according to insiders. They're not able to fill all the slots available, and it doesn't look like it's just a post-holiday downturn. Apple conceived of these ads as an alternative to TV ad spending, and he thought they'd be able to convince companies to redirect ad dollars to iAds instead of to TV. Well, that worked for a bit when Jobs was the one doing the arm-twisting, but when the task got handed over to rank-and-file Apple employees the revenue has dried up.
As a consequence, ad revenue for game developers is not where they'd like it to be. A purely ad-supported model is a difficult thing to achieve on smartphones.
I think part of the problem is the screen size; when you put any kind of advertising on the screen you're taking away a substantial amount of usable space. Or you're taking away the whole screen for some period of time, and with mobile apps you usually have less time you want to spend on using an app than when you're sitting at a desk.
Of course, another big issue for iAds is that Apple wanted you to throw at least $1 million at a campaign... which certainly excludes a lot of potential advertisers. Apple might be open to lowering that threshold in order to try and bring in more advertisers. We'll have to wait and see, I guess.
Meanwhile, game developers are likely to keep exploring in-app purchasing as a revenue model, since that seems to go over really, really well -- since it accounts for more than half of App revenue overall.