Apple iPad: Online media's holy grail?

Some media analysts are already predicting that Apple iPad is a major step in establishing a new business model for online content providers – both by bringing order to the online advertising world and by forcing users to pay for content that they have been enjoying for free.

More than 300,000 iPads were sold in the first day of sales this past weekend, Apple reported. The device is “going to be a game changer,” Steve Jobs, Apple’s CEO, said in a statement Monday.

As it stands, online content providers have found it challenging to produce sufficient revenue. That’s because the two traditional sources of revenue – advertising and subscriptions – have yet to result in a robust flow of dollars.

Online advertising, for one thing, has more or less mimicked what is found in print: Stand-alone or pop-up ads direct users to brand websites or videos. A similar phenomenon has happened with content (such as a news story): Media outlets have relegated their sites to largely straightforward text presentations.

Moreover, media operators have had difficulty in agreeing on a viable subscription model.

The iPad is being seen as a way to address these issues. It offers a new, high level of interactivity that is expected to be a boon for advertisers.

“The iPad is a lightning strike in the whole dynamic [of online advertising] and is forcing old-guard media and advertisers to jump-start their thinking and to really rethink the value proposition for what they do, which is much deeper and much broader than just creating and pricing a commercial spot,” says Diane Mermigas, a contributing editor and columnist at MediaPost.

The iPad’s interactivity is also seen as encouraging publishers and video producers to finally agree on a revenue-sharing system – that is, a way to charge users for the content.

Why could the iPad potentially accomplish these things when other devices haven’t? The iPad combines some of the strongest features from other devices, including smart phones, laptop computers, reader devices like Amazon’s Kindle, and MP3 players. And the iPad does this on a 9.7-inch screen that is larger and friendlier than those on most mobile devices. (For some people, however, the larger size of the screen is a drawback: A nearly 10-inch screen isn’t easily portable, they say.)

Already, major outlets like USA Today, The New York Times, Men’s Health, and others are planning paid subscriptions for iPad users. They’re promising exclusive content and behind-the-scenes videos of photo shoots and major stories.

Cable networks and media companies are also creating new programming tailor-made for the device. For example, Discovery Communications partnered with Apple on a $4.99-priced app that gives fans of the hit show “MythBusters” immersive game-play and video access.

“If you can start to experiment in a space that virtually costs nothing in comparison [to traditional media advertising], you can immediately make transactions happen, and you can reach people in a way you never have before,” Ms. Mermigas says.

But there could be some barriers to the iPad making an impact. With a base price of $499, some technology consultants say, the iPad is too expensive to penetrate the market in a big way.

According to a Zogby Interactive poll conducted in March, 55 percent said the price was too high.

The applications are also too high in price, says Paul Miller, an editor of the technology website Engadget.com. The app pricing structure – ranging from $5 to $10 and higher – may backfire on Apple because the device is not an essential tool to the consumer’s daily life, like a phone or laptop, Mr. Miller says.

“Nobody needs an iPad. It’s a pure luxury item. In that sense, you can charge whatever you want,” he says. “But if you want it to become a truly mass-market [device], that’s not very consumer-friendly.”