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The Future of iAds : Is it Really a Premium Network?

About a month ago, Apple announced iAds  and when it was first launched there was a lot of speculation as to whether or not it would be the right tool to help media companies monetize their mobile applications. We wrote a blog post on it here stating that it probably was not the best solution for most media companies.

Apple is enforcing a lot of rules around the iAd platform. Firstly, they are controlling all of the inventory. If you want to run a house ad or retain your existing ad sales team to sell your inventory, you are probably out of luck. This would be a major change of strategy for a number of media companies who do indeed use ad networks at times, but usually sell their own advertising and then use networks to fill remnant inventory. Secondly, Apple is taking 40% of all the profits. I cannot think of a single media company that would be willing to give up 40% of all their advertising revenue to Apple.

Today, the Wall Street Journal unearthed some more information about iAds. They found out that Apple will charge upwards of $1 million for certain ad-buys.

To be among a select group of advertisers at launch could cost $10 million or more, the WSJ suggests.  Ad executives say they’re used to paying between $100,000 and $200,000 for similar mobile deals, but Apple is certainly putting a premium price on it’s so-called premium mobile advertising opportunities.

Apple is planning to charge advertisers a penny each time a consumer sees a banner ad, ad executives say.  When a user taps on the banner and the ad pops up, Apple will charge $2.  Under large ad buys, such as the $1 million package, costs would rack up to reach the $1 million mark with the various views and taps combined.

Our question is this, if media companies do not use iAds because it simply doesn’t provide them with the logical solution they need (inability to manage their own inventory and retain significant revenues), how is iAds a premium network? Why would big advertisers opt to spend $10M on a network buy that includes low quality financial apps or even worse fart apps?

I understand that Apple can target based on application category -i.e. Entertainment, but the only applications worth spending big advertising budgets on in that category are the ones developed by big media companies (MTV, CBS, etc). Those companies are using ad platforms that enable them to sell their own ad inventory and don’t take a massive 40% cut, leaving  applications to advertise on that are by no means ‘premium’.

Maybe we are missing something, but there seems to be a disconnect in the logic here. What do you think?

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