This could be really, really, really big. The Wall Street Journal has sources that claim that Apple is charging a premium for iAds where premium means charging one cent per impression and $2 per tap (for us developers that means .6 cents per impression and $1.20 per tap). On one hand, this kinda stinks for marketers who can’t pay (and will mean it will mostly be the big brands at the beginning) but on the other, this could be a boon for developers trying to make a consistent income from their iPhone and iPad apps.
I am really sorry I haven’t posted about Grades for a while—detailed launch analysis is coming, I promise. Over the summer I will be coming up with strategies to monetize Grades now that the initial launch spike has passed. iAds could play a huge role in this.
One interesting statistic is that Grades currently does about 2000 sessions per day (it’s opened 2000 times per day). That means a good percentage of the people who purchased the app are using it frequently. It also means that if I could find a way to triple or quadruple my user base, I could easily do 10k impressions per day. I could probably pull this off by doing a free+ version of the app.
With iAds, 10k impressions = $60 sure cash. Then, assuming there is a 1% tap-through rate (which I think is extremely conservative), that’s 100 users tapping the ad, that’s $120. So that’s $180/ day total. Okay, so thats not going to make me a millionaire but I think these are pretty conservative estimates and that is a good $64k a year. Not bad for a relatively passive income (and many times better than what I’m making now at $1 a pop). I also think that tap-through rates could be much, much higher than 1%. For one, these ads are displayed right inside your app so users won’t worry about losing their context; for two, I think people will actually want to check out these ads since they will be interactive, high quality, and downright fun! So assuming the tap-through rates were more like 5%, 10k sessions = over $600. That’s $216k a year.
To summarize, I think iAd is a win-win for users and developers. Users will be able to try out high quality apps for free and check out really cool ads. If they don’t want ads, they could opt out by paying a buck or two. For developers, we now have an amazing way to make consistent long term revenue without the need to be in the top 100.
Would love to hear your thoughts.
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Those are sexy numbers for sure, but the problem will be in filling all the available inventory. I just can’t imagine there being enough advertisers at that price to really fill a ton of the spots.
And if some big company, let’s say Pepsi for instance, does decide to purchase a bunch of iAds, I am almost sure they will stick them all in the big apps by big publishers. The average marketing guy would much rather stick an ad in some EA game someone paid $9.99 for (so we know they’re not shy about spending money) than in a cheaper indie app. It looks more legitimate to their bosses or whoever they tell about it to say “oh yeah we ran an ad buy in NHL Hockey 2011 for iPhone”, plus the risk of click fraud is reduced hugely.
I could be wrong though (and I really hope I am!), and there may be a ton of advertisers who discover that $2/click is great value for them and inventory might not be a huge issue. That would indeed be an awesome thing!
Andrew: definitely legitimate points. We don’t know the details of the iAd program and how the partnerships work so its hard to be sure how they are going to fill all those spots.
One counterpoint: I doubt that pricey apps are going to want to include iAds since users feel that paid apps should be ad-free (and legitimately so).
By the way, looking forward to hearing more from your blog. I know I run into the same dilemma all the time, commenting on someone else’s blog and thinking “wow, I just spent half an hour, why haven’t I posted to my blog in a while?”
Oh yeah, actually the 9.99 was a really dumb example, haha oops. I should have said free games like the lite versions of games by more established companies. But yeah, good point, doh!
This would be great but this is why it will not happen
If your income from the 2000 users that will click iAds in your app is around 200K, Apple will charge for this around 300K. In order for somebody to pay this money, the company has to have an income resulted in, let’s say, 400K.
So 2K users, on average, should generate an income of 400K. That is 200$/user/year. Otherwise this model does not make sense.
This is a big number to be achieved.
Dragos: not sure where you are getting your numbers… Under the system I described, how would 2000 unique users tapping-through generate $200k a year? Apple’s system certainly charges a very high premium but not *that* high.
Update: just to be clear. You seem to be indicating that somehow $300k will only give advertisers access to 2000 unique eyeballs. I don’t see how that could possibly be the case. Indeed, 2000 taps a day = 720k taps/year = $1.4 mil/year. $1.4 million is a lot but that is also a ton of taps (probably from mostly unique users).
You said you have 2000 sessions per day and you estimated 216k
I said I have 2000 sessions, yes. To make $200k I said I would need to bump that up to 10k sessions and 10k sessions/day != 10k users. It probably means more like 40-80k users since it isn’t the same users every day.
[...] Olson se pokusil spočítat kolik by vydělala jeho aplikace Grades, pokud by použivala iAds (Mimochodem Jeremy píše velmi [...]
Jeremy, you are too optimistic.
You calculate that you will get 1 ad per session. But its not guaranteed. You can get 1 ad per 10 sessions (and its more real).
Michal: you could be right. It depends on how many ads Apple can sell. Thats why Apple is selling 1-10 million dollar packages to start off.
[...] 2.0 we will be experimenting with iAds and in-app purchases to generate more sustained income (see Jeremy’s post on iAds 1 cent per impression and $2 per click). Because we can’t afford a traditional marketing campaign, our marketing strategy will [...]