Apple having a hard time on the mobile-ad scene

How many times have you tapped on a mobile-ad (not counting those by accident)? Not many, right? Well, about a year and a half ago, Apple thought it has discovered a way of making mobile-ads more involving and eye-catchy, thus improving the click-through rates of ads served on its iOS devices. This was supposed to happen through iAd – the company's brand new mobile advertising service.

Actually, Apple's original intention was to buy AdMob, an already established ad network, but Google managed to snatch it first, so Cupertino had to harness its creative potential (acquiring a company named Quattro Wireless along the way) and devise its own solution. The core idea of iAd was to present marketers with a powerful platform that would allow them to create much more appealing and interactive advertisements, which would then show up in developers' iOS apps. A major advantage of iAd was the fact that iAds were regarded as apps within the apps, meaning that the user no longer had to quit their current application in order to be sent to a webpage, upon tapping on an ad. Instead, an in-app screen would appear, with lots of options allowing you to discover the product that's been advertised, even interactive ones such as mini-games.

Such kind of advanced ad functionality was certainly impressive, and a brave departure from the good-old simple banners. Many of us thought that this is the kind of stuff that was needed to give mobile advertising a big boost, but it turned out this wasn't exactly the case.


A demo of the Nissan Leaf iAd

Wrong pricing

Initially launched with a pretty steep requirement of a minimum commitement to the tune of $1 mllion, iAd wasn't received with significant interest by advertisers. Developers were quick to add support for the service in their apps, most certainly hoping for some sweet revenues down the road, but they soon observed less than stellar results. So, if iAd was really that cool and powerful, why did it suffer from poor adoption? Well, as premium as iAd is (in the world of advertising platforms), it really can't justify the $1 million minumum commitment asked. This kind of amount is currently unheard of when it comes to deals with online advertisers, most of which do not exceed sums like $100,000 or $200,000.

Having met these harsh realities, Apple had no other choice but to reconsider the price of iAd. First, the company decided to cut it by the whooping 50%, setting it at $500,000, but it later lowered it even further to $400,000, which is much more reasonable, but still way more than what its competitors are asking for their solutions; for example, Google's AdMob.

Another downfall of iAd is that it's not as flexible as its competition. For instance, Apple is said to be charging advertisers $10 for 1000 impressions (appearances) of an ad. On the other hand, Google's prices range between $4 and $12 for 1000 impressions, catering to the needs of a wider range of marketers.

Tight control

So, now that Apple has lowered its pricing, its mobile-ad business should be starting to heat up, no? Well, no. There seems to be another problem with iAd that's bothering clients. You know how Apple tests each and every app that's submitted to the App Store to make sure of its qualities, right? While this approach has worked with devs, it doesn't seem to appeal to advertisers much. Not only does Apple want to have control over the production — something that advertisers aren't used to — but some companies have also complained that it took too much time for their ads to reach the publishing stage. Roughly, it would take about 8-10 weeks for an iAd to go from conceptualization to launch, which is a time-frame easily beaten by rival ad networks.

Another limitation of the iAd network is that it's basically closed within the limits of iOS. Not that there aren't many iOS devices, having in mind all the iPhones, iPads and iPod touches that are being sold, but marketers would always want to reach a broader audience, thus they would be looking for cross-platform solutions like AdMob, or some of the newer players in the field like Millenial Media and Greystripe.

A ray of hope

We've actually painted a pretty gloomy picture of iAd, but not all is lost yet. Things are certainly not very bright right now, but the platform does have its own small following, including companies such as AT&T and Disney (surprise, surprise). Another example is health and wellbeing company Unilever (owns brands such as Dove, Rexona and Domestos), which has decided to renew its contract with Apple for another year.

What's interesting is that clients do notice an increased amount of time that users are spending viewing their iAds, compared to traditional means of mobile advertising. This comes to show that users are willing to play with advertisements, in case they have something interesting to offer, which in turn means that there's place for iAd on the market. However, it's obvious that Apple is having a hard time finding enough clientele for iAd. The company still lacks well-established relationships with marketers that would allow it to score numerous deals for iAd.

With a mobile-ad market share of 15% this year, down from 19% last year, Apple is starting to show signs that it's willing to learn. The significant price cuts that we mentioned above are certainly a good start. It's also said that just recently, about 30 senior marketing executives from different companies have paid a visit to Cupertino for a quick tour around the campus.

Whatever measures Apple is to undertake, it needs to act quickly. Last year, the company shared the top spot of the ad market with Google, but now it's down to third place, with Google in the lead and Millenial Media second. It's still hard to say if Cupertino will be able to turn the ship around. There are many who believe in the potential of iAd, and just as many who consider it a doomed product, due to its steep pricing and closed nature. Pricing, of course, could be fixed, and when it comes to it being closed, it all depends on Apple whether it will be able to justify its desire of having complete control — by delivering a premium product, which is superior to what the competition can offer — or that will actually translate into a clumsy, and uneffective ad network, alienating marketers with its strict rules and uninviting atmosphere.

sources: WSJ, DailyTech