Under the Radar

Under the Radar 45: Ads ★★☆☆☆


  welcome to under the radar a show about

  independent iOS app development I'm

  Marco Arment and I'm David Smith under

  the radar is never longer than 30

  minutes so let's get started so today we

  wanted to talk again about the App Store

  and about how at the App Store is

  changing over time and especially around

  this time when iOS 10 is coming out and

  things are changing and especially this

  year where it seems like for the first

  time we're having all this change and I

  don't like tumult in the App Store where

  we're getting subscription of my model

  of changing their search ads coming

  they're purging old ad apps from the App

  Store they're changing app review review

  timing all kinds of things are changing

  in the App Store and all that change

  recently made me take a look back and do

  what I like I love doing most which is

  making a chart of course any time I kind

  of feel nostalgic or curious

  I'll try and make it to make a chart out

  of that and so what happened I did and

  this is a lot of we're gonna start

  talking about it's an article I wrote

  called evolving apps for business models

  which I'll have the link to in the show

  notes a lot of these things I feel are

  so easy to get stuck on like the way you

  feel now and these slow gradual changes

  are hard to really pin down for like

  what's actually been happening in the

  App Store because you know it's been

  quite a while since I've been it I

  submitted my first app I think my first

  app I submitted almost eight years ago

  and a lots changed since then

  and the interesting thing that I found

  is when I went back to my all like my

  app store sales data as far back as I

  had kept it and honestly I really wish I

  had my data all the way back to eight

  years ago but I just don't like I

  consolidated into a new like reporting

  system only like three or four years ago

  and certainly have dated back to then

  but then nevertheless you should release

  that oh it's awful it is it is one of

  those classic projects which I'm sure

  any developer can appreciate where it is

  it is designed to work for nobody but me

  like it like I do weird things it's a it

  makes no sense to anybody but me but for

  me it's perfect and like I have to run

  like these six scripts to get all the

  data in and the way I like it but it

  works for me so I would not recommend

  if you'd looking if you're looking for a

  sales and reporting system I'm sure

  there are many great hosted providers to

  do what you want to do don't roll your

  own I can tell you it's terrible but if

  you have this data you can go back and

  look at it

  the most striking chart and I think the

  thing that is most strongly drawn

  attention to this article was I did a

  chart of the percent of my revenue from

  three different sources from an I

  purchase from paid sales and from

  advertising and the truly remarkable

  thing from that graph is the way that

  advertising has just been steadily

  clawing away at paid sales over the last

  four years to such a in such a linear

  and clear way that when I first saw it I

  was like wow like my date is broken like

  there's no way there's this linear of a

  progression like I'm doing something

  wrong in my analysis but turns out check

  the data this is what it is like I went

  from a period in the beginning of 2012

  where only about 10% of my revenue

  kimkim advertising and now it's getting

  close to about 80% now my revenue comes

  from advertising and interestingly over

  that period in our purchased in revenue

  has remained almost they almost constant

  like not quite it's certainly gone up

  and down but roughly it's been hovering

  around 15 to 20 percent of my revenue

  and that's kind of fascinating to me

  because it shows how in sort of stark

  numbers how the App Store has been

  changing in a way that I kind of feel

  that this has been changing you know

  it's kind of the old thing we've talked

  about for so long about the race to the

  bottom about lack of trials or the death

  of a paid model or repeat the devaluing

  of software like all these things that

  you could kind of the things that we

  talked about a software developers I

  always find it reassuring where rather

  than just kind of like wishy-washy

  talking about things to actually look at

  the numbers and say like is that

  actually true and yeah like as somebody

  who has been doing this full-time who's

  been doing it with a lot of apps who's

  been doing it probably more more

  importantly who's tried about every

