Apple's iAd Service Losing Customers, Forced to Slash Prices

Apple logoWhen Apple Inc. (AAPL) launched iAds in June 2010, it unleashed an unparalleled mobile advertising platform. At the time Google Inc.'s (GOOG) AdMob's mobile platform was still a work in process and was far less attractive than Apple's slick, easy to use implementation. Powered by its recent acquisition, Quattro Wireless, Apple's iAd platform looked like a market bull.

I. IAd -- Going Downhill Fast

Fast forward a year and not only is Android outselling the iPhone two-to-one worldwide, but iAd is also floundering. High profile clients Citigroup Inc. (C) and J.C. Penney Comp., Inc. (JCP) have reportedly dropped out of $1M USD iAd contracts they entered at launch, opting for cheaper competitors.

According to unnamed sources quoted by Bloomberg, Apple is privately now offering identical advertising packages for $300,000 USD -- a 70 percent discount. To qualify, advertising agencies have to bring several campaigns to iAds. Generally, Apple now offers a $500,000 flat rate -- still half off the original price.

Apple's slipping foothold in the advertising market comes at a time when competitors are cashing in. AdMob is now polished and has the advantage of being able to work across all the major platforms, including iOS, Android, and Windows Phone 7. And new players have risen, including Millennial Media and ValueClick, Inc.'s (VCLK) Greystripe -- both of which also offer multi-platform deals.

Thom Kennon, senior vice president of strategy for the Young & Rubicam ad agency in New York tells Bloomberg that Apple's underlying model is flawed, stating, "Apple's closed ecosystem may have been interesting in the short run for advertisers, but in the long run they priced themselves out."

II. Hope for iAds?

Apple still has a massive footprint, with 425,000 applications in the App Store at last count. And it still offers developers a pretty attractive deal -- 60 percent of ad-click revenue.

The company is also taking some additional steps to try to steer the iAd platform back to success. They've added a suite called iAd Producer online, which allows advertising firms to develop iAds more quickly and easily. It also hired Carrie Frolich, former head of digital for WPP Plc’s MEC -- a top ad agency.

There are some signs of progress. Apple currently only has 20 major iAd partners, and many of those are companies that are closely tied to Apple, such as the iPhone's original carrier AT&T, Inc. (T), or Walt Disney Comp. (DIS), a company in which Apple chief executive Steven P. Jobs is a major shareholder. Still, company officials are quoted as saying that the company's ad stable will soon expand to 50 companies.

The platform does have some proponents. GroupM North America's chief executive Rob Norman currently pushes advertising client Unilever NV's (AMS:UNA) products via iAds. Mr. Norman admits the price must be right, but says the prestige of using iAd is currently worth it. He states, "Everyone likes the consumer experience it creates. Everyone wants to be there because they think that, possibly since television, this iso ne of the most elegant customer experiences. We'd all like to stay at the Four Seasons, but not if it costs $150,000 a night. There’s a price equation."

Others are already shoveling dirt on the iAd coffin, saying that the platform is doomed due to its smaller audience and Apple's demands for complete control.

States online marketing firm ICrossing's vice president of mobile, Rachel Pasqua, "I haven’t encouraged any of my clients towards it. I haven’t seen a huge value proposition."

Source: DailyTech

Tags: Apple

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