Thursday, July 07, 2011, 12:00 pm

Apple's iAd program facing stiff competition on ad fees

By Jeff Valvano

Apple is reportedly being forced to dramatically lower its pricing for iAd campaigns by as much as 70 percent as rival ad networks seek to woo the company's high profile clients.

A report by Bloomberg cited unnamed sources as saying Apple had "cut rates by as much as 70 percent" off the original million dollar threshold for iAd advertisers when the program first launched last year.

The report noted that two original iAd clients, JC Penney and Citigroup, were no longer paying Apple a million dollars for new campaigns, and that Apple itself has reportedly started to offer new iAd packages for as little as $300,000. The report did note that both companies said they "may use iAd in the future."

Apple began iAd as a new way for iOS developers to monetize their apps, using interactive ads that were presented within the app via an integrated HTML5 environment, rather than pushing users out of the current app and redirecting them to an external web browser.

As part of its launch, Apple lined up high profile advertisers and built a series of campaigns with a minimum budget of a million dollars each.

In February however, the company halved its minimum campaign size to $500,000 to attract smaller advertisers, making the new reported offering of $300,000 iAd buys a logical progression for the company's expanding ad network plans.

The report noted that "Apple has cut the minimum ad purchase from $1 million to $500,000, and it’s offering agencies deals for as low as $300,000 if they bring together multiple campaigns."

Apple itself noted that iAd has attracted more than 100 launch campaigns from advertisers in seven countries, recently signing on Disney, AT&T, and Geico insurance. The company said 50 new campaigns will launch in the next few months.

Apple's iAd only serves ads to the company's own iOS devices, allowing rival ad networks to offer advertisers a wider demographic of viewers that includes Android, WebOS and Windows Phone 7 devices. Other advertisers, including Google's AdMob, Millennial Media, Greystripe and Mobclix, are touting both multi-platform support and lower fees for advertisers.

The iAd program has also been a thorn in the side for online marketers and ad departments, who complain that Apple exerts too much control over user data and ad design approvals.

At the same time, Rob Norman, chief executive of GroupM North America, noted that "Everyone likes the consumer experience it creates. Everyone wants to be there because they think that, possibly since television, this is one of the most elegant customer experiences." GroupM clients use iAd, including Unilever.