In the rush to application platforms and application stores it seems that few people have been thinking about the challenge of how to market or discover applications on mobile devices.
If we look at the web world we have a mature ecosystem that has at the least
- search advertising
- search engine optimisation & site optimisation
- affiliate links to monetize traffic to sites
- consumer understanding of how to go to a web page
And much more - mobile is just starting to scratch the surface of any of these - and faces some uphill battles - how do you explain to a user how to download an application, when it's a different application store for different devices, platforms, and mobile operators?
The mobile industry now generally accepts that the iTunes App Store is a successful model - certainly it's able to generate buzz, and sales for mobile applications that no previous mobile application solution has been able to. So I've been looking at how mobile advertising works for paid applications in the application store.
I've started with a simple, but effective mobile application - the application is Citymap London - you can go and buy it now. The application provides an offline map of London - so iPod Touch users, and iPhone users can find streets and navigate around London without requiring a network connection (for example on the tube)
The app has proved to be a small scale success since it's launch, with sales growing at around 10% per week - but still in the "small volume" category (a round of beers a week, not a case of champagne a day)
So what would the impact of a small amount of advertising be?
The application sells primarily to people in the UK, so advertising was focussed on the UK market, and has run over the last two weeks on two different mobile advertising networks. The results have been similar from both.
Both generate large numbers of impressions - over the period of the campaign 177,000 impressions have been shown.
Click through rates are below 1% though - 1,200 clicks on these adverts over the time.
So how have these clicks converted to sales for the £1.79 application?
The sales uplift is barely measurable - under 1% of the clicks.
So incremental revenue from all these impressions and clicks? About £11.
Now average cost per click is £0.09 - so at these conversion rates applications need to generate £9 in revenue to break even on the cost of acquisition - so that means listing at £14.99 after VAT + iTunes cut - so expect more $24.99 applications in the store?
Or something has to change
So what could change?
Cost per click decrease this is a likely outcome, making the cost of running advertisements much lower, but with the large volumes that mobile can bring compensating - consumers can expect more adverts, and lower quality adverts. Application developers with strategies to earn their living from advertising funded mobile applications are likely to see dramatic (10 times) falls in revenues at constant volumes - though those with successful high volume applications are going to continue to see gains and benefits.
Increase in conversion rates better adverts and better targetting of adverts can keep the cost of acquisition low - so innovative mobile advertising companies using better data to target adverts and drive better conversion rates will win as they provide a better consumer experience. Smaller numbers of more actionable advertisements are the goal here.
There is likely to be some churn in the market for mobile advertisements - and the winners are going to be those who invest today in the consumer experience, and understanding how to provide relevance and convenience in advertisements on mobile. If anyone believes they have a solution that can beat the current iPhone advertising markets then let me know - I'm happy to run the same test as I've used with existing ad networks with your solution and share the results here.
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