iRadio to be free, ad-supported with iAds?

iadBloomberg is reporting, according to multiple unnamed sources, that Apple’s upcoming “iRadio” service will be free – supported by their iAds ad network. Apple is looking to boost the participation within iAds by targeting big brands as advertisers in the struggling ad platform. This would be a big departure for a service that was created “to help developers make money.” Apple CEO Tim Cook told a reporter at D11 that Apple created the iAd platform solely for developers, adding “It wasn’t about Apple making money.”

iAd was released in July 2010 to poor reception due to the extremely high minimum advertising contract of $1,000,000. The platform is great, providing some of the most beautiful and interactive mobile ads that I’ve ever seen. This wasn’t enough, apparently, as few advertisers threw $1 million at Apple to try the untested network. Less than a year later, Apple chopped this in half to $500,000 which spurred some usage. Just five months after that, Apple again slashed the pricing. This time down to $300,000. In February 2012, another $200,000 was chopped off to bring it to the current buy-in of $100,000.

The price reductions seem to have worked, though. According to Apple, iAd has resulted in over 15 billion app installations, and engages with iAds for an average of 60 seconds per session. My own anecdotal evidence of increased usage is supported by the fact that most of the mobile ads I see (notice?) are utilizing iAd, whereas AdMob used to be on nearly every free app I used.

Will Apple redesign the iAd network to support its digital radio service? They will probably have to. With the way Pandora-like radio services work, I can’t imagine that ad engagement is very high. iRadio is reported to closely resemble Pandora, where users listen to “stations” instead of picking and choosing songs or albums to play. It’s more of a set it and forget it approach than active engagement through frequent song selection. This may pose a problem for a service relying on an ad platform that requires engagement by tapping on a banner ad.

If Apple does offer a free version of their upcoming iRadio service, I would expect to see a premium plan as well. Profit is something eagerly chased by digital radio services, but remains yet unachieved by Spotify or Pandora. It would be surprising for Apple to accept this, which may be why Apple is looking to leverage and sell more iAds.

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