Inflated iPad Ad Premiums Leave Media Buyers Wondering

Domenic Venuto and John Koenigsberg

Thursday, July 8, 2010 I guess Apple didn’t need the spectacle of long store lines to feed the frenzy of iPad sales. It was announced that the iPad eclipsed 3 million units sold—a faster rate than the iPhone took to reach similar milestones. With the PR around these record sales approaching a steady roar, it’s safe to say that Apple’s “magical” new bling has gained some serious traction in its first months.

While this is great news for Apple—they just pulled in at least half a billion dollars in revenue in under one month—we're going to go out on a limb and predict that no one will be quoting these stats with as much zeal over the next few months as publishers' digital sales reps.

In the days leading up to and soon after iPad’s launch, Razorfish media planners had the honor of reviewing an array of app sponsorship opportunities. While our initial impressions of each app were fairly diverse, what stood out consistently was the outrageous $500K+ premium attached to virtually every partnership. We say “outrageous” because, as a media opportunity, the iPad is untested and almost entirely un-trackable. By banning apps from transmitting data to third parties, Steve Jobs clearly does not want the iPad to become a traditional direct response medium filled with fat-belly ads. His hope is that this policy will suck the lifeblood out of ad networks, namely Google’s AdMob, which rely on data inputs and analysis for their survival.

The resultant fear among marketers: Quantifying the value of an iPad ad will become an impossible dream. Without the ability to derive learnings from in-app behaviors, top tier publishers, as well as ad networks, will be limited in their capacity to report on much of anything. In a number of cases, Razorfish media planners have been told that app downloads will be the only data point made available to us. In the face of these serious concerns, digital sales reps will surely jump on iPad’s early sales success as justification for the fat price tags they’re floating in the marketplace at present.

Jobs wants us to believe that the iPad will give rise to the optimal blend of emotive and interactive advertising experiences, and this appears to be the impetus behind all of the premium iAd pricing that’s getting thrown around. Surprisingly, digital sales reps have not been leading with engagement as their core selling point; instead iPad’s “newness” factor and the associated PR that launch partners will receive appear to be the driving force behind initial pricing. When the dust settles—perhaps after the release of a few rival tablet devices—we’ll need to actually assess the relative value of iPad in comparison to more mature media vehicles.

The pricing structure that we’re headed toward appears to be a hybrid model of cost per impression and cost per engagement. Advertisers will pay a nominal sum for surface-level brand exposure—essentially the same thing as a banner advertisement—with additional payments if consumers interact with their ad. The key then will developing a more nuanced understanding of engagement. Acting on this knowledge, marketers will have the ability to engineer consumer interactions with their products that are actually valuable and worth paying for.

If we can do that, then we’ll surely deliver on Jobs’ vision of emotional experiences that stand out, with a different sort of composition than anything we have ever seen before.

Minsider columnist Domenic Venuto is SVP and Head of the Media and Entertainment Practice with the New York City office of digital agency Razorfish. He can be reached at domenic.venuto@razorfish.com. He co-authored this piece with John Koenigsberg, assistant media planner at Razorfish.

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