  business model you can think of the ones

  that have worked over time has changed

  and the business model now that seems

  most reliable for me is advertising and

  paid sales are now

  vanishingly small percentage of my SAP

  and even more crazies when I look at the

  chart you can see part of what makes a

  paid sales so terrible because there's

  these massive spikes where I launched a

  new out big spike in paid sales and then

  it just falls off again and that more

  than anything else the thing that I you

  know really don't like about paid sales

  and how just volatile that is when

  you're trying to make a living from it

  yeah I mean we've all I mean anybody

  who's ever had a paid app in the store

  has seen this exact same pattern before

  of like you know if you're lucky you

  have the launch where you have a decent

  spike and then no matter what no matter

  how lucky you were at launch it just

  drops off after a few days probably at

  most and starts to level off into you

  know basically a slowly declining

  plateau after the Hat of sadness and and

  uncertainty and what I found is that

  every time you know if I have a paid app

  suppose suppose I do like a 2.0 or 3.0

  like a major update even if they get a

  lot of press I might get spikes on that

  day but it's never as high as the

  initial launch spike and you know and

  like every every spike you have

  subsequent to an app's launch is usually

  smaller than the one before it

  to the point where now like even makes

  your holidays don't really impact me at

  all like used to be like Christmas used

  to be a major sales day and and now like

  paid apps don't even do that well it's

  it's it's kind of sad really but I guess

  it does you know as you're saying here

  it really does reflect the the reality

  of what people are doing a regardless of

  how we think things should be or how we

  wish things would be this shows you know

  what people are actually doing how

  people are choosing to spend money or

  not spend money in the App Store I think

  is very clear here yeah and I think it

  speaks to you also how I look at this

  graph and I think to myself how I glad I

  am that I've been willing to experiment

  a lot because the thing that I I think

  is most dangerous in the App Store is

  not being flexible and not trying new

  things and try not moving around because

  they've definitely been times as I've

  gone through this we're like oh my god I

  really want to do that do I not want to

  do that dwell and it's interesting to

  see so clearly that if I had

  and if I'd been stuck on one model if

  I'd said like no this is how I'm gonna

  do sell my software you know it just

  wouldn't have worked like if my revenue

  was just my paid sales number for

  example like if that's what I'd stuck to

  and committed to you know I would be

  consulted at this point almost certainly

  I would or I'd be working you know a

  nine-to-five job somewhere like there

  just is there it would I would not be

  able to live on that near diminishing Li

  small part of the pie now and so by

  being a little bit flexible on that it's

  you know reassuring that like that was

  the right choice because at the end what

  I wanted was to be an independent to be

  able to make you know make that software

  I want to make and then make a living

  from it and to do that it's like this is

  this is what this is what that takes and

  this is what that looks like now I

  suppose yeah I mean you know if you look

  at your graph the one that's not like a

  hundred percent graph but the one that's

  just like a pure spiky graph it's it's

  interesting to note that like you

  basically are making a pretty similar

  salary steadily since about 2013 and if

  you subtract the advertising from that

  you see what I think most developers

  have seen since 2013 which is a slowly

  declining curve and and a lot of sadness

  as things decline and seemingly can't

  get back up so really which were you

  know I think which we're gonna talk a

  little more about it seems like

  advertising is kind of not maybe not

  saved you but certainly has been a

  massive part of your success over the

  last few years and it seems like that is

  the kind of the missing part that a lot

  of us Indies have not had over the last

  few years to keep it steady you know

  instead we only have those paid sale and

  maybe if we're lucky in our purchase

  sales like what you have but they have

  about the same shape that your graph has

  which is everything's getting harder and

  harder and harder and money's just

