Apple Continues to Shave iAd Buy-In Fees Amid Increasing Competition

Bloomberg reports that Apple has continued to reduce the buy-in fee for its iAd mobile advertising service, dropping package prices for mainstream advertisers from the original $1 million commitment down to just $300,000 in some cases.

Apple Inc.'s iAd mobile-advertising business has cut rates by as much as 70 percent as some marquee clients are using rival services, two people with knowledge of the matter said, signaling the company is struggling to parlay its technology leadership into success in the ad industry. 

When Apple rolled out iAd a year ago, companies such as Citigroup Inc. and J.C. Penney Co. were being charged $1 million or more to run ad campaigns. Today those brands aren't using iAd, and Apple is offering packages for as little as $300,000, said the people, who asked not to be named because the rates are private.

Just a few months ago, Apple was reported to have cut the buy-in fee down to $500,000, but even that level has apparently not been enough to keep existing advertisers on board and bring on new ones to meet the ever-growing number of ad slots available. The new $300,000 rate is said to be being offered to companies willing to package together multiple campaigns for iAd. 

For its part, Apple touts the over 100 campaigns already pushed through on iAd and notes that 20 companies have used the service over the past month with another 50 set to debut in the coming months. But still, app developers are only reporting fill rates in the range of 5-15%, limiting the potential income available through the iAd program. 

According to the Bloomberg report, advertisers are turning to Google's AdMob, Millennial Media, and Greystripe as cross-platform advertising services competing against the iOS-only iAd. With the growing strength of Android, high buy-in fees for iAd, and developer dissatisfaction with iAd's performance, advertisers are increasingly interested in addressing multiple platforms, a key feature not available with iAd. 

Apple is not standing still, having recently hired a prominent former advertising agency executive to help draw in brands to the iAd program and last December debuted its iAd Producer software to make it easy for advertisers to design their ads. But it remains to see whether these moves along with iAd's Apple prestige and sleek appearance can overcome the limitations inherent in the program.