulu’s free model. “That is certainly not in the cards,” he said when an analyst asked if a “Hulu Premium” is a possibility.

Mr. Burke called Hulu and TV Everywhere — Comcast and Time Warner’s online-video initiative — complementary products, with broadcast TV shows appearing on Hulu and premium cable programs on TV Everywhere.

“Right now, NBC Universal is distributing a lot of their broadcast content on Hulu, and they have been quite careful not to put too much of their paid-for-cable content out for free over the Internet. We think both those strategies are smart and appropriate — not that they asked us,” he said. “I think right now, the way NBC Universal are managing those two ways of distributing are very similar to the way we would want to do it when the two companies come together.”

There you have it. Now let’s see if it turns out to be true.