Execs tell us the writing had been on the wall for Apple's big advertising experiment iAd for some time

Apple is pulling direct sales support for its advertising business, iAd, as first reported Wednesday by BuzzFeed’s John Paczkowski. The writing had been on the wall for the big advertising experiment Steve Jobs launched in 2010 for some time, according to the advertising and ad tech industry sources we have spoken to.

Apple isn’t commenting on the report, but multiple sources told Business Insider that they had heard the same. In short, the iAd advertising platform is going fully “self-serve,” — removing the need for a big, human iAd salesforce. Publishers and developers on the platform will take on responsibility for selling, creating, and managing the ads on their iPhone and iPad apps.

Fitting advertising within Apple has been like trying to force a square peg through a round hole.

The managing director of one digital ad agency told Business Insider: “Advertising sales is a brash, loud, in-your-face type activity. Pretty much the antithesis of Apple. No wonder if they have struggled with it.”

A director-level exec at a global media agency who asked not to be named shared the story told to him a former member of the iAd sales team: “[They] said the writing has been on the wall for some time. Paranoia is sort of part of their overall culture, but for the iAd team, it was heightened.”

An inevitable exit

The bar was set high when Steve Jobs launched the premium in-app mobile advertising platform in 2010. He set out the bold ambition that iAd would compete with Google to capture 50% of the mobile ad market.

It never got anywhere close.

EMarketer pins iAd’s share of the mobile display advertising market at just 5.1%.

After first asking for $1 million commitments for its untested platform, it was forced — apparently due to low fulfillment rates — to lower the minimum spend to $50, giving smaller app developers a slice of the action. But advertisers became increasingly perturbed that Apple refused to give them access to the wealth of data iAd had on its consumers from Apple’s hundreds of millions of iTunes accounts. And it moved slowly to keep up with the latest ad tech developments, such as cross-device retargeting.

Stefan Bardega, media agency ZenithOptimedia’s chief digital officer, told us: “iAd has long been a story of unfulfilled potential. Apple has unique customer level data that is hugely interesting to advertisers but has struggled (despite talented sales teams) to access that data in a way that doesn’t conflict with the core business.”

Another media agency director who asked not to be named told us iAd got little support from the wider Apple organisation

He said: “For me, they never understood that they needed to behave like a media owner, rather they could go it alone charging what they wanted, not sharing data, no third-party tracking, they don’t officially come to conferences and events. Clients loved it at launch, only to a year or so later figure out that it didn’t live up to the hype. They have struggled to make ground with brands based on not being able to deliver basics around targeting for example.”

Last year, Apple CEO Tim Cook took a huge potshot at ad-driven companies like Google and Facebook (without naming them.) In a speech, delivered to a dinner hosted by the Electronic Privacy Information Center, he said:

Our privacy is being attacked on multiple fronts. I’m speaking to you from Silicon Valley, where some of the most prominent and successful companies have built their businesses by lulling their customers into complacency about their personal information. They’re gobbling up everything they can learn about you and trying to monetise it. We think that’s wrong. And it’s not the kind of company that Apple wants to be.

He also released this statement on Apple’s values with regards to privacy. There he admitted that Apple did also have an advertising network, but that it was a “very small part of our business.” He explained iAd was built to support developers to monetise their apps and to offer free music streaming on iTunes Radio. Reading in between the lines, Cook was sending a message to advertisers that they weren’t at all Apple’s priority. It was a difficult hit for staff on the iAd sales team.

Then Apple delivered another punch in the gut to the ad industry: Its move last summer to allow ad blocking apps into the App Store for the first time. Those apps block ads in the Safari web browser — not within other apps, where Apple seeks to control the user experience, and the ad experience through iAd.

Overall, the main take from those we spoke to is that Apple’s move to scale back its advertising business — much like Microsoft’s recent decision to do the same — was inevitable.

Dave Morgan, CEO of US-based ad network Simulmedia, said: “They are a very modest player in the ad space and it makes a lot of sense to step back from it and shift to something simple and automated for publishers for now. This lets them rethink what role Apple should play in advertising. It seems inevitable that they will have to play in ads, not unlike how Amazon does, since it’s a half trillion global business closely tied to the delivery of content to consumers, which is a business that they are big players in and intend to be bigger ones. So, yes, net net, Apple’s move totally makes sense and is no surprise.”

There’s one outstanding question

iAd did already offer a self-serve platform for advertisers. In late 2014, Apple took the unusual step of actually partnering with other companies. iAd signed up ad tech partners including Rubicon Project, AdRoll, MediaMath, The Trade Desk, Accordant Media, and Adelphic to oversee programmatic — or automated — ad sales on the platform.

Many of the sources we spoke to questioned what will happen to those partnerships, now that iAd publishers can just sell programmatic advertising on their apps themselves. That’s great for publishers and developers as they can now have a direct dialog with their advertisers, but what does that mean for Apple’s programmatic ad tech partners?

BuzzFeed’s Paczkowski writes that it “doesn’t look good” for those partners, who could be hurt (although only slightly, given the size of iAd’s business) but the reality is probably more nuanced than that.

Gavin Stirrat, managing director at ad tech company Codewise, said: “A lot of the [advertising] inventory comes from apps who don’t have the expertise at selling or at selling programmatic ads, and nor do agencies [and their trading desks] have the scale to pick up a ton of new conversations. These platforms exist to increase levels of automation — Apple pulling back from iAd does not mean the industry will take a step backwards. So if Rubicon, Mediamath, etc. are unhooked, I suspect that inventory will flow into other platforms — and most likely would still be available through Rubicon, Mediamath etc. but via different routes and platforms.”

Dave Hendricks, the UK managing director of ad tech company LiveIntent, suggests Apple’s recent move to launch its “News” service made it clear it wanted to revert back to becoming more involved in the supply-side of advertising than the demand-side (ad sales.)

Monetizing mobile traffic is a huge challenge for publishers right now. Anything that helps publishers do this — and avoids the rise of ad blocking on the mobile web — is going to see “rapid adoption,” Hendricks adds.

For now, iAd as a business is going nowhere. But the scaling back of its direct sales teams suggests — based on Steve Job’s original ambition for the platform — iAd was one of Apple’s very rare flops.

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