Apple iAd — A Summary for Search Marketers

The past 10 years have seen the beginning of a revolution in the world of advertising. Every year, interactive advertising budgets become more significant and eat away at traditional budgets. Change is a constant.

But one thing has never changed: year after year, pundits think this will be the year mobile advertising explodes. Of course, 2010 was once again expected to be that year. This time, one event seemed to guarantee it would be different: Apple’s announcement of iAd, its very own proprietary ad network designed exclusively for iPhone and iPad.

How are iAds Different from IAB Format Ads?

As the video explains, one significant differentiator of iAds is the fact that they’re usually an app within an app. Most iAds are self-contained experiences and can be used to download apps, buy stuff on iTunes, save branded wallpapers or backgrounds, save coupons and bar codes, or share content using e-mail or social networking apps. Presumably you can also use them to collect leads or sell stuff.

However, because they are quite complicated to build, Apple has been very much involved in the creation of their advertisers’ iAds, which has made many marketers and agencies understandably annoyed about giving up creative control.

The iAd Network

All iAds require iOS 4 enabled devices, such as iPhone 3G, iPhone 3GS, iPhone 4, and eventually with iPad as well. The iAd audience potentially covers more than 6.5 billion installed applications, and 160 million iTunes accounts across 23 countries. Two hundred new apps are downloaded every second worldwide, and the average user spends, on average, 30 minutes per day using apps.

Targeting & iAd

One of the more interesting targeting options available to advertisers is location. Advertisers can target users with iAd based on their home location, or their current location. Other targeting options are demographics, application preferences, music passions, and movie and television genre interests.

Metrics & iAd

You can’t bring your own tracking service to iAds, but Apple provides their own tracking system, which includes the following:

  • Impressions
  • Clicks and click-through rate
  • Visits
  • Page views and pages per visit
  • Interactions (videos viewed, images viewed, etc.)
  • Average time spent per ad
  • Conversions and downloads

How Much Does a Typical Test Campaign Cost?

It seems as though brand marketers looking to use iAds require a $1 million per year minimum commitment. To put this in context, according to eMarketer, 2009 mobile ad spend worldwide was only $416 million. So unless you’re out there trying to promote $0.99 app downloads, for which Apple seems to have a “special” program in place, you will need deep pockets and no worries about ROI.

PPC or CPM Model?

The actual rate card of iAds is hidden behind closed doors, at least for now. However, there is information circulating and it is consistent across sources. ClickZ (and many other sources) says Apple charges a minimum of $10 CPM (or $.01 per impression) plus $2 per click.

Rev Share Model with App Developers

Apple says app developers — the Apple equivalent of publishers — are paid 60 percent of all revenue. Early reports of teenage developers making upwards of $1,400 per day aren’t a surprise, as big brands dumped money into the initial deployment of iAds.

Of course, it wasn’t too long until the horror stories of ridiculously low advertiser returns started coming out.

Can iAds Succeed?

The question is whether iAds will be able to sustain such a strange market penetration strategy for the long term. The current pricing structure is completely unfair to advertisers who certainly haven’t been flocking to iAds to promote anything.

If budgets are to migrate to mobile in any meaningful way, ad networks will need to follow a more transparent model and let advertisers help determine what is a fair price to pay.

Until then, Steve Jobs needs to convince savvy marketers that they should go back to the dark ages of advertising, relinquish control over their creative and over how much they should pay for the media, give up third-party ad serving, start experimenting with a new channel, and give them a million bucks to find out if it works.

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