Andy Beal's Marketing Pilgrim: Apple’s Cracked the App $ Code: Charge Developers for iAds

Apparently Apple just isn’t making enough money off the iPhone. In addition to making at least a little on each unit sold, Apple also gets a cut on the apps and other media sold for the device.

But they want more. The Wall Street Journal reports on a rumor that the new iAd network will come with a hefty price tag—possibly $1M to join the program, and $10M to be among the first. Additionally, Apple’s split of the ad revenue is 40%, and the price tag “comes with initial demands for greater control over advertisers’ marketing campaigns.”

It’s often routine to charge a premium to participate or especially launch a new platform, but even established advertisers are surprised by the price tag. Says the WSJ, “Ad executives say they are used to paying between $100,000 and $200,000 for similar mobile deals.”

But, says the WSJ, the bigger fish are still biting: “Despite the high price, ad executives at agencies from Boston to New York and San Francisco to Los Angeles have crowded into conference rooms in recent weeks to listen to the tech company’s pitch for iAd.”

Another feature that makes the iAd attractive is the format. Advertisers pay a very low CPM, but when consumers click on and interact with the interactive ads, the price for advertisers jumps up:

One example Apple has been showing advertisers is an ad for Nike’s Air Jordan basketball shoe, says Baba Shetty, chief media officer at Boston-based ad agency Hill Holiday, owned by Interpublic Group. When a user is in an application, an animated banner ad appears on the border of the screen, along with an iAd logo. If the user taps on the ad, it expands across the screen, displaying a video, an interactive store locator and exclusive offers at local stores, among other features. . . .

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 $1 million with the various views and taps.

With 85M devices and approximately 42.5M hours of screen time for apps a day, it’s little wonder advertisers are interested. But with cheaper alternatives out there, will it be enough to make it worth their while? What do you think? Andy Beal's Marketing Pilgrim