You can't win them all, even if you're Apple (Nasdaq: AAPL).
When Apple bought the mobile advertising company Quattro Wireless early last year, there was very little ambiguity about what the Mac maker had in store. There's little it could do with a mobile advertising company other than, well, get into mobile advertising. It had also allegedly bid on rival AdMob, but Google (Nasdaq: GOOG) ended up winning that war.
Thus, the foundation for iAd was laid. Not only was iAd a way to take aim at Google's bread and butter, but it also presented another way that developers could monetize their apps. Shortly after iAd's debut, one developer reported earning almost $1,400 from iAd on a single day for a simple free flashlight app.
On the other side of the paycheck sits advertisers, and Apple's notoriously tough bargaining posture has been costing it contracts, according to a recent Wall Street Journal report. The initial entry contract commitment started at $1 million, and earlier this year, that cover charge was sliced in half to $500,000.
According to WSJ, Apple is now willing to discuss $400,000 deals in an attempt to boost ad sales. Ad execs tend to prefer Google's AdMob, because it offers a more practical price and advertises on a slew of devices like those made by Motorola Mobility, HTC, Samsung, and LG, as opposed to iAd's Apple-only offering.
The service was initially a hit, with IDC originally predicting Google, Microsoft (Nasdaq: MSFT), and Yahoo! (Nasdaq: YHOO) losing share as Cupertino and Big G tied for first with 21% market share. While far short of the 50% share Apple was initially targeting, sharing the gold medal hardly warrants complaining. IDC ended up pretty close with its prediction, and last year Apple and Google each ended up grabbing 19%.
This year hasn't been kind to iAd, as it gave some back to Google. IDC says this year Google will carry a 24% share, followed by smaller Millennial Media's 17%, with Apple taking third at 15%. Further down the totem poll sits Yahoo! with 8% and Microsoft with 6%.
How bad is iAd? IDC even takes it a step further, predicting Apple will eventually "fade into the background" since its attempt to perfect the advertising experience "hasn't really worked." It doesn't help that if advertisers buy iAds to market on iDevices, they also need to buy ads from competing ad services to expand their scope.
When it comes to advertising, Google is top dog, and Apple is no match. The good news for Apple shareholders, myself included, is that the $95 million of the mobile ad market that Cupertino earned is inconsequential to its bottom line. Apple's results are in the billions, and what's a measly $0.095 billion between friends?
Add Apple to your watchlist to see if iAd fades away. Apple has started a mobile revolution that can't be stopped, and promises riches to a handful of component suppliers. Get access to this free report that details 3 hidden winners of the mobile revolution.
