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Is Apple Struggling With Mobile Advertising?

Big cuts reported to iAd pricing
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Reinventing mobile advertising may not be as an easy as Apple hoped.

Earlier this year, the company confirmed that it had halved the minimum ad buy in its iAd mobile advertising program from $1 million to $500,000. Now, Bloomberg reports that as agencies take their business to more affordable competitors like Millennial Media, Greystripe, and Google's AdMob, Apple is cutting prices even further—allowing agencies that bundle multiple campaigns together to pay as little as $300,000 per campaign.

The Wall Street Journal offered more context about the deal, presenting it as a way to give agencies greater flexibility, not a cut in prices. Specifically, it says that WPP's ad-buying unit, GroupM, committed to more than $1 million in iAd spending, and GroupM will allow its clients to buy iAd packages for as little as $300,000. The actual pricing of the ads (1 cent per impression and $2 per tap) remains unchanged.

Pricing isn't the only concern to come up about Apple's foray into the ad business. A few months after the program launched in July 2010, some advertisers said that Apple's insistence on controlling the creative process was leading to unusual delays. To accelerate the ad creation process, Apple later unveiled a new iAd Producer tool.

Some of these stumbles may seem like a natural part of the learning process for a tech company moving into ads, especially when mobile advertising is itself still immature. Still, it also seems like a letdown after the hype around Apple's announcement of iAds last year—the program was supposed to deliver higher quality, more lucrative ads to the iPhone, in contrast to most existing mobile advertising, which Apple CEO Steve Jobs said "really sucks."

iPhone application developers are only filling 5 to 15 percent of their inventory with iAds, according to mobile ad exchange Mobclix. But even if Apple is struggling to get the business details right, Mobclix co-founder Krishna Subramanian told Bloomberg that the company has already changed the industry by legitimizing big, expensive campaigns: "You can go to an automotive company and pitch a $500,000 to $1 million campaign, and it’s realistic."