Under the Radar

Under the Radar 11: Ad-Funded Apps


  welcome to under the radar 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 this

  week we're going to talk a little bit

  about I add an ad driven app revenue

  models because there's some news this

  past week that I ad was shutting down

  part of its offerings and the it's

  showing on what's called the app Network

  and a lot of people it was very

  confusing message and a lot of people

  kind of thought this was shutting down

  all of AI ad and it's kind of confusing

  as to what parts of I add are left and

  and David's you know since you have a

  lot of experience with AD funded apps I

  and and I think most most developers who

  most people hear from in podcasts and

  stuff don't have a lot of experience I'm

  you know most developers who in podcast

  and who have blogs and stuff are trying

  to sell paid apps or at least free apps

  with paid and net purchases and I I

  don't hear a lot of discussion from

  people who have much or any experience

  especially significant experience with

  app driven or with AD driven revenue

  models and apps and and you do so I love

  to hear a lot from you on this with your

  experiences and your thoughts around you

  know what's going on with ads what what

  kind of led to this point what the

  reality is of AD funded app development

  today and then what this what this

  announcement really means and what it

  might mean for you so but I definitely

  wanted to dive into a little bit at

  first like the background of where I'm

  coming from with ads and so like

  whenever I think about revenue for an

  application the first thing obviously is

  like you think about well how am I going

  to make money and you can really make us

  make money in three main ways like you

  can have an ongoing payment from

  somebody you know something like a

  subscription you can get a one-time

  payment from your youth from your

  customer where yunus which is the

  typical sort of like paid upfront model

  and then you'd have something where you

  get no payment from your customer and so

  you're either than relying on

  advertising where someone else is paying

  you for that customer to use your

  application or you have just no revenue

  at all in which case you're probably you

  know you're going for some kind of

  market share play or something where

  direct revenue isn't important to you

  and so why would you end up using

  advertising it's an application that's

  gonna have a lot of people and the

  majority of which who don't want to

  actually pay to use your application

  with money which is a lot of

  applications especially in the iOS App

  Store and so I've used advertising in

  almost all of my app or it for almost

  the entire like length of my history of

  being an app developer for I one of my

  earliest apps I even originally built my

  own app Network and like we're just

  trying to do direct sales for it and

  that didn't really work in scale and so

  I pretty quickly moved to I think back

  then this was probably in 2009 ish it

  was probably AdMob I think was the big

  one back then then at you know I ad was

  introduced in 2010 and so I jumped on to

  using that as quickly as I could and I

  had always did pretty well for me you

  know so apples it was apples platform it

  was nice and integrated into the

  platform and it did well you know I go

  it's got pretty good fill rates like

  which is the amount of times that I ask

  for an ad that actually get one back for

  me it was usually like three quarters to

  almost like 98 percent I think often for

  fill rates I had pretty quality ads good

  revenue and I was overall generally

  pretty happy with it like over time

  there the quality of I ad is certainly

  changed but I think it's probably more

  in some ways a reflection on how the

  store has changed in you know since like

  2010 we're now a lot of the ads are just

  for you know sort of like the candy

  crush a game of war kind of games where

  the it's all about trying to drive

  downloads for apps that are you know

  then use you know purchased to you know

  sort of to get revenue from people and

  so that's where most of my ads are for

  which means you know they're not it's

  not great they're not awesome things but

  at this point like perhaps or

  advertising probably makes somewhere

  between 40 to 45 percent of the revenue

  I get and it's definitely like the

  biggest source of revenue from my most

  important apps to me and so that's kind

  of a weird place to find myself now that

  I find that I add is going to be

  shutting down or closing or doing

  something dramatic

  in the next couple of and if I think by

  June or so it'll be changing and I don't

  think we know exactly what it's going to

  look like after that but it's definitely

  going to be different so III know that

  you know you talk about you talk about

  the fill rate and I've heard various

  things I've heard from people who aren't

  happy with I adds fill rate I've heard

  it is it getting worse over time um it

  varies and so this is one of those funny

  things with advertising like I've heard

  from some people who get like because

  it's all based the adverts did the ants

  that you get are always going to be

  based on the demographics of the people

  who you use your app and how they use it

  and some kind of you know secret

  algorithm that is trying to pair people

  up and so for my apps for like

  audiobooks and pedometer plus plus I've

  usually had pretty good fill rates um I

  wouldn't say they've gone down over time

  maybe there's some of the rates have

  gone down over time but those are even

  really hard to track because they're so

  cyclical like every January first my

  like advertising rates drop by at least

  a half because everyone's advertising

  budgets you know we're sort of all spent

  up until then and no one buys ads at

  first like the first couple weeks of

  January and so things like cycle

  dramatically but like I would say I had

  is it's it's maybe it's gotten done down

  slightly I think overall in the

  advertising market I think in a lot of

  ways things are going down and the weird

  thing did you then start having to like

  balance those like what kind of ads are

  you even talking about like most of my

  apps only do banner ads you can also do

  interstitials and all kind of and sort

  of more aggressive forms of advertising

