Apple cuts minimum iAd buy to recapture advertiser interest

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Apple (NASDAQ:AAPL) continues to tweak the terms of its iAd mobile advertising network, offering Madison Avenue more flexible and favorable contract options in an effort to boost the flagging business unit.

Bloomberg reports Apple has cut iAd rates by as much as 70 percent, offering packages as low as $300,000. When Apple first unveiled iAd in mid-2010, the minimum iAd buy was $1 million, but advertisers who bought in at that price--including Citigroup and JC Penney--have since halted their campaigns and moved on to rival mobile ad networks including Google's (NASDAQ:GOOG) AdMob and Millennial Media.

Apple has now launched more than 100 iAd campaigns in seven countries. Twenty advertisers rolled out iAd campaigns over the last month, including the Walt Disney Company and Apple's iPhone partner AT&T (NYSE:T); Apple said another 50 iAd campaigns are in the pipeline. The Wall Street Journal reports Apple is now pitching ad buyers on upfront iAd commitments they can parcel out to multiple clients--for example, WPP's GroupM ad buying unit will spend more than $1 million to purchase iAd inventory, then allow clients to buy smaller chunks within the package. An Apple spokesperson said it will pursue similar deals in the future.

When iAd first launched in the U.S. in mid-2010, some marketers paid more than $10 million for levels of exclusivity within their respective industry vertical. But Apple has since struggled to attract advertiser attention, and in late February, the company cut its minimum spend demands from $1 million to $500,000 in an effort to attract advertisers with more limited budgets.

Apple's iAd fill rates--i.e., the percentage of ad inventory filled with actual advertisements--have been in steep decline since the year it began, insiders indicate. In early February, TechCrunch reported that developers say iAd fill rates fell from 18 percent to 6 percent during the early weeks of 2011, with some newer applications running with all of their ad slots unfilled.

Many advertisers are turning to other networks that span across multiple mobile operating systems including Google's Android and Research In Motion's (NASDAQ:RIMM) BlackBerry. All iAd campaigns are optimized solely for devices running Apple's iOS platform--as of May 2011, iOS accounts for 26.6 percent of the U.S. smartphone market, behind Android at 38.1 percent.

"Apple's closed ecosystem may have been interesting in the short run for advertisers, but in the long run they priced themselves out," said Thom Kennon, senior vice president of strategy at ad agency Young & Rubicam.

For more:
- read this Bloomberg article

Related articles:
Apple slashes minimum iAd buy in half
Apple removes iAds from apps targeting children
Rumor Mill: Apple's iAd fill rates in sharp decline
Apple poised to extend iAd to European advertisers

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