Apple's ability to take existing hardware products and make them better has made the company a phenomenal success. But the company doesn't get much praise for software-oriented service businesses like iCloud, iTunes, or its App Stores, despite management shuffles.
Now, according to Buzzfeed, Apple is rethinking its involvement with iAds, the online advertising service it launched in 2010. Possibly as soon as this week, Apple is said to be planning to retreat from the ad sales business, making iAds solely a self-service platform.
Apple did not respond to a request for comment.
Apple introduced iAds as a premium mobile ad service, asking advertisers for $1 million or more as a minimum commitment to participate. Over the years, it has relaxed its creative requirements and lowered its financial threshhold, first to $500,000 and then to $300,000 in 2011, and then to $100,000 in 2012. By 2013, the iAds minimum ad buy had been lowered to $50, which matches the minimum commitment at Google's AdMob.
Selling advertising at a premium turns out to be more complicated than selling hardware at a premium. According to eMarketer, Apple's iAd service accounted for just 2.6% of the mobile display ad revenue in 2015, amounting to $795 million. That's up from 2.5% in 2014. Google and Facebook accounted for 32.9% and 19.4% of mobile display ad revenue last year.
Apple has been keeping 30% of ad revenue for ads sold through iAds, down from 40% initially, in exchange for the assistance of its ad sales team. Buzzfeed claims Apple will let its ad sales team go and allow publishers to keep 100% of ad revenue for ads appearing in their apps.
In an email, Garrett Mehrguth, CEO of digital marketing firm Directive Consulting, said he wasn't aware of Apple's reported plan, but isn't surprised by it given Apple's tendency not to share data.
iAds, Mehrguth said, has been received poorly. "It's fairly exclusive and the data is meager," he said. "Plus without having any real control, it's not ideal. It's not as if you can simply login to iAd and set up an advertising account as you can with Google."
Shifting to a self-service model will help, Mehrguth said, but it won't change the fact that clicks from ads in apps perform poorly. "While they rack up brand impressions, they rarely convert," he said. "For example, it's highly regarded as best practice to exclude in-app placements within Google's display network for conversion driven campaigns."
[Find out why the creator of the most popular ad-blocking tools for iOS 9 is having second thoughts.]
Mehrguth sees Apple's decision to step back as an opportunity for brands seeking a larger share of mobile ad impressions. His firm, he said, will be watching how these ad placements drive sales and acquisitions for clients, how iAds' cost per thousand impressions (CPM) compares with competing ad platforms, and how iAds works with Apple News.
"Currently, Apple News is struggling with its data reporting … no surprise," said Mehrguth. "Hopefully, they can add some transparency and allow advertisers to get a better understanding of user engagement."
While Apple's decision to embrace ad blocking in iOS 9 may seem like a contradiction for a company with a mobile ad network, Mehrguth sees the company's positioning as forward-looking. "Apple is very aware of a public shift towards data privacy and faster load speed," he said. "Once they figure out their metrics, Apple will be able to focus on pushing Apple News. They know that GenZ wants branded and editorial content. I think they are simply racing towards tomorrow."
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