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Apple's 'iAd for Developers' May Not Be Cost-Effective

Late last month, Apple enhanced its iAd mobile advertising platform to allow app developers to purchase ad space for simple banners that expand to display "in-app" App Store pages that allow users to read about and purchase applications without leaving the app they are currently in. Billed at $0.25 per click as opposed to the per-impression and $2-per-click fees for traditional advertisers using interactive ads, iAd for Developers appeared to offer a way for small developers to make use of the company's platform.

Anecdotal evidence from developer David Smith of Cross Forward Consulting (via Silicon Alley Insider) suggests, however, that the program may not be cost-effective for developers, as a test ad campaign resulted in low click-through and conversion rates for an app priced at only $0.99.

From August 19 through August 25 I ran a campaign on the newly released iAd for Developers platform for our Audiobooks Premium app. The results were, to say the least, disappointing. For all the promise of selling your apps directly within an advertisement, it appears that so far this is not a viable way to drive traffic and create an economically sustainable promotion. For $1,251.75, my campaign generated a total of 84 downloads, thus a Cost Per Acquisition (CPA) of ~$15. For a $0.99 app, those economics just can't work out.

The remainder of the post details the process of signing up for an monitoring the iAd for Developers, and while Smith was pleased with the professionalism of Apple's iAd staff and the ease with which he could monitor his campaign, the return on investment was simply nowhere near what would be required to be viable. While an application carrying a higher price tag or significant in-app purchasing content might stand a better chance of seeing a profitable ad campaign, conversion rates would likely be even lower for a more expensive application.

Given that the cost for the campaign is entirely based on clicks, we designed our banner to try and provide the audience with all the basic information they need to understand what Audiobooks is and whether they might be interested in purchasing it. This lead to a more textual treatment than a graphical one. Since we don't pay for impressions we only wanted truly interested people clicking on the advertisement.



Smith's banner ad for Audiobooks Premium

Apple's iAd program utilizes a "targeting system" that helps identify which users might be most likely to respond to and purchase a given application, and for that reason, Apple's staff encouraged Smith to continue the campaign beyond the first few unsuccessful days in hopes of refining that targeting and boosting yields. Improvement was non-existent, however, and the campaign was canceled after six days and only 84 downloads on over 2 million impressions.


Smith also performed a comparison campaign using the same banner ad on AdMob's network, finding a click-through rate over five times higher than that for iAd, and with AdMob's cheaper cost structure, Smith's cost-per-click was over six times cheaper on AdMob than on iAd. The reason for the significant difference in click-through rates between the platforms is unclear, especially considering the widely-held belief that the iAd program would offer a "premium" branding that would be more enticing to users than traditional banner ads.