There’s an app for that(Part 1)
If you’ve been keeping an eye on the news recently you may haveseen applications or ‘apps’ flashing up a lot. Most recently thesimple yet addictive, ‘Flappy Bird app’ and Instant Messagingapplication ‘WhatsApp’.
The most startling feature of these stories is the sheer amountof money these apps are raking in. Flappy Bird was making $50,000 aday before its creator, Dong Nguyen, removed it from digital storesas he saw it as an ‘addictive product’.
More recently WhatsApp, the cross-platform messaging service,has recently been acquired by Facebook for $16 billion. The appwhich was developed in California, was released in 2009 and in 2012was sending and receiving 10,000,000,000 messages a day.
These figures may seem like one-offs in the grander scheme ofthings, but the reality is, there’s plenty to play for when itcomes to the app business. Companies will compete for literally a1cm wide bar at the top of your phone which they call ‘ad space’.Facebook’s main attraction to WhatsApp was the access to450,000,000 users on their database.
One of the main questions is, how are apps in particular freeones making so much money? Well you can see the answer fromearlier, it’s all about advertising. Advertiserstraditionallybuy app ads according to eCPM, which means effective cost perthousand impressions-the price to show an ad to 1,000 players.Advertising networks like Adfonic, which sell ads across many apps,quote a standard eCPM of $1.20, but the rate goesup to $5 for app users in Western countries.
It’s important to remember that companies are paying for‘impressions’ not click-throughs. The different tech giants all usethis system and the stats are interesting: Google wins therace as they have 900 million Android users, meaning on averageeach developed app is downloaded 60,000 times. This doesn’ttranslate directly to revenue. Apple does substantially better onthis front, each download on an apple device would earn a developer$1. If you think how successful apps can get in a short space oftime (sometimes overnight) we can see, we really are dealing withcrazy money!