It is, Apple is terrible at advertising sales. I think they thought that would mean they would only get large branding campaigns (Toyota, Coca Cola, McDonalds etc) that would pay high CPMs and that those large advertisers would clamor to reach the high spending iOS users. It failed as hard as an advertising platform can fail, evidences by dropping the minimum from $1,000,000 to $50 and is still not gaining traction.

Initially it was aimed at big-budget ad agencies. The idea was that they could create polished little micro-sites that were launched from the ad, and wouldn't have to leave the app showing the ad.

In reality, ad-funded apps never really took off on iOS, probably due to free-with-in-app-purchase becoming a big money maker. And with the growth of Android, making a platform specific ad was not nearly as appealing.

No, it's perfectly reasonable.

They wanted to jump start the service with few select big clients, like Nike, Coca Cola, Disney etc.

For those kind of companies, 1 million for an ad campaign in a major mobile platform is small change.

It's a high ask, but there's a fundamental difference between iAd talked about in this article and the million dollar commitment iAd they started off as. The original vision for iAd was branding campaigns ie-tv and magazine like campaigns. A million dollars minimum and from Apple isn't crazy at first glance. What they're focused on now, especially in this article, is CPI app installs. Totally different markets.

Actually talking about two very different products here. iAd banner ads, what the OP is talking about, are cheap and accessible.

The large minimum spends still apply to rich media iAds. Despite iAd Producer being readily available, the ads you create in it can only be used as creative for rich media campaigns. That requires a relationship with an iAd account manager and a minimum spend of $100,000 per campaign per region (as of last week).

That's pennies. Broadcast TV can be more than $40 cpm, often going above $90-100. Cable has a lower average which still exceeds the price of most online inventory.

Ya, crazy... Now it makes sense