  getting lower and lower over time and

  the willingness to experiment is

  literally what's making your business

  now because you know you can experiment

  with different apps but if everyone

  experiments with different apps but only

  one or two payment models you're missing

  out and part of the experimentation like

  you know in this in your case

  experimenting with ads and various and I

  purchase schemes has really helped you

  a bit over anybody who just tried to

  sell an app for a few bucks and hope

  that it works because that can work but

  it's certainly a lot harder to make that

  work and I think over time it's working

  less yeah I think it speaks to also

  something that I've found that's like an

  unintended benefit of advertising for me

  is the reliability of the income that it

  gives and that's certainly not to say

  that it's always been this like it's not

  the same day-to-day and advertising is

  notorious for especially the first day

  of a new financial quarter and

  especially the first day of a new year

  falling off cliffs because everyone's ad

  budgets kind of a big a you know they

  spend them up and then you get to the

  end of the month day and if a quarter

  and they're like oh no we got all this

  money let's just spend it and your rates

  go up nicely and then the first you know

  like you get you hit that January

  February March and then all of a sudden

  like if they just falls off so it's not

  like it's completely reliable and once

  you've been through one of those crazy

  cliffs once or twice you kind of know

  what you're looking for looking at but I

  find fascinating is on a day to day

  basis these my sales income from paid

  things where I'm relying on somebody to

  open their wallet and hand me and me $2

  the variability I found between that is

  is it always been way higher than from

  advertising base and I think it's

  largely because advertising is

  functionally a measure it's like this

  rough measure of the engagement of users

  in my application you know how many

  times they're opening it how long

  they're opening it like it's that

  overall usage number and the that number

  is very stable to a certain point that

  you know you hope you had your app has a

  I guess it brings on more users than it

  loses as you go you know suit that you

  want you need those downloads at the

  beginning and then you have some kind of

  retention over time that you know some

  people will stop using your app and then

  they're replaced hopefully by new people

  and if that number is gradually working

  its way up in order for your income to

  go down like obviously the rates can

  drop which sometimes happens but usually

  they're fairly stable and so as a result

  your income just becomes fairly flat

  because it's only increasing or

  decreasing by the very slow adjustments

  from the amount of new users you get

  in the numbered users that you're losing

  and so if you have a big spike in new

  users it's like yay that won't actually

  make a big difference to your revenue

  that day though it's like it that read

  that ripped that spike gets averaged out

  over the next you know a few months as

  your daily active sessions or whatever

  the right measure would be slowly works

  its way up and you know say you make a

  change and people don't like it and they

  leave the app it's like that'll likely

  I'll be offset and the same thing like

  that that it's a gradual decline and

  that as a develop as an independent as

  somebody who makes you like who pays my

  mortgage with my app revenue that is so

  reassuring that if this feeling that I

  don't have to check my sales report

  every day and worry that you know it's

  like it is has this been a good weekend

  has this like for a while had apps that

  would do really well on Sundays and you

  know I'd have a sometimes I'd have a

  Sunday where it's something like my

  sales just wouldn't be what they were

  and it's like whoa like there goes 15%

  of my weekly revenue because it was a

  holiday or because there was an issue on

  the app store and payments weren't

  processing for a few hours which is

  something that's happened before and you

  look at those whoa this is really scary

  at least with advertising and that kind

  of a model and you'd say in some ways

  subscriptions have a similar kind of

  feel to them but it's lovely to have the

  sense of these slow and slow increases

  and slow decreases over time rather than

  these huge spikes that are up and down

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  supporting this show all right so we've

