Apple Slashes iAd Prices Again

Facing a rapid decline in mobile advertising share, Apple (NASDAQ:AAPL) will again be cutting the minimum amount it charges for advertisers who want to use the iAd mobile advertising sytsems, according to Ad Age. When first launched amid much fanfare in 2010, the starting price for advertisers was $1 million. It was then lowered to $500,ooo last year, and then $300,000 when combined with a long-term buying agreement. The new number? Only $100,000 to start running an ad campaign through an iPhone or iPad app.

More than that, Apple is also increasing the amount it will be sharing with app developers, increasing the developer cut from 60 percent to 70. Besides compensating developers for the new, lower ad rates, the move also encourages them to continue to work with Apple in the face of increased competition from Google‘s (NASDAQ:GOOG) Android OS.

According to Apple’s latest earnings report, there are 315 million devices running the company’s iOS worldwide with over 550,000 apps presently available. Google, however, is gaining on them, with 250 million Android devices active worldwide. However, Android devices now outnumber Apple smartphones in the United States, and thus provide app developers with a larger audience and likely more ad revenue.

Also, likely as another way of encouraging continued usage, Apple is simplifying its system for charging agencies and advertisers. Previously, Apple essentially charged for advertising twice, employing a click per user fee plus a fixed rate for every 1,000 ad impressions. From now on, Apple will only be employing the latter system.

The changes come after interest and demand for iAd advertising has declined from two years ago. Despite the large initial cost, many jumped at the chance to advertise with Apple, but the high cost and low yield led to a decline in usage. Many had hoped that Apple’s innovation would have extended to the still-emerging market for mobile ads, but there are those that feel that it’s progressing in the same direction as other online advertising did years ago.

As of right now, according to IDC, Google claimed a little less than a quarter of the $630 million market for mobile ads in the U.S. last year, a 19 percent increase from 2010. Millenial Media had that number closer 10 17 percent, with Apple coming in at 15 percent; this marked a decline for Apple from 2010, where it was 19 percent.

Last year, Apple named former Adobe (NASDAQ:ADBE) executive Todd Teresi to head the iAd division, replacing Andy Miller, who was the CEO of mobile-ad network Quattro Wireless.  Apple acquired Quattro for $275 million as part of its initial effort to build its mobile-ad division.

To contact the reporter on this story: Jonathan Morris at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com