||A Rare Apple Compromise
Facing challenges winning over customers for its iAd mobile advertising service, Apple is softening its approach as it loses ground to Google Inc. in the fast-growing mobile-ad market.
Launched in July of last year, and championed by former CEO Steve Jobs, iAd is Apple's service for selling ads within mobile apps on iPhones, iPads and iPod touches.
But response so far has been tepid: Marketers say they have been turned off by iAd's high price tag as well as Apple's hard-charging sales tactics and its stringent control over the creative process.
Google's AdMob service, on the other hand, is priced more reasonably, ad executives say, and is available on a wide array of devices -- not just Apple products.
In response, Apple is making some changes. It is showing more willingness to bargain on the spending commitment it requires of advertisers.
Having originally asked marketers to commit to spend at least $1 million -- an amount later dropped to $500,000 -- Apple is now discussing ad deals with a minimum commitment of just $400,000, according to a person familiar with the matter.
Apple has also introduced more flexibility to a pricing structure that had befuddled advertisers, ad executives say. Instead of charging marketers every time a user taps on an ad -- a policy which often led to ad budgets quickly being exhausted -- Apple is willing to put a cap on what it charges for the taps, according to the person. Advertisers pay $10 every time an ad is viewed a thousand times and $2 every time it is tapped on.
Pricing for Google's mobile-ad products vary widely, according to one ad executive. Ad executives say display ads on apps from a range of providers vary from $4 to $12 per thousand views. Advanced targeting or mobile video can command higher premiums than static banner ads, this person said.
In an effort to woo more advertisers, Apple is establishing a training program, arranged in conjunction with its media buying agency OMD, part of Omnicom Group Inc., to teach the firm and its clients about the mobile marketing landscape.
In recent weeks about 30 senior marketing executives, from firms including PepsiCo Inc., Clorox Co. and J.C. Penney Co., visited Apple's headquarters in Cupertino, Calif. The marketers got a tour and a series of information sessions with Apple designers and product teams.
Participants concluded the tour with a visit to the Apple company store where they were able to make purchases with a discount, according to ad executives who participated.
OMD is planning a trip to Apple in February with more of its advertiser clients, according to a person familiar with the matter.
The event demonstrated that Apple is trying to adapt to the ways of Madison Avenue. Inviting marketers for campus visits has long been a standard tactic for ad-dependent Silicon Valley firms like Google, Yahoo Inc. and Facebook Inc. While it has hosted big customers of its electronics products at its campus, this is one of the first times Apple has tried such an approach with advertisers.
"They are still learning the advertising world," says Shiv Singh, head of digital at PepsiCo Beverages.
Mr. Jobs envisioned iAd more as television advertising than online marketing, which he viewed as irritating, according to people familiar with the matter.
A typical iAd is one for Unilever's Dove Men + Care soap brand. In it, a consumer sees a banner ad at the bottom of an application on a phone or iPad. When the consumer taps on the ad, videos featuring baseball players like Andy Pettitte appear, as well as more information about Dove products.
Some marketers say they are pleased with the results of their iAd campaigns and are eager to renew deals. Unilever, which has bought 13 iAd campaigns for brands including Dove soap, and Ben & Jerry's ice cream, said that consumers spent an "amazing" level of time with the ads, on average 68 seconds in the U.S., across mobile devices.
Apple is hoping to gain back ground that it has lost to Google in the mobile-ad market. Last year, Apple shared the top spot in the mobile display ad market with Google, with each company capturing 19%, according to research firm IDC. This year, Apple fell to the No. 3 spot, behind Google and independent mobile ad firm Millennial Media, capturing 15%, or $95 million, of the $630 million market, IDC says.
A spokesman for Apple declined comment.
While Apple's moves to placate marketers won't greatly affect its business, which is humming on hardware sales, the state of the service could affect developer loyalty to its platforms over time.
The company launched iAds to make building Apple apps more attractive for developers, who are increasingly interested in building software for Android devices and getting advertising checks from Google.
Hordes of developers have activated iAd, but they say that Apple hasn't sold enough to make any meaningful revenue for them. David Barnard, founder of mobile app company App Cubby, says he earned $320 from iAd in the past 30 days and that the service is only filling roughly 13% of his apps requests.
Unilever recently agreed to renew its iAd agreement with Apple for the next year, including launching iAd in developing markets across the globe.
"We got in there early and we're both learning together. They learn from us and we've learned from them," says Unilever Chief Marketing Officer Keith Weed. He declined to discuss pricing.
Even so, marketing executives say Apple needs to modify its approach to win over more.
"Apple said, 'Let's try to disrupt the advertising business.' On this one, they didn't succeed," says Alexandre Mars, head of mobile for Publicis Groupe SA. "They know that they need to adapt themselves now if they want to survive -- even if it is Apple."
One major challenge Apple faces: because the company only sells ads that appear on Apple devices, marketers are forced to buy ads from competitors to reach broader audiences, says IDC analyst Karsten Weide. "Apple we believe will, over time, fade into the background," he says. "It was attempted to make sure that even consumers advertising experience on Apple devices was perfect, but it hasn't really worked."
(Source: The Wall Street Journal, 12/13/11)
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