When it comes to reaching consumers, it’s hard for advertisers to ignore
the iPhone and iPad. The former is arguably the world’s most loved
smart phone, and the latter has single-handedly created a viable market
for mainstream tablet computing.

The popularity of these devices has put Apple in an enviable spot. A
spot that it is trying to exploit with iAd, its iPhone and iPad
advertising platform. Getting involved with this new advertising
platform, however, comes with a hefty price tag: a $1m commitment.

That $1m minimum was good news for Apple when it launched iAd. Not surprisingly, the company was able to lure a number of notable blue chip advertisers eager to experiment with iPadvertising. It was also good news for developers running iAds in their apps, some of whom made significant amounts of money rather quickly.

But have advertisers been happy with the iAd experience? The answer isn’t entirely clear.

There are reports that iAd fill rates have declined substantially, which may indicate that advertisers aren’t chomping at the bit to buy inventory. Possibly lending credence to this is the fact that Apple is now reducing the minimum commitment by half, to $500,000.

According to Apple, the ad platform is working wonders for its advertisers. The company commissioned a Nielsen study which showed that Campbell’s Soup iAds performed significantly better than Campbell’s Soup television ads, with iAd viewers recalling the company’s iAd at double the clip as their television counterparts.

According to Nielsen, iAd viewers were also five times more likely to recall the Campbell’s brand.

But as Jim Edwards at BNet notes, Campbell’s spend on iAd is almost certainly tiny, relative to its overall ad spend, and there are questions about just how much advertisers are paying for their iAds.

In short, even if one believes that iAds are highly effective, they’re still likely very expensive, relatively-speaking. From this perspective, lowering the price of admission for advertisers may do a lot less for Apple than lowering the cost of the ads.

Right now, iAd advertisers pay for both impressions and engagement (eg. clicking to open an ad). That sounds okay on paper, but if the impressions and clicks don’t come cheap, which is reportedly the case, advertisers may question whether they’re overpaying for the performance they’re receiving.

Apple, of course, has thus far targeted major brands with deep pockets, so iAd advertisers are far less price sensitive than mom and pop advertisers, but that raises an interesting question: if iAds blow away even television ads, and $1m is a drop in the bucket for major brands anyway, will the new $500,000 minimum really do a lot to convince brands to divert more money to iAds?

We’ll soon find out.