Flickr/mattbuchananThe late Steve Jobs.Apple will repurpose iAd, its mobile ad serving system, to support its new streaming music service, which some are calling iRadio.
The new service will compete with Pandora, which has vastly outpaced Apple in the mobile ad business.
The movie is a huge strategic shift for Apple as it relates to paid media. And it’s a belated admission that founder Steve Jobs’ vision for iAd — that its ads would provide financial support for developers creating apps for the iPhone and the iPad — has largely failed.
IDC estimated that revenues at iAd in 2012 increased 30%, from $95 million to $125 million. But revenues in the entire mobile ad category overall more than doubled, from an estimated $630 million in 2011 to $1.7 billion in 2012.
Apple was falling behind, essentially.
IDC . AppleInsiderHumiliatingly, Apple was eclipsed as a mobile ad server by Millennial Media, one of the smaller but faster-moving players in the business. Apple served about 15% of mobile display ads last year, according to IDC, even though its devices are the leaders in the phone and tablet categories. Millennial served 17% and Google served 24%, IDC estimates.
The reason Apple got left behind is that the big ad money went into independent app publishers, like Facebook and Pandora, not into ad-serving networks, like iAd. Facebook and Pandora run their own ad sales operations and have huge mobile audiences. Pandora booked $375 million in ads in its last fiscal year, with a 99% increase in mobile ad revenue. Mobile ad revenue alone was $256 million.
Ad networks serve ads across multiple apps. It turns out that most people use Facebook and Pandora extensively, and spend relatively little time inside the second-rung apps.
Jobs’ calculation — that iAd will provide wealth for all app makers — now appears to be wrong, or at least vastly overestimated.
What actually happened was advertisers stayed away from iAd. First, it was the high prices — Apple initially charged a $1 million entry fee for the platform, and had to humiliatingly reduce that price as time went on and chatter about low “fill rates” got louder.
There was even speculation that advertising was so marginal to Apple that it might leave the ad business altogether.
But then, rumours emerged that iAd might form the basis of a revamped Apple ad exchange. And now, Apple appears to have at last found a new, more realistic, vision for iAd.
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