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How Google and Apple exposed their Achilles heels this week

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Has Apple's iAd had it?

Advertising, unlike payments, is a core competence for Google, and its AdMob acquisition has extended this success to mobile. By contrast, Apple has repeatedly reduced the pricing and loosened the terms for its mobile advertising service iAd, in the face of limited uptake by customers, and now it has made its most drastic moves yet, according to Ad Age magazine. The report cites unnamed sources reporting that agencies now need to stump up only $100,000 upfront for an iAd campaign, a far cry from the $1m minimum demanded at launch in 2010.

Apple has also reportedly decided to charge brands only a single rate for every 1,000 ad impressions, rather than its unpopular policy of also imposing an additional fee for a click-through. Developers will also gain more favourable terms, getting 70 per cent of revenue generated from ads within their applications, up from 60 per cent.

All this is designed to claw back some market share from Google's AdMob unit, which had 25 per cent of the US mobile advertising segment last year, according to IDC, a growth of 5 per cent on 2010. By contrast, iAd's share dropped from 19 per cent to 15 per cent in the same period. Meanwhile, the third main player, Millennial Media, has grabbed the second place at 17 per cent (though another calculation, by eMarketer, puts iAd and Millennial virtually neck-and-neck in the US last year, on 18 per cent and 17.7 per cent respectively).

The market could become more crowded soon, with Facebook revealing in its IPO filing that it was not monetizing its mobile traffic effectively yet, but was likely to experiment with some advertising techniques – possibly leading to a full ad platform launch later this year.

The main reasons for iAd's problems, according to disgruntled advertisers, have been high prices, rigid contract terms, and Apple's famous demand for creative control of the ads themselves. It insists on making sure ads support the quality of experience of the iDevices and use rich media formats optimised solely for iOS.

This has driven advertisers to broader and more flexible platforms, particularly Android, and this tide will only rise as the Google OS comes closer to Apple in terms of app download volumes. This has led to Apple becoming progressively more flexible over iAd terms and conditions.

In December, The Wall Street Journal reported that the firm would now consider deals priced as low as $400,000, a floor that appears to have fallen further in 2012. Apple is also agreeing to install a cap on CPM costs and providing mobile marketing training for free to clients.

"Hordes of developers have activated iAd, but they say that Apple hasn't sold enough to make any meaningful revenue for them," the WSJ said.

Copyright © 2012, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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