Is Apple Out of Its Mind with iAds Premium?

Apple is making a high-profile gamble with iAds -- on two levels. First, according to the Wall Street Journal, there's going to be a hefty premium to be part of the inaugural wave of advertisers ($1M). And Apple is trying to hand pick those advertisers to boot: "I'm going to give you the privilege of paying me $1 million to be part of this experiment."

In addition, Apple is going to approve the creative, in an effort to make it really "pop." Here are some details from the WSJ story:

Apple is hitting the road to showcase its new mobile-device advertising capability, dubbed iAd, and has indicated it could charge as much as $10 million to be part of a handful of marketers at the launch, according to a person familiar with the matter.

Ad executives say they are used to paying between $100,000 and $200,000 for similar mobile deals.

Earlier this month, Apple unveiled iAd, a software system to offer ads in the applications available in its App Store. Ads are likely to start appearing in applications on its iPhone and iPod Touch devices in June, and its iPad later in the year, according to the person familiar with the matter.

Apparently targeting will be based on location and app download history (in the aggregate). This might be a kind of proxy for demographic targeting (gamers tend to be . . . ). But it also works out as potentially as a kind of contextual and/or behavioral targeting as well. 

The audacity and associated cost of this effort and approach risks alienating agencies and advertisers and scaring them away from the platform. By the same token creative that doesn't really live up to the self-created hype will similarly represent a problem and disappointment for Apple. 

The pressure is on the folks at Apple (and Quattro) to make these ads the most compelling, engaging and successful ad units the world has ever seen on any medium. Anything less wouldn't justify all the hype or the inflated cost. 

What's also interesting to me is that the idea behind iAd is: ads as content or ads that don't seem like ads. Ironically this is also the philosophy behind Google search advertising as well. It's "ironic" to me because of the rivalry between the two right now.