Apple 2.0

Covering the business that Steve Jobs built

AdAge: Apple's iAd is 'double dipping'

May 4, 2010: 12:50 PM ET

Madison Avenue casts a wary eye on Steve Jobs' new iPhone/iPad advertising platform

Source: Apple Inc.

Most mobile ad networks charge either a set rate per 1,000 impressions -- the so-called CPM. Or they charge a rate for each time a customer clicks on an ad -- the CPC.

Apple's (AAPL) new iAd advertising platform, according to a report in Monday's AdvertisingAge, is charging for both. Marketers who want to reach iPhone, iPad and iPod touch users through iAds will have to pay $10 per thousand impressions plus $2 per click.

"Apple is reinventing mobile ad pricing," write AdAge's Kunur Patel and Michael Learmonth, "and not in a good way."

For example, AdMob, the mobile ad company whose acquisition by Google (GOOG) is being scrutinized by the FTC, charges $10 to $15 CPM on average, but doesn't add costs per click. If advertisers buy CPC campaigns, AdMob's rates are 15¢ to 30¢ per click.

In addition, because Apple hasn't released an iAd developer's kit, creative directors will need Cupertino's help to build their ads -- a service for which Apple is charging top dollar. For agencies spending less than $1 million on iAd buys, Apple is charging $50,000 to $100,000, according to agency executives. That's about twice today's going rate.

What do advertisers get in return? According to AdAge:

"iAd targeting is based on app context -- nothing new in mobile advertising -- and also on behaviors gleaned from iTunes app and music-download history. ... Where it gets interesting, [says Eric Bader, worldwide strategy officer for Initiative, a unit of the Interpublic Group], is when Apple can extend the reach across all Apple mobile devices internationally, a difficult feat today with the morass of carriers and platforms."

In addition, writes AdAge reader "metroxing" in the story's first comment, "you will get around $25 million of dollars in FREE PR and all the bloggers + tech sites testing and reviewing the ads so as long as you don't mind being in the spotlight -- it is like a Super Bowl ad. You will be forever remembered in Wikipedia & as an innovator as long as you don't FAIL."

To see what Apple thinks good iAds should do, see the samples Steve Jobs demonstrated at the iPhone 4.0 event April 8. The video can be streamed from Apple.com in QuickTime. The iAd portion starts at the 44 minute mark.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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