It seems to me that Apple's downfall here is that horrible price.
Apple's entire idea here is that iAds are like mini-applications. They treat the ads the way they do apps, by only allowing them to run on Apple devices and only after Apple has approved of them.
Why not make it $99, the same cost as developing full applications.
Here's what would happen if they did:
1.) Everyone who has something worth advertising could do advertise it.
2.) Developers using iAds would see near 100% fill rates.
3.) All users would get ads relevant to them.
4.) Apple wouldn't make as much money from people signing up, probably, but that 40% that Apple takes on clicks would become much higher, because there would be a lot more clicks.
The price, as it is, is ludicrous. Only the biggest of big name brands could possibly be able to pay it, and honestly, I think their name and reputation does more for them than an iAd does in leading to sales.
Start ups you've never heard of who don't have much cash are the ones who need the extra marketing help of a compelling interactive ad, not the big names we all already know about.