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The irony of ad-sponsored apps

Money

Here’s a thought, or rather a theory, that we’d love to run by you.

It starts with a little piece of irony. Most advertisers want people to buy their product, i.e. pay for it. When an app (on any platform) is free and sponsored by ads, a large portion of its user base will be people who want something for free. If we’re allowed to generalize here, they don’t want to pay if they can avoid it.

Spotted the problem yet?

How do you sell to people who don’t want to pay? This dilemma will be even more pronounced in apps where there are paid, ad-free options in addition to the free, ad-sponsored version. The most valuable customers for advertisers would be the ones who paid for an app, not the ones who opted for the free version.

This is a problem that in-app advertisers will have to somehow overcome if they don’t want to simply waste a large portion of their advertising efforts, which means:

Promoting something free.

This is of course not a new trick, but it makes even more sense when advertisers are targeting someone inside a product that is free. It essentially becomes an exercise in simply getting customers in the door, hoping to sell them something once they’re inside.

The question now is, how effective is that, really?

Yes, this was a super-short post, but we thought it was an interesting thing to bring up. What are your thoughts on this?



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12 comments
Egga
Egga

It's an interesting point. However, with a popular game like angry birds, millions of people play it every day. If only a small percentage go to ads (say 0.2%), then they make a large sum. Also, there should be more pay-per-impression ads with free software. For example, between levels, you could show an ad for 2-5 seconds. This would especially would work with well known brands.

Carrie
Carrie

Getting more and more relevant everyday. Getting people to pay for apps isn't the key. Its the advertising you send them with the first update. Paying for addons etc is were the cash is.

Fraser D
Fraser D

With so much poor quality out there having the opportunity to judge and try before you buy is appealing. Web users are becoming used to waiting while a few seconds of there life is wasted watching a dancing soda can or a singing cow try to sell them cheese before being allowed to view a free article of sometimes dubious quality. Sometimes the ads are more entertaining than the content.

Mark
Mark

I don't think this is really an issue. Advertising is known to be effective - it wouldn't exist if it wasn't. And just because someone doesn't want to pay for a 69p iPhone app doesn't mean they won't be willing to pay for anything else either - they have, after all, bought an expensive phone on which to use their free apps. People's willingness to pay for something isn't based on absolute value (ie, what it costs compared to other things), it's based on perceived value (ie, what it costs compared to what the buyer perceives it to be worth). A lot of phone apps are disposable; they have little lasting value to the user and hence people are reluctant to pay even 69p for them. But the things being advertised on those apps are not necessarily the same, many of them are products or services which do have perceived value and hence will attract paying customers. The other point is that most phone advertising is cost-per-click, so there's no wasted expenditure - if someone isn't interested in the ad, then they don't click on it and it costs the advertiser nothing to show it to them. The advertiser only pays for the small number of people who are interested enough to click, and it only takes a relatively small proportion of those to turn into paying customers to justify the ad expenditure.

scpi
scpi

funny post... and true it all depends on the conversion rate i guess

Dave
Dave

When it's floating around in conversation this sounds like a big problem, but when you try to nail it down, it seems like most publishing media have dealt with this and survived. Broadcast, ad-supported TV vs. paid, ad-free movie channels, for example. It's not so much that 'the entire industry of app developers needs to surmount the problem' as it is 'some publishers will find sweet spots and some developers won't'. The last few blog posts are sounding a little different...got a new writer?

Arron
Arron

I think trying to advertise a phone app via an "app ad" (if that makes any sense) might be silly.. the viewer may not value apps enough to pay for them. But I disagree that using the free version of an app reflects general spending habits. One may not purchase apps, but would happily pay money for the food/car/laptop they see advertised. "One man's trash is another man's treasure"? Not that I'm suggesting apps are trash, more that what is worth spending money on is down to the individual.

mpkossen
mpkossen

Great post! But how do you let a creator of a free ad-sponsored app know you'd rather pay for the app and not have the ads? I loath the ads in Angry Birds for Android, but there's no paid version available (that's ad-free).

person287
person287

Never really thought about that buy yeah, if you aren't going to buy a 69p app you're probably not going to buy a new sky contract or whatever!

Pingdom
Pingdom

@Dave: Good points indeed. It's not a new problem. However, in the "internet era" the habit of getting something for free has arguably become much more established in the mindset of people out there. We're getting so much for free, and there are SO MANY ads out there (that's another topic for discussion, ad fatigue...). New writer? Nope.

Pingdom
Pingdom

@Arron: Fair points, especially "what is worth spending money on is down to the individual". A we pointed out, we were generalizing.

Pingdom
Pingdom

@mpkossen: Thanks! And yes, if there is no paid option (or a better, different paid app), part of the reasoning falls down. The "worst case scenario" for advertisers should be when there is a paid AND a free version of the same app. At least in theory. If anyone's seen any actual data on this we'd love to know. :)

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  1. [...] Pingdom: Most advertisers want people to buy their product, i.e. pay for it. When an app (on any platform) is free and sponsored by ads, a large portion of its user base will be people who want something for free. If we’re allowed to generalize here, they don’t want to pay if they can avoid it. [...]