  that completely take over the

  application until you watch a 30-second

  video or those types of things well

  which obviously get better and better

  rates accordingly right but of course

  annoy people more and more yeah I mean

  that's always a tricky balance with

  advertising is like what works is being

  more intrusive and more annoying and and

  like you can there are things that work

  that aren't intrusive and annoying that

  there's always this constant tension

  there's pressure to you know make a

  little bit more or to combat some other

  kind of downturn by just making things a

  little bit more annoying or a little bit

  more creepy and you know data privacy

  issues or things like that there's

  always these pressures and a lot of

  times people have to cave to those

  things in order to even survive to have

  their business to survive it's it's a


  tricky balance and in some areas like in

  podcasting right now we are lucky that

  podcast advertising right now is still

  very high quality and and that you know

  we're able to command great rates and

  have ads that aren't too annoying at

  because of the nature of the medium and

  the market conditions right now but apps

  I think are similar to the web in in

  that it's very very hard to get great ad

  rates for in-app ads I mean it have you

  found that to either to the case yeah I

  think so I mean it's every I set up say

  I'm so making almost half of my revenue

  from them so I mean there is money to be

  made there but yeah it's the volumes you

  need to make a living doing it is pretty

  substantial this may be the better way

  to look at it in much the same ways like

  with the web or something where like you

  say with a podcast like the number of

  listeners you have to have before you

  can have you know it's not a substantial

  revenue coming from a podcast is

  dramatically less than the number of

  users you need for an out you know for

  an application to have any kind of any

  kind of sort of real tangible revenue

  you're talking about probably you know

  tens if not hundreds of thousands of

  users a day of your application before

  you're going to be getting into that

  into into something that you could

  really like make a run at which is and

  they have to keep doing it all the time

  being in some ways it's nice because

  advertising is based on people using

  your application and so it's nicely in

  some ways it's nice I've always said I

  like that it aligns my people using the

  application with the revenue I get so if

  I engage people more if I make people

  really like the app and come back to it

  time and time again my revenue goes up

  which is nice but it still always

  creates all these weird tensions for

  like well what if there was another way

  that I could get people back into the

  application what if I sent them a push

  notification it said hey you know how

  you haven't checked your steps in a

  while maybe you should you've earned the

  new step bomb yeah like there's so many

  things that you start to get into that

  get cross all kinds of lines that like

  it's a really it forces you to really be

  thoughtful in a way that isn't is a bit

  weird like sometimes I like just the

  paid app that's the paid model which is

  nice because it's simple like in some

  ways I can just be lazy about it and be

  like well thank you

  money I gave them app like that's great

  that's nice and simple versus all having

  to really think about like does this

  cross the line is this like too

  is this too aggressive is this too

  annoying is this going to like work in a

  way that is going to ruin my reputation

  but like you could make me more money

  but really make the app not so good to

  use like it's some really hard questions

  that things like advertising force you

  dad to face up to well and I think you

  know among like the the kind of like

  Apple enthusiast community I think ads

  and apps are taboo that I you know you

  don't see people like Panik making apps

  with ads in them like the idea of the of

  like the the the high-end in the kind of

  craft app scene almost nobody in that

  scene uses ads

  in any apps that people have actually

  heard of and used like some people will

  have like a secret app on the side you

  know that like like like I've heard like

  it like David Barnard a tap cubby always

  talked about he has he has mirror app

  and that his you know that's like we're

  where he experiments with with revenue

  model stuff and they have ads and that

  that's fine but like you know you like

  you don't see like tweet bought five

  free with ads or pay to unlock them but

  that's you hardly ever see ads in that

  in that kind of like high-end app

  development community and I think

  ultimately I think that's temporary I

  think we will get to a point where ads

  start moving in just because the other

  revenue models are getting so much

  harder you know because I just like it

  is that's a really good point that like

  it does make sense for apps that are

  used frequently like you know if you

  have some kind of like quick utility app

  that is hardly ever used that look the

  kind of thing you keep on your phone for

  occasional use or maybe if you're

  traveling mean them something like that

  or maybe it's like a special kind of

  like unit converter that you only need

  four times a year but you're really glad

  it's there in those kind of instances ad

  funded apps probably don't make a lot of

  sense but if it's something like the

  like a newsreader where you're going

  into that every single day you know like

  then then and spending meaningful time

  in it then I think that makes a lot of

  sense and that actually have you found

  like is it possible for ads in in

  frequently used apps in a high pressure

  in an environment where there's a lot of

  pressure to keep the upfront price down

  like the a store might ads make more

  money for like daily use apps than a

  paid upfront model code I think probably

  I mean I think that's an analyst II

  that's why I do like why I have ads and

  so many of my applications it's because

  I that is a way to make more money

  probably than I would from paid apps and

  for I mean it's a bit I haven't done too

  many of these now because most of my

  apps I just I like my default is that

  the app will be free with some other

  form of revenue whether that's an in-app

