iAd: Steve Jobs' last blunder

Hubris is a lousy business model

Apple just announced it’s slashing the annual minimum commitment for advertising on its iAd mobile ad system. Again.

Now a mere $100,000 annual commitment lets advertisers run campaigns in iPhone and iPad applications. While that’s a fortune to local Richmond advertisers, it’s a pittance compared to what Apple was originally charging.

When Steve Jobs unveiled iAd in 2010, its minimum requirement was a cool $1 million a year. Last year, that dropped to $500,000 and later to $300,000. Today, it’s just a tenth of its former self.

Moreover, they’re giving application developers a larger cut of ad revenues from their apps — 70% instead of 60% before. And instead of charging advertisers twice — once per 1,000 ad impressions and again for each click — they’ll now just charge the cost-per-thousand rate.

iAd’s comedown is part of a bigger Apple pattern, right out of Greek tragedy.

Hubris begets nemesis

In the classic Greek tragedies, the hero’s hubris — extreme haughtiness, arrogance or pride — always provoked nemesis, a poetic-justice-like form of revenge. And hubris is the perfect word to describe the Jobs style.

When introducing the Macintosh in 1984, Jobs chose to keep its architecture closed to software developers, so that Apple could wring not only hardware money, but also software money out of Mac buyers. IBM, on the other hand, chose to open its architecture to developers.  The resulting flood of Windows-based applications gave IBM and its clones a combined 88% share of market for decades.

History repeats itself

In 2010, figuring he had mobile app developers and mobile advertisers over a barrel, Jobs got arrogant and greedy again.

He didn’t realize that other mobile platforms and apps might come along. He never expected he could ever have any competition. And at first, it seemed he was right. Dozens of advertisers lined up to be the first brands on iAd. Many stuck with it, despite the exorbitant cost.

But then nemesis, in the form of reality, struck.

Up the road in Mountain View, California, a little outfit named Google developed a mobile platform called Android. While it still doesn’t have quite as many apps as iAd, it’s getting there — and stealing market share left and right.

How the mighty have fallen

In 2010, Google’s share of the mobile ad business was 19%. Last year, it increased to 25%.

And Apple? As of two years ago, there were fewer iPhones than Android phones in the United States.

In 2010, Google’s share of the mobile ad business was 19%. Last year, it rose to 25%.

In 2010, Apple was tied with Google’s 19% share. Last year, though, they were down to 15%. After Jobs, the iAd unit has gone through two leaders in as many years, surely a sign of an organization in trouble.

Talk about nemesis.

Selfishness isn’t a great business model

Believe it or not, this column isn’t a screed against Apple; in fact, it’s being written on a MacBook.

But it is a caution against a short-sighted, selfish way of doing business.

Your product may be the first of its kind. It may be a truly great product. But your exclusivity won’t last forever.

Sooner or later, someone’s going to start selling a credible competitor, and customers who’ve been gouged by your pricing and alienated by your my-way-or-the-highway arrogance will start choosing it over yours.

Excessive greed may give you a boost short-term, but it’s going to get you down the road. With reasonable pricing initially, you’ll be in better shape for when competition set in.

And, unlike Apple, you won’t go from extorting high prices for your product to bribing people to buy it.