In addition, app developers will receive 70% of ad revenues from
iAds running on their apps, vs. their previous 60% cut. The extra
money will compensate for lower ad rates and serve as added
incentive for developers to build businesses on Apple devices, even
though they may grab a bigger audience or more ad revenue creating
apps for Google's Android devices, which now outnumber Apple
smartphones in the U.S.
Apple also plans to change the way it charges for ads, which
irked some advertisers and agencies. Since iAd launched, Apple has
charged advertisers twice: a fixed rate for every 1,000 ad
impressions plus an additional fee every time a user clicked on the
ad. Apple will now charge only the cost-per-thousand rate.
The changes are the biggest reset for the offering since Mr.
Jobs launched it in typical Apple fanfare two years ago. Dozens of advertisers lined up to
be the first brands to go into business with iAd, despite the hefty
cost. Many big marketers stuck with iAd; some hoped Apple could reinvent the nascent mobile-ad
market, which they saw heading down the troubled path of online
display, beset with bad creative, ineffective ads and low
As the novelty wore off, demand waned and the million-dollar
minimum far outstripped the realities of advertisers' mobile
budgets. Apple cut the threshold to $500,000 last year, and then to
a $300,000 minimum for advertisers willing to guarantee ad spending
In the meantime, Apple has been losing share in the mobile-ad
market, threatening the business and app developers' ability to
make money from advertising.
Google took 24% of the $630 million market for mobile display
ads in the U.S. last year, up from 19% in 2010, according to
research firm IDC. No. 2 Millennial Media had 17% compared with Apple's 15%.
Apple's share declined from 19% in 2010, according to the firm.
There are now 550,000 apps and 315 million devices running Apple
mobile software iOS, according to the company's most recent
earnings report, but Google is gaining fast. In its latest earnings
report, Google reported 250 million Android devices activated
worldwide. In the U.S., there are already more Android smartphones
Apple, which declined to comment, has begun communicating the
coming changes to developers and advertisers. The new pricing comes
after Apple appointed former Adobe exec Todd Teresi
its iAd unit to start the year. Mr. Teresi replaced Andy Miller,
CEO of Quattro Wireless, the mobile-ad network Apple acquired for
$275 million to build its ad business.