  been talking about ads and your

  transition to a diversified income

  stream that includes ads in your apps

  and this got me thinking a while back

  you know maybe I should try ads in

  overcast because the problem I was

  facing so I wrote this big blog post

  kind of explaining all this in more

  detail but overcast has had you know

  three business models now though the

  first year roughly it was you know I

  always wanted to be free upfront because

  I have a lot of reasons why I want this

  why basically market share is more

  important to me than total revenue for

  this app I really want max

  market share and I'll try to get enough

  revenue somehow once I have that so I

  have the very first year I have you know

  free upfront and you get some of the

  features but you don't really get the

  best features things like smart speed

  and voice boost and like full playlists

  and everything like it was pretty

  limited and it was really annoying with

  with like how much in the app it was

  limited it basically it was not a very

  good app in this limited state and yet

  the vast majority of my users were using

  it in that state because most people

  didn't buy the one-time $5 an app

  purchase to unlock the cool stuff so

  trying to combat that problem about a

  year ago I switched to every feature was

  free and you just pay me what you want

  basically I did a monthly subscription a

  dollar a month and you could buy it

  ahead as long as you wanted it was not

  renewing it was the you know the old

  kind of solution where it doesn't auto

  renew so you basically just you know buy

  it for five years if you wanted to give

  me a bunch of money or just buy it for

  three months if you wanted to try it out

  but you didn't get anything for that and

  I was kind of banking on people's

  goodwill and it did work just not enough

  it it did work enough to get me a little

  over like I think just about one and a

  half percent or so or two percent

  roughly of of users to actually pay and

  subscribe but that was not really enough

  to really bring in meaningful revenue

  over time so instead I switched about

  six months ago I added a couple of

  features that had been very highly

  requested the main main one of which was

  dark mode a whole dark theme of the app

  i out of that too the app a that six

  months ago and that I added it only for

  people who were paying the voluntary

  patronage and that was weird for a

  number of reasons I mean first of all

  now it's still called patronage but now

  you get perks and so that's a little bit

  odd a lot of people have ejected to the

  terminology there and I understand why

  and then a lot of people are mad because

  people who had bought the original

  five-dollar unlock everything purchased

  the year earlier were very mad that here

  was a new feature that they did not get

  they were extremely mad and I heard from

  them constantly even literally for the

  last six months like it never stopped I

  kept here

  from them and so I don't want to make my

  early customers so mad and then and then

  the final problem was even that while it

  did provide a nice bump to the number of

  people who were paying it didn't provide

  enough of a bump to make it really a

  sustainable good income so I could

  sustain the service on that just barely

  but but I really need more to to both do

  what I want to do with it and to justify

  pouring a lot a lot of my time into it

  rather than having to start exploring

  new projects so I decided ads were worth

  a try because as you said like ads make

  a lot of sense now you know there's a

  reason why so much that we that we

  consume and use in today's technology

  world is ad funded there's a big reason

  for that and that is that you know you

  basically anybody can use everything

  they want for free you just have to

  tolerate these ads and most people don't

  mind ads you know I don't know anybody

  who loves ads but most people don't mind

  like they know people will give will

  take that trade off if the trade off is

  I would rather not pay but I'll take ads

  or you can pay and then you won't see

  ads most people will choose the the add

  option there because they don't want to

  pay and that's fine it seemed to make a

  lot of sense the the the main risk to

  this was of course that here I had this

  app that is very well regarded by a lot

  of people very it's used by a lot of

  people many of whom were very strongly

  opinionated and it looks you know had a

  good design you know has it has a good

  design it looks nice and a lot of people

  were going to see me triads and I've had

  various opinions of ads over the years

  and again I I don't love them either but

  I consider them kind of the the

  acceptable trade-off for what we're

  doing here so I was very very scared to

  release this this was this was the most

  nervous I've ever been about really seen

  anything since I've done a 1.0 and I

  released it and overall the the reaction

  was better than I expected it was it's

  not great I wouldn't say it's a great

  reaction but I would say it's a lot less

  horrible than I was predicting and that

  I was prepared for my star rating is in

  the crapper

  this was the this is the first time

  overcast has ever had a star rating

  below four-and-a-half I believe now I'm

  at two and a half something like that

