When Steve Jobs introduced Apple’s mobile advertising network, iAd, to
the world, he effectively said it would be a game-changer for mobile advertising. Although some of
us were skeptical, who would bet against him?

A year later, it appears that the skepticism was well-placed. iAd is, according to a new report by Bloomberg, floundering.

Major brands that paid seven figures to jump on the iAd bandwagon, such as Citigroup and J.C. Penney, are apparently no longer iAd advertisers, and, according to Bloomberg’s sources, Apple has cut the prices for iAds substantially in an effort to win business.

Not only have campaign minimums been halved to $500,000, Bloomberg says that agencies bringing multiple campaigns to the table can see the minimum reduced even further to $300,000 per campaign.

Despite shaving up to 70% off its original minimum, it doesn’t appear to be working as well as Apple might have hoped.

While 20 brands have run iAd campaigns in the past month and Apple says that more will be joining them, some of Apple’s earliest iAd advertisers have taken their business to competing mobile ad networks, such as Google’s AdMob.

Price is, not surprisingly, a huge factor. Thom Kennon, an SVP at ad agency Young & Rubicam, told Bloomberg, “Apple’s closed ecosystem may have been interesting in the short run for advertisers, but in the long run they priced themselves out.” Dane Holewinski, who heads up marketing for ad network Greystripe, added, “Advertisers don’t care about platform. They care about audience, performance and engagement“.

In other words, despite Apple’s Midas touch and the beauty of the iAd formats, it simply isn’t offering enough value to advertisers.

The iAd pricing structure appears to be based more on the Apple name than it is on the size and quality of the iAd network, and the returns it is able to deliver.

To fix the cost-value ratio for iAd, Apple would likely have to reduce its prices far more substantially, which seems unlikely.

So is iAd effectively dead? Not yet, but one thing is clear: Apple may be the king of the mobile ecosystem, but it almost certainly won’t be the king of the mobile advertising space.