Apple makes further concessions to save iAd

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Apple makes further concessions to save iAd

Reports indicate that the upfront cost of a campaign is now just $100,000, down from $1m at launch, as AdMob gains ground

By CAROLINE GABRIEL

Published: 15 February, 2012

READ MORE: US | Advertising | iOS

Apple rarely puts a foot wrong with its devices and user interface, as we will no doubt witness if, as expected, it unveils the 'iPad 3' next month. This is likely to sport an vamped-up processor and display and may even support LTE, while many analysts also expect a smaller screened model to wrest some of the lower end user base from Amazon. However, outside its comfort zone, Apple is far more fallible, as seen with the Apple TV missteps, and now with the deep trouble in which its iAd mobile advertising platform finds itself.

Apple has repeatedly reduced the pricing and loosened the terms for iAd, in the face of limited uptake by advertisers, and now it has made its most drastic moves yet, according to Ad Age magazine. The report cites unnamed sources reporting that agencies now need to stump up only $100,000 upfront for an iAd campaign, a far cry from the $1m minimum demanded at launch in 2010.

Apple has also reportedly decided to charge brands only a single rate for every 1,000 ad impressions, rather than its unpopular policy of also imposing an additional fee for a clickthrough. Developers will also gain more favorable terms, getting 70% of revenue generated from ads within their applications, up from 60%.

All this is designed to claw back some market share from Google's AdMob unit, which had 25% of the US mobile advertising segment last year, according to IDC, a growth of 5% on 2010. By contrast, iAd's share dropped from 19% to 15% in the same period. Meanwhile, the third main player, Millennial Media, has grabbed the second place at 17% (though another calculation, by eMarketer, puts iAd and Millennial virtually neck-and-neck in the US last year, on 18% and 17.7% respectively).

The market could become more crowded soon, with Facebook revealing in its IPO filing that it was not monetizing its mobile traffic effectively yet, but was likely to experiment with some advertising techniques - possibly leading to a full ad platform launch later this year.

The main reasons for iAd's problems, according to disgruntled advertisers, have been high prices, rigid contract terms, and Apple's famous demand for creative control of the ads themselves. It insists on making sure ads support the quality of experience of the iDevices and use rich media formats optimized solely for iOS.

This has driven advertisers to broader and more flexible platforms, particularly Android, and this tide will only rise as the Google OS comes closer to Apple in terms of app download volumes. This has led Apple to become progressively more flexible over iAd terms and conditions. In December, The Wall Street Journal reported that the firm would now consider deals priced as low as $400,000, a floor that appears to have fallen further in 2012. Apple is also agreeing to install a cap on CPM costs and providing mobile marketing training for free to clients. "Hordes of developers have activated iAd, but they say that Apple hasn't sold enough to make any meaningful revenue for them," the WSJ said.