  so my ratings destroyed and that's gonna

  hurt me a lot I hope that's only

  temporary we will find out I'm getting a

  lot of angry emails and tweets and lots

  of them lots of people who are not very

  kind about about this change but on the

  other hand I've gotten a whole lot of

  people who are totally ok with it and

  like that there's no longer this weird

  difference between like special features

  that patrons get and you know and this

  weird terminology of patron eggs that

  even though it is also including special

  features so now I simplified things so

  now you have these ads and if you don't

  want to see ads and then down the road I

  might add a few little things here but

  if you don't want to see ads you can buy

  the annual subscription which is a new

  Auto renewing kind and it's just called

  overcast premium so no more like patron

  eggs wording like you know no more

  messing with ideas of you know goodwill

  or charity over in that area because

  that was as I said problematic for a lot

  of people now it's just called premium

  you pay ten bucks a year you get ads

  this is a simplification even from the

  previous subscriptions they were a

  dollar a month so it was twelve dollars

  a year if you paid annually this is even

  cheaper ten ten dollars a year because

  it's nice and simple you know and I even

  adjusted on all the different currencies

  around the world so that like a lot of

  the Euro based ones we're gonna be like

  ten fifty euro and I said now just you

  know $9.99 is fine or 10 even whatever

  it is so made it very simple much

  clearer wording and a much honestly

  simpler business model there's ads in

  the app if you want to get rid of them

  you pay me ten bucks a year the the

  amazing thing about this is that I get

  recurring revenue from anybody who's

  actually using the app so I'm getting it

  somewhere whether it's the ad or whether

  it's subscriptions I'm getting recurring

  revenue from usage and it's exactly what

  you said earlier David it's like you

  know I'm incentivized to keep people

  using the app and to make the app good

  enough the people keep coming back and

  using it I don't I know longer have an

  incentive of like what am I gonna do to

  push people over the over like the next

  big version or what kind of crazy

  features can I come up with that'll make

  pay and you know anger everybody else

  like I really have to make the app

  better now and as long as I do that I

  make money from everybody who uses it

  and it's not like a massive amount more

  money but it is more and and the ads you

  know it's a little early to say how well

  the ads are working because it's only

  been a few days since I've had them in

  but even in these few days I've gotten a

  ton of more of more subscriptions it's

  not you know I haven't like doubled or

  anything and but that might happen who

  knows I haven't doubled yet but I

  certainly have a lot more subscribe or

  subscribers these are also now all in

  the new apple autumn renewing system so

  that means a year from now if they still

  subscribe I will get 85 percent instead

  of 70 percent from them which is a big


  and the ads are kind of making up the

  difference of you know trying to give me

  some money for everyone who's not a

  subscriber and you know right now the

  amount of money the ads are making is

  fairly modest but you know it's still

  very early and I still could experiment

  with different placements of the ad

  different formats of ads things like

  that and I think it's ended up working

  out the I mean I'm going to have to

  figure out how the heck to make

  everybody happy enough to stop giving me

  1 star reviews and sending me nasty

  emails because my star rating is as I

  mentioned down from four and a half to

  two and a half with a very large volume

  so I don't know about that but the rest

  of it seems to be working ok sure and

  the reality is - it's the awkward thing

  of so much of this is coming I think

  from the change in business model like

  if this was if the app that you just

  released were overcast 1.0 I doubt you

  would have that same negativity because

  that's just the nature of these things

  where people are like oh I had this

  thing it's like you were giving me this

  great app for free with nothing in with

  no impingement at all upon me now it's a

  free app that is impinging on me

  slightly by showing me you know ads at

  the tops of some of the lists and so

  that change it's like it feels like

  you've taken something from me which

  we've done really but you know that's

  the way it feels I imagine and so you

  know over time I suppose in some ways

  it's one of the nice things where well

  one day I would love for the App Store

  to do like a rolling average of reviews

  the next time you do an update your


  we'll reset again and you can hopefully

  put a lot of these one stars behind you

  you know and just sort of go from there

  yeah I think that's really you know what

  I'm doing here I mean and a lot of

  people have asked why I why I didn't

  release this as part of a bigger 3.0

  update and I think the results speak for

  themselves if I have leased this as part

  of a whole bunch of other features and

  changes and a big push similar to

  Apple's headphone jack thing the story

  would have been all about the ads and

  the star ratings would have been all

