Advertising platform Apple iAd, announced along with iOS4 last year, was designed to shake up the mobile advertising business through compelling interactive banners with a concomitant increase in income of publishers and developers. But now Apple is softening its approach to advertisers as it loses ground to Google in the fast-growing mobile ad market.

iAd saw some difficulty in attracting new advertisers, so Apple was forced to lower the bar for a minimum budget for the organization of promotional campaigns.  Instead of requesting $500,000 to start an advertising campaign in iOS, Apple now only calls $400,000 (on iPad, iPod and iPhone devices), and this figure had dropped from the million dollar price tag that was requested last year. In addition, Apple woos the enterprise with an invite for sightseeing in Cupertino, where they can purchase Apple products at reduced prices.

iAd ads first appear as a banner underneath an app only when the user taps it, e.g. play a video, accompanied by other information.

“Apple said, ‘Let’s try to disrupt the advertising business.’ On this one, they didn’t succeed,” says Alexandre Mars, head of mobile for Publicis Groupe SA. “They know that they need to adapt themselves now if they want to survive – even if it is Apple.”

Steve Jobs had announced the built-in iOS advertising platform in April 2010 and promised the app developers 60 percent of advertising revenue, while Apple took in 40 percent for itself.  Apple wanted to outdo Google’s AdMob, but failed on its own rigorous conditions. Advertisers had a contract worth at least a million dollars to be able to get in the door. Apple has also lost the #2 market position in mobile ad sales to Millennial Media, sliding even further behind Google.

Companies have complained about the strict supervision that was exercised over the Apple creative design. The success of iAd never came to fruition, not to app developers, who were able to achieve only minor revenue through advertising.

Google, Facebook vary in mobile ad approach

Google’s service AdMob, depending on the contract, offers cheaper prices ranging from 4 to 12 dollars per thousand “views.” Google’s ad system also works on many more mobile platforms, including Windows Phone.  The search company’s market share is expected to rise to 24 percent for 2011 from 19 percent in 2010, while Apple’s decline to 15 percent from 19 percent, as per report from IDC, a unit of Boston-based International Data Group.

Facebook, too, is looking to get into the mobile ad scene, planning a big push for March of next year.  The social network will have a few options to play with in terms of finding the perfect fit for revenue and relevance, with one purported idea being sponsored ads through its mobile app.

Apple, for the first time, is making changes to its marketing policy amid tough challenges in the fast-growing mobile-ad market.  The company is showing more willingness to bargain on the spending commitment it requires of advertisers.  Apple has a history of providing quality over quantity.  As long as iAd can deliver the appealing ads that fascinate the attention of the mobile audience, it will continue to attract mobile marketers keen to pay for that service.