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Monday, December 12, 2011, 05:05 pm PT (08:05 pm ET)

IDC offers scathing prediction of certain death for Apple's iAd program

Apple is reported to be reaching out to advertisers to improve its iAd program, but its third place share of the market doesn't seem to reflect the bumbling failure it is being portrayed as by IDC's marketing analysts.

A report by the Wall Street Journal describes iAd as being a disaster, saying that advertisers' "response so far has been tepid," and complaining that marketers are turned off by iAd's "high price tag" and "Apple's hard-charging sales tactics and its stringent control over the creative process."

The report, titled "Apple's Rare Compromise," stated that "Apple is now discussing ad deals with a minimum commitment of just $400,000, according to a person familiar with the matter."

In reality it was publicly reported back in July that Apple had begun offering new iAd packages for as little as $300,000 to woo new advertising clients such as Citigroup and JC Penny, as Apple continued to expand its program outside of its initial million dollar iAd launch clients.

The article also stated that while Apple makes its money from hardware, not ad sales, the "state of the [iAd] service could affect developer loyalty to its platforms over time," imagining in print that software developers "are increasingly interested in building software for Android devices and getting advertising checks from Google," a daring observation made without any supporting evidence whatsoever.

Apple working with clients to improve iAd

The report did indicate that Apple's iAd team had established a training program with media buying agency OMD, to gain new insight into the mobile marketing world.

As part of the program, Apple reportedly invited 30 senior marketing executives from companies including Clorox, PepsiCo and JC Penny to its campus to engage in sessions with the company's designers and product teams. While a first for Apple, campus meetings like these are something that has become a "standard tactic" for "ad-dependent" tech firms "like Google, Yahoo and Facebook," the report noted.

IDC, which tracks mobile advertising market share, said Apple's share of the market has dipped from 19 percent at the end of last year (when it was tied with Google), to 15 percent this year. Google has edged up to a 24 percent share this year.



However, Apple entered the mobile advertising business by purchasing Quattro Wireless at the end of 2009, back when that firm had only a 9 percent share of the market. Google then had a 27 percent share, but as IDC reported last fall, Google, Microsoft and Yahoo "swiftly lost share" after Apple's iAd debuted in July 2010.

Google has since won back a portion of its initial position, but Microsoft has fallen from 10 to 7 to 6 percent share over the past three years, while Yahoo has dropped from 12 to 9 to 8 percent share over the same period.

Unlike the ad-centric paid search results businesses of Google, Yahoo and Microsoft's Bing, Apple entered the market with iAd to incentivize App Store development, and did not expect to turn a huge profit from its new advertising business.

The idea that Apple is dramatically losing market share in terms of ad dollars collected is therefore an intriguing way to portray iAd as a failure, particularly given the poor performance of the mobile ad market overall.

IDC predicts iAd will fade away

IDC analyst Karsten Weide failed to connect those dots when interviewed by the Wall Street Journal however, announcing instead that "Apple we believe will, over time, fade into the background," in the market for mobile ads, largely because Apple's iAd program only advertises to iOS devices.

Weide said iAd "was attempted to make sure that even consumers advertising experience on Apple devices was perfect, but it hasn't really worked."

Apple is currently straddled with 15 percent of the $630 million mobile ad market, putting it in third position behind Google and Millennial Media, but ahead of Jumptap, Microsoft and Yahoo.

Apple's share is actually larger than Microsoft and Yahoo combined, making it curious why the Wall Street Journal and IDC worked so hard to portray iAd's $95 million in revenue as a fumbling failure destined for certain death.

Apple paid $275 million for Quattro Wireless at the end of 2009, after losing its bid to acquire AdMob, which Google paid $750 million for in its parallel efforts to enter the mobile ad market.