The Pocket Cyclone

This was a very interesting week for folks trying to make a living with apps, looking at mobile ads as a revenue stream.

So is Apple the new Google and the future advertisement top dog?

Is Steve about to make “his” developers rich?

As of Day 2, the results where pretty mixed. And they stayed that way. eCPM, the averaged payout for every 1,000 ads served, turned out to be very high and dropped since then into a still high, yet more regular dimension. A successful app typically serves a lot of ads every day and whichever ad network fills it with the MOST VALUABLE ads creates the highest eCPM. When I started in this space it took me a while to understand that this number really is a (pretty broad) variable and that there are some ads out there who pay out nice money vs. huge bulk (junk) ads that pay only a few cent per click, because as a developer you have no influence into this selection (and only limited visibility). iAds are certainly at the top of the premium range here.

With the first two iAds out there, Dove and Nissan, another effect is very visible already when looking at the second big parameter that defines success and revenue: The fill rate. It started at around 10-15% on the first solid days of serving ads. That means that you had a very high chance to open any of the apps showing iAds and see… nothing!

To make matters worse, the fill rate dropped since then, I heard all numbers between 5% – 7% on the following days.

And this is crux: Premium is great. However that’s not how this space right now works. The money that advertisers want to pay is very seasonal (big bucks before Christmas) and tied to the demographic. In January, the situation was so bad that even the biggest ad networks at times did not have enough inventory to fill all the adspace out there and the ads that were served came with a very low price tag. If you are new to the ad business, brace yourself, the classic difference between December and January is very steep.

One more time, how is eCPM and fill rate tied together: If your app is opened 10,000 times a day (and for a successful app that is a low number), you have a chance to serve 10,000 ads at a minimum (more, if your app has more screens or is used a long time). Your ideal case is that these 10,000 spots are filled with very high-value ads with high eCPM and that you get all 10,000 spots filled (100% fill rate).

So one way to look at it:

Developers who had an exclusive iAd integration in their app made some money. They served much less ads than they could have, but when they served iAds, they made good money from those few times, however less than if they had gone with several ad networks. Nobody is raving at this point.

Another way to look at it:

If Apple manages to provide a 90%-100% fill rate with those deluxe iAds, apps will generate more money than before through advertisement. If Apple manages to provide like a 50% fill rate, they probably still are at the top of the payout curve, but more average. Note that Google provides a steady fill-rate of 97-100% with their mixed ad approach (low eCPM and premium mix).

So right now I am really curious where this will lead to. At this point it is clear that developers need to mix in ads from other networks to fill those huge gaps. Which sheds an interesting light on the “Apple does not allow Admob/Google ads anymore” discussion. Right now, any developer with a successful ad business model would make heavy losses going with iAds only.

I really wonder though how Apple plans to mitigate that. All I read at this point is that Apple wants to approach this as a real premium market, with handmade iAds done by Apple. Yes, more ads will come, but also the number of apps which will show iAds will quickly increase. So do we have to prepare for a future with very low fill rates?

For myself, I don’t see a straightforward path out. Going premium will lead to low fill rates which very likely will make nobody rich. Adding mainstream ads into the mix will destroy that premium idea of iAds.

Feel free to share your thoughts in the comments, the crazier the better. For the curious, here is a link to what Apple could do with targeting the iAds to the right users.

For myself, I am off blogging now with this idevblogaday entry, I need to look into adwhirl again and think about a free app that targets the 30-40yr male audience, married with kids!