  about the ads and the reviews would be

  all about the ads and I feel like that I

  I'm better off making this transition to

  ad based now while I'm still in the

  two-point X series and then when I do a

  big 3.0 release down the road hopefully

  not too far down the road but when I do

  it down the road this story will already

  include like people who write about

  overcast people who review or guys

  people who use overcast will all already

  know okay this happens I had driven so

  that that'll be old news you know just

  like the headphone jack thing and the

  iPhone this week you know we all knew

  about it months ago so now it's old news

  I'm real kind of accepting it and moving

  on and just evaluating the iPhone on its

  other merits that's how this is gonna be

  I think with overcast 3.0 that you know

  I'm going to be able to now do things

  freely and and make the app great on its

  own merits and the story won't won't be

  just about the ads when I finally launch

  it and perhaps even more over it seems

  like imagine no not to speak for you but

  there's a slightly better incentive for

  you to really put that work into 3.0

  because if it if it feels more

  sustainable and viable it's not like

  doesn't feel like you're just putting

  more time after something that kind of

  is slowly decaying over time that you're

  just kind of you put all this effort

  into a 3.0 all these new features all

  those big updates and then it's like and

  it's not actually gonna make any

  difference at the end of the day like

  you could just leave the app as it is

  now and hope for the best that is

  entirely correct I mean I I was really

  you know not not in a very good

  psychological place about the app before

  long stats because revenue was just flat

  and and flat at not a particularly great

  level and I didn't really know what else

  to do it felt hopeless and now I have

  this big influx of subscribers and I

  have this nice little kind of side money

  from the ads

  and that is amazing and that has a

  little fire under me now you're totally

  right it has totally turned around my

  motivation I'm not thinking of like Oh

  what other apps could I make to make

  more money no now I'm just thinking how

  do I make this even more amazing and I

  have had an amazingly productive few

  days since since launching me HAP's

  arson selection the ads rather of just

  making the app incredibly better like

  getting a lot of stuff done on 3.0

  working through like some navigation

  changes and making some like custom

  animations and you know cool stuff like

  that that that you that you can kind of

  only do if you're making money or if you

  if you think you're going to make money

  I don't have like investing into it not

  just like bullet point features but like

  polish and fun new things and rethinking

  some of the design aspects and and you

  know I'm making I made the watch app a

  lot better you know for 3.0 also and now

  I can think about adding it today widget

  and all this bogus that now just called

  widgets all this stuff that I can now do

  because there's money coming in and at a

  reasonable rate now that I can I can be

  relatively assured of its future and and

  that's something I couldn't say before

  and and that made me you know honestly

  quite sad pretty much all all summer as

  I watched the sales just kind of

  flattened but now things have turned

  around and I am kind of on fire now and

  I'm like plowed through and doing all

  sorts of great stuff and it feels great

  and I think in the long run you know

  even though right now it is quite

  painful to see my rating go goes so far

  down the tubes and to get all these

  angry messages from people but I think

  long term it will be better for my users

  overall yeah and I think the thing that

  I love so much about this change is like

  you answer with are what they are like

  you can sometimes I feel like we can

  moralize about them and get all like

  fancy about it but at the end of the day

  they're just a tool for businesses to

  make money and what I love though is

  that it lets you like with the things

  that you're talking about the thing that

  I love about that is it's allowing you

  to not have to make this big case of

  like I always hate the three-point owes

  that feel like it's like the kitchen

  it's like everything in the kitchen sink

  right it's just I have to have these I

  have I did all my good features in

  version 1 I can made up some other stuff

  for version 2 version 3 here's just

  everything else I could think of is just

  an assault by feature checklist it's

  like now you can just say you know I'm

  just gonna polish I'm just gonna keep

  polishing this and

  make it better and better and better

  because I'm not trying to upsell you on

  a paid upgrade I'm not trying to do

  something like that I just want to make

  the app as like the absolute best it can


  and that sounds like an awesome place

  for you to be it really man it feels

  great I mean you've been here before I'm

  sure like it feels great and so I'm I'm

  just so happy to finally kind of be like

  be back in it again and and to feel good

  about its financial future again it's

  awesome all right well here's hoping it

  goes well and we're out of time this

  week thank you everybody for listening

  and we will talk to you next week bye