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Apple seeks to boost iAd adoption by cutting minimum buy in half

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Unilever invites iPhone users to tap on a product via an iAd

Sources at Apple confirmed that the company will in fact be cutting its $1 million minimum iAd buy in half. So will more brands flock to the mobile ad network at the expense of competitors?

A source at Apple said that it is not a change in iAd's pricing structure, just a lower minimum commitment at the same rates for brands with smaller budgets and agencies that are using the iAd Producer tool to create and produce their own iAds. This appears to be Apple’s attempt to counter low fill rates.

“The cut confirms what has been rumored for a while, that Apple's mobile ad sales have been struggling for a while now that Steve Jobs does not make the calls to prospects himself anymore,” said Karsten Weide, program vice president of digital media and entertainment at IDC, San Mateo, CA.

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“Instead, they had junior sales people try to sell ads at the $1 million minimum—and they failed,” he said. “Sales are slow for another reason, too—a lot of advertisers don't like the lack of cross-platform support for media purchases on Apple iAd.

“And as Android outsells the iPhones and iPads, pressure on Apple sales will only continue to increase.”

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More agency-friendly?
In response to criticism from its partners, Apple has released software development kits and ceded more campaign control to agencies.

While that is certainly a step in the right direction, Apple is not moving toward an open model—it will still have to approve each and every iAd campaign before it goes live.

While the news of the price cut is certainly welcome, many marketers have been anticipating this move for some time.

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“For us it really came as no surprise—we knew that something would have to give,” said Sarah Amitay, vice president and director of mobile marketing at Mobext, Boston. “Million-dollar mobile ad buys are not sustainable in the long run, so we’ve been waiting for the shoe to drop.

“With the SDK being announced, agencies will start taking this process over, which is certainly contributing to the price drop,” she said. “As Apple moves to have this platform proliferate, a price drop needed to happen, and they had to move more control into the hands of creative and digital agencies.”

Apple will still have to approve the iAd campaigns, but the tools will be in the hands of the agencies, which should help the relationship between agencies and Apple.

The move was made necessary because some brands such as Chanel and Adidas cancelled iAd buys, more due to Apple’s “control freak” tendencies than the cost of the campaigns.

“[The iAd price cut] is more of an indicator that there are some issues with fill rates, so it became clear that it was time to look at pricing,” Ms. Amitay said.

“It is still priced at a premium, and Apple values the premium audience it delivers—$500,000 is more palatable, but it still prices out certain marketers,” she said.

Competitive space

While reducing the minimum iAd buy will definitely affect competing mobile ad networks, there is still plenty of room for competitors to do healthy business, especially since iAd is limited to Apple devices.

Large players such as Google, Microsoft, Yahoo, Nokia and AOL are still running many mobile campaigns for big brands, as are independent ad networks such as Millennial Media, Jumptap, InMobi, Mojiva and Greystripe.

For the biggest spenders in mobile advertising, results, not price, will be the ultimate differentiating factor.

“We still have a lot of room to push mobile marketing further, definitely options brands can explore under the $500,000 mark,” Ms. Amitay said. “It is a good thing that the price for iAd is coming down, because we will see more campaigns and happier marketers, but it is still really wide open.

“I don’t think there needs to be a market response to this particular event,” she said. “I don’t think competitors will lose any business because of this—there’s a lot of room under the hood

“Targeting, analytics and measurement are the differentiators, rather than price points.”

Another agency's take
Bryon Morrison, president of wireless marketing at Omnicom's The Marketing Arm, Dallas, responded to an inquiry with the following statement:

I think the important thing to point out here is that they are not cutting the ad rates to my knowledge. I believe they are reducing the minimum spend that is required.

In other words, you’re still going to have to pay the CPM rate and the click-through rate, but you can have that right for a lower amount.
 
It’s not terribly surprising that they are removing some of the barriers for advertisers. 

There was a big value in being part of the rollout, because their logo shared the stage with Steve Jobs, Apple did the programming for their iAds, and they were advertising in a completely uncluttered channel. 

That balloon has been released, and while Apple has a powerful offering in its device network, it’s one of the many solutions that are out there helping marketers reach their targets.
 
Now that Apple is having to compete on a more level playing ground as other advertising channels, I wouldn't be surprised if their minimums eventually went away, at least behind closed negotiation doors. 

While Google truly reinvented advertising buys with AdWords, Apple has created a nicer looking “me too” solution, so it has to compete with the people who have been asking for advertising dollars for the last 100 years … and those folks don’t put minimums on your buy.

Final Take
Dan Butcher, associate editor, Mobile Marketer

 
Related content: Ad networks, Apple, iAd, mobile advertising, mobile ad networks, iAd Producer, Steve Jobs, Karsten Weide, IDC, Campbell Soup Co., ATT, Chanel, Adidas, Sarah Amitay, Mobext, mobile marketing, mobile

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