What Does the Future Hold for Apple’s iAds?

Latest reports on iAds tell us that Apple recently slashed the minimum ad buy for an iAd from $1 million to $500,000 in an attempt to make the platform more appealing to advertisers. What exactly does this mean for Apple's iAds? Are they hurting that badly? Is this a move to attract advertisers in lieu of the new iPad 2 release this week? Several explanations exist and there's much speculation as to how well iAds are actually working.

Apple rolled out iAds in April 2010, with the goal of reinventing mobile advertising and creating "branded experiences" over the cheap standard mobile ads. With Apple selling and hosting the ads, developers getting 60% of the revenue, and an initial ad spend of $1 million per advertiser, developers quickly jumped on board to get these ad slots. Steve Jobs sold over 60 million dollar iAd buys to ad execs, touting that iAds would be unlike any mobile ad you've ever seen before. In a typical mobile ad, users are directed away from the current application they're using. In an iAds users stay within the same app, creating a better user experience. Additionally, iAds are rendered in HTML5. Jobs' presentation of the Toy Story iAd was fully interactive following suit of a native app.

2010's boom of iAds, however, is now coming to a halt.  Fill rates (the portion of ad inventory being bought by advertisers) is falling fast for iAds, while competitor mobile ad networks like AdMob continue to fill much higher rates. But fill rates aren't the only factors to consider. In app developer Hung Truong's case, despite the lower fill rate (only 15% compared to AdMob's 88%), iAds resulted in a higher revenue, due to the more than double click-through-rate that iAds were driving (0.81% compared to AdMob's 0.25%).

TechCrunch points out other reasons why iAds are "hurting" including seasonality, the shift in sales and relationship management from Steve Jobs to junior account managers, confusing pricing models, and limited reach (due to the availability only on the iOS platform). However, iAds are working for some. Take, for example, Campbells Soup. According to AdAge, A Nielsen advertising effectiveness study commissioned by Apple and Campbell's Soups to evaluate the soup brand's iAd campaign said viewers were twice as likely to recall seeing it, three times as likely to remember the ad message and five times as likely to remember the brand as viewers who saw it on TV. Although there may have been a slight bias since iAd respondents were "recruited within various apps", Campbell's director of global advertising, Jennifer Gordon was convinced by the findings.

Unlike TechCrunch, I don't think resistance is setting in just yet. Apple has already taken a step forward by cutting the ad buy price in half. On top of that, the concern of limited reach will be somewhat quelled by the release of the iPhone onto the Verizon network. But I do think Apple needs to make a couple key changes to it's model including actively identifying and better surfacing more iAd success stories (such as Dove and Nissan), adjusting the extremely confusing and ridiculously high priced CPMs.

Will the recent price drop, and the introduction of new iPads and iPhones alone be enough to keep Apple's iAds afloat? Only time will tell.

Anjali McKenzie

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Posted in Article Category: #Strategy
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