Opinion: The Problems with Apple’s iAd Revenue Split

Apple’s iAd, which launches July 1st, is a bold move by the company. Google, Apple’s chief rival, has acquired AdMob, and in doing so gained control of most iPhone advertising. Apple hopes to reclaim that with a new advertising service, based on the company’s acquisition of Quattro Wireless, that will provide developers with an easy, integrated way to monetize free apps.

For the most part, I am excited by iAd. Apple is pushing advertisers to make quality ads, combining the “emotion” of TV advertising with the “interactivity” of web advertising. For the first time (as far as I know), these ads will keep you in the app. Also, Apple seems to be using this service to wholeheartedly back its developers.
One thing, though, has bothered me since Steve Jobs first announced it on stage. Apple is taking 40 percent of the revenue, with the remaining 60 going to developers. In Apple’s App Store and iBookstore, developers or content providers are paid 70%. Why not here?
Jobs has insisted, in fact, that Apple’s purpose in launching iAd is not to make money, but instead to help its developers make money. Why, then, is Apple taking nearly half the revenue? Much of Apple’s 30% split of app and book sales is used to pay for hosting and maintaining the store. Yes, Apple must have many costs with iAd, but does it really cost forty percent of the revenue? (I really have no idea what the costs involved are, but I find their amounting to forty percent hard to believe.)
The explanation Apple provided when first announcing iAd was that the 60/40 split is an industry standard. But since when is Apple about following industry standards? Apple is supposed to shatter industry standards and rewrite them. If Apple adopted a 70/30 split here, the industry would follow, and if what Jobs says is true, that would be a change for the better.
This move, indeed, may be dangerous for Apple. Google will likely dramatically change AdMob’s advertising system in a response to iAd. It won’t be hard for Google to give developers a more favorable revenue split, and with Apple having just launched its system, adjusting its own split may be difficult. This will probably not happen, but if it does, Apple may find itself in a fix. In all probability, things will turn out good for Apple in the end, but I think iAd would be much better with more money going to developers.


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