mdialog ipadIt might look like Apple will crush competing iPhone and iPad advertising companies with its iAd program, but startups aren’t giving up. Toronto company mDialog is trying to stand out by offering greater interactivity, which might make ads genuinely useful. Today it’s unveiling its latest improvement — support for what the company calls “in-stream apps”.

You could be watching a 30-second video advertising a car, then tap a button to find the nearest dealership. All the activity happens within the ad, so the video pauses while you look for a dealership, then it resumes once you’re done. (You might not care about continuing the ad itself, but you were probably watching another video when the ad popped up, so this integration reduces overall disruption.)

mDialog already announced “interactive overlays” for its ads, but a company spokesman told me that today’s announcement goes further, with “interactive apps within the overlays themselves.”

That description made my head hurt, but the idea is that mDialog is providing even more interactive features to advertisers. For example, during mDialog’s demonstration in April, it allowed users to tap a button and enter their email address as a way to sign up for a car test drive. With the new in-stream apps, mDialog can actually access your iPad’s GPS capabilities to identify where you are, then open a Google Map showing all the nearest car dealerships.

The company has raised $3.15M from angel investors. You can see a sample ad, as well as mDialog’s tools for creating the ad, in the video below.