Updated: More Than Year Later, Apple’s iAd Still Not Wowing The Ad Industry

There’s no question that Apple (NSDQ: AAPL) has gotten a lot of things right in deploying its mobile strategy over the last several years, but when it comes to something pretty far outside its core product design and development strengths–namely advertising–Apple’s magic touch doesn’t seem to have had an effect.

Bloomberg reported Thursday that clients working with Apple’s iAd program are losing interest in the service, which allows them to place compelling ads within iOS applications for large sums of money. Apple first unveiled the service in 2010, promising that advertisers who signed up for iAd would be able to deliver a much more interesting ad experience than anything possible with third-party ad networks, and went so far as to consider banning third-party ad networks owned by competitors (a move directed almost entirely at Google’s AdMob) before backing down.

However, a year later that vision doesn’t seem to have played out, as Apple has been forced to deeply discount iAd space from around $1 million per campaign to about $300,000, according to Bloomberg’s unidentified sources. This new entry price comes after Apple had already reduced the minimum price to $500,000 earlier this year. Several companies were willing to admit they were trying other options after flirting with iAd, and developers are only seeing 5 percent to 15 percent of the ad space within their applications coming from Apple, the report said.

The problem is simple: companies willing to spend that much money on mobile advertising want to reach as many people as possible, and despite the strength of Apple’s iOS products they are still only reaching about 25 percent of the U.S. market. Options like AdMob that allow them to reach both Apple and Android devices are more compelling than the whiz-bang ads that are possible with iAd. And to top it all off, mobile advertising spending is still very small compared to what is spent on Web advertising in general.

Update 5:15 p.m. PT: Apple reached out to point out a story by the Wall Street Journal which notes that the $300,000 figure is only in play when an agency commits to bring in business from several clients each willing to spend $300,000 that adds up to over $1 million, rather than an individual business or individual being able to buy an iAd for $300,000. The minimum for a single business remains $500,000.