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M-Pulse ANALYSIS: inneractive Cracks The Code On Mobile App Monetization

Topic: Media, Mobile Apps | Author: Peggy Anne Salz | Date: April 5, 2012

At M-Pulse Rob Woodbridge and I catch up with Itay Gadot, VP Marketing at inneractive, to dissect app monetization models, debate the realistic range of eCPMs (and revenues) developers can expect and discuss the increasing (and surprising!) importance of rich media ads in the marketing mix.

The interview is entertaining and hands-on, in part because Innteractive has seen the market from all the angles. Founded in 2007 as an in-game ad network, inneractive has since evolved into a mobile app monetization exchange that pulls together the resources (and reach) of 100+ ad networks and local premium agencies.

To round out the picture (and the ecosystem) inneractive has also cleverly forged ties with development platforms such as Corona SDK, a complete solution for developing across platforms, OS versions, and screen sizes; Marmalade, a software allowing developers to build and distribute cross-platform applications; and Unity, a development environment for Web, mobile and console. These alliances insert inneractive as the de facto monetization layer on top of these already advanced development environments. Smart!

Another ace in inneractive’s hand is an approach that understands the last thing mobile developers need is more complexity. Write once, run everywhere? Well, how about insert once, monetize everywhere?

This is certainly where inneractive is placing its bets, and raising the stakes. The key here is the inneractive cross-platform SDK, one line of code developers can insert into their apps to monetize them across all the ad networks and agencies that work with inneractive (100+ and counting).

The deal for developers is a 65-35 split (after agencies take their share) in favor of the developer. If a third-party (such as a platform development environment) is involved, then Itay tells me inneractive feeds that stakeholder out of its 35 percent share. The developer keeps 65 percent — full stop.

Where the money is

inneractive - The App Monetization ExchangeThe vast majority of apps are free because ad-funded is the model that adds up. (No pun intended). As Itay puts it: Apps is “where you can make more money when you provide it as a free product, than as a paid one.” To make his point Itay walks us through the numbers.

Let’s say you go with a pay for download model and a per app price of US$0.99. Generally, a developer will make about US$0.70 from each download. “But if you go to the ad-funded model, then you’ll have a much larger deployment….and create revenues on a monthly basis from the same applications.”

Do the math — as Itay does — and freemium model pays off because developers can make money on premium features (example, an upgrade from a free cut-down version to the paid full version). “Let’s say 5 to 9 percent is the conversion between the free and the paid-for version, then you have 9 percent (maximum) of the entire inventory that has  upgraded to the premium version. Meantime, the rest of the 90 to 95 percent [of the inventory] is still generating money because the apps are free, but they’re also ad-supported. That’s the magic.”

Itay also maps out the differences between a mobile ad network and a mobile app monetization exchange .

One, an app monetization exchange like inneractive, which works with a lot of ad networks to choose the highest paying bid, does not require developers to manage multiple ad networks on their own. The exchange does this “automatically.” To ensure transparency and visibility into this process— and the pricing— developers can see what each ad network is bidding via a dashboard.

Two, most ad networks typically focus on a specific region, limiting reach if you want to monetize or market your app across multiple markets. At the other end of the spectrum,  global ad networks will offer developers coverage, but might also deliver lower fill rates and eCPMs (effective cost per thousand impressions or the effective cost per thousand ad impressions displayed). I can’t comment based on first-hand experience since my own series of road tests — though relevant — focused on other offers and approaches.

Getting rich on rich media

During our interview Itay shares some frank insights on the current range he sees for eCPMs. In the case of display ads, the “range will be somewhere between US$0.50 and US$2.50 or even UD$3.00.” This, of course, depends  on a laundry list of variables including operating system (OS), geography and category of the app.

Meantime, rich media is making significant gains. Itay reveals he is “seeing a lot of campaigns that use video,” as well as expand/collapse banners that encourage deeper brand interaction. “The CPM is amazing, between US$5.00 to US$20.00. This is where it’s going!” And this is also why the inneractive SDK supports rich media, and not just in-app display advertising. Opportunity is knocking…

So, what’s next?

You’ll have to tune into the video interview (below) for a more detailed road map.

Meantime, let’s just sum it up by saying inneractive will support the delivery of “hyper-localized ads,” focus more on in-app search and optimize its monetization tools to support virtual currency. And all these monetization verticals will be automated and  optimized by using the one line of code SDK that is core to inneractive’s USP.

My take:

One code (ring) to rule them all? As I point out in my post-interview chat with Rob, how you monetize your app depends entirely on your business model. For some developers, particularly ones short on resources and patience, inneractive’s single line of code and singular focus will no doubt be perceived as a huge plus. After all, not everyone has the capabilities to micro-manage their app monetization, especially now that marketing  models are more high-maintenance. Hyper-local. Device-specific. Virtual currency. Rich media. There’s an ad (network) for that. (I’m purposely playing here on the Apple ad slogan  ‘there’s an app for that’…) That’s where inneractive’s simplicity could play in its favor. Significantly, inneractive ‘gets’ ETDBW (which stands for Easy To Do Business With), the concept that has its roots in the milestone business book Customer Service On The Internet by Jim Sterne. The key takeaway: companies that make their money from online commerce must be ETDBW and make it as frictionless as possible for customers to order and pay for goods and services. Taken in context of today’s app explosion, the ability of companies (like inneractive) to offer developers (and marketers) a frictionless way to manage the monetization of mobile apps may well be the capability that separates the leaders from the laggards.

Check out Episode #11 of m-pulse here.

Next week we delve even deeper into the developer ecosystem. Check out UNTETHER.tv for the full-length interview – and I’ll provide additional analysis in a companion post here at MobileGroove. If you have a good company or a great story, then submit it for consideration (peggy@mobilegroove.com or rob@untethertv.com). It may be that we include YOU in an upcoming segment of the show.

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