Apple (NSDQ: AAPL) has had a clean run at the mobile market in the last few years with only a few bumps — now it looks like it might be trying to smooth out one of them, its mobile advertising platform iAd, by changing the way it does business.
As part of the changes, the company is reportedly once again reducing the buy-in required from brands to advertise on the platform — it now costs $400,000, down from $500,000 earlier this year and $1 million when iAd first launched in 2010; and it is taking a little more time to schmooze would-be clients Madison Avenue-style, inviting them to their headquarters to meet with designers and other executives, and then even giving them a discount card to shop in is on-campus store, according to the WSJ.
The WSJ story doesn’t mention it, but it’s worth wondering how and if the changes have been precipitated by the departure of Andy Miller, who had headed up advertising for Apple.
The WSJ story does, however, describe this as a rare compromise for Apple, a company that has not been known for changing the way it does things because some people complain. But the fact of the matter is that Apple has been so successful in mobile up to now that it hasn’t had to compromise much.
That’s not to say that Apple hasn’t held a strong position with its high-stakes approach to mobile advertising: According to IDC, Apple ranks third in terms of mobile advertising revenues, at 15 percent ($95 million) of a $630 million mobile advertising market; that’s behind Google (NSDQ: GOOG) at 24 percent and Millennial Media at 17 percent. But that’s still a decline over last year, when Apple was actually level with Google at 19 percent.
Other modifications that the WSJ is reporting include how Apple charges advertisers once people interact with the ads: Apple charges advertisers a fee of $2 each time an ad is clicked, but it did not put a limit to how high that charge might go. Now, apparently, there will be a cap — presumably agreed on a case-by-case basis. Apple charges $10 for every thousand views of an iAd, which is on the high end of the $4 to $12 range for CPMs mentioned in the story.
So far, it seems that even if developers have been activating iAd in their apps, Apple hasn’t sold enough marketers on to the platform to meet demand. One developer quoted by the WSJ said that iAd only filled in 13 percent of his inventory.
Some predict that iAd might be more trouble than its worth and could be one of those Apple services that might quietly disappear over time: “Apple we believe will, over time, fade into the background,” predicts IDC analyst Karsten Weide.
However, as is the case with apps and music, iAd is not so much a huge revenue driver for Apple as much as it is another piece of the content experience that makes the high-margin devices business so special. That seems to imply that Apple may be willing to compromise even more on its terms to make the service work, and keep developers loyal to Apple.