  purchase or ads or probably both but

  back in the day I used to do the kind of

  way you'd have the like ad version that

  was free and the paid version that was

  you know you let you charge for and was

  like people could choose like do you

  want the ad free or the other one and

  there was a time when they sort of gave

  each other a run for their money but I

  don't know probably for the least the

  last three or four years it's been in

  almost entirely in the free like and I

  know this is my own behavior

  like that's in some ways the expectation

  for apps in the App Store now is that

  they're going to be free to free to

  download and there may be some other

  things that are have it either

  advertising or an in-app purchase later

  but if it's not free you just there's a

  massive wall and it feels like the wall

  is getting bigger and bigger now and so

  if you want to make your goal is to make

  it like a living from it from an app

  there's a very good chance that

  advertising will need to be something

  that you at least strongly consider if

  not implement and use in your

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  under the radar in all of real afm so

  getting back to I add what was the

  announcement so the announcement said

  that they were shutting down the app

  network can you go into what that was

  and what's left this is all very

  ambiguous and as somebody who like I

  said makes a very substantial amount of

  my revenue from I had I've tried my best

  to understand this be both from the

  official announcement they made and the

  various bits are like rumors are like

  leaks or other things that sort of like

  before Apple actually made their

  official announcement there was a bunch

  of articles from all over the place

  because people kind of talking about

  that Apple was going to be scaling down

  their sales team they were going to be

  changing things around so like they

  specifically said that the iadapt

  network will be discontinued as of June

  30th of this year although we are no

  longer accepting new ads into the apps

  into the network advertising campaigns

  will continue to run and be still

  earning advertising revenue until June

  30th as best I understand like the

  iadapt network is one it's a term I was

  I spent the last like a couple of days

  trying to find a definition for what

  that actually means and I haven't found

  any like hits it the exactly like it

  could be that the app network is the


  if I add right now that you use two if I

  wanted to promote my app like I could

  put make an ad for pedometer plus plus I

  could put it into my ad and then other

  apps that are showing I ads would be

  sure you know then promoting it for me

  and I'd pay for that it could be that I

  think it's also possible that it's the

  sort of the whole way that which ads are

  being collected and aggregated right now

  both from that and then from the

  original thing like back in 2010 when I

  had was first launched it was supposed

  to be about big brands and you know

  there was Steve Jobs talked up on the

  stage talking about how they were gonna

  partner with all these big brands to

  make these really emotional experiences

  and you know to raise and elevate the

  thing which I thought lasted like a

  month didn't last very long that's it

  that's probably fair to say I remember

  there was a like because a Nissan Leaf

  had won there were a couple of like big

  brands that had them but it just didn't

  seem I think it might have literally

  only been a couple yeah

  and that never really went anywhere and

  so I don't think it's that but it seems

  like the I had as we know it now is

  going to be going away from what other

  not necessarily from Apple's direct

  announcements but from some of the other

  leaks it sounds like they are going to

  be continuing to there will continue to

  be an i ad framework in iOS I'm not

  completely sure on that like it's

  possible in iOS 10 that it's just gonna

  go away

  that would seem a little weird but it's

  possible and it may be replaced by

  something more how griff mcore

  straightforward or it's entirely

  possible that Apple is just gonna sort

  of back away from this whole thing I

  mean I think the reality though is

  either way whatever is going to happen

  as of June 30th the revenue models that

  are based like my own on you know

  substantially hanai ad are likely going

  to need to be prepared for a change

  exactly what that looks like I'm still

  honestly working out for myself but

  whatever we're do whatever it is it's

  likely not going to be as performant in

  terms of revenue or as from a fill rate

  perspective and all these things as you

  know the major thing they're doing now

  because it definitely doesn't sound like

  they're just like oh we're going to

  taking what we have and going in a

  different direction there's definitely

  like we're discontinuing a large swath

  of this I'm going to be potentially

  replacing it with something or maybe not

  at all but it's definitely a big massive

  change if you use I ad

  coming you know coming in in June

  presumably like you know right after WWC

  maybe like going at bill announced or

  cheering WC they'll announce what's

  going to replace it or what we need to

  do which will be a little short notice

  but something's definitely coming yeah I

  mean it's interesting like if you think

  back about like why I ad was created in

  the first place it was to to basically

  like Apple saw that ad networks on

  mobile were becoming a thing ad funded

  apps for life had become you know a big

  revenue stream and they were all these

  kind of creepy ad companies coming in

  and trying to make these kind of crappy

  atom beds for apps and so I imagine the

  reason I ad exists is because Apple you

  know Steve said it right and say she

  said in that announcement that like

  these things frankly suck and that we

  think we can do better and you know

  Apple wanted what they want to control

  over this monetization method for

  themselves but it didn't really play out

  that way what what has played out is

  turns out Apple is not not a very good

  ad company it just seems like it's not

  the kind of thing Apple is good at we

  especially with all their stances on

  privacy and everything else like it just

  seems like running and running a big ad

  network kind of conflicts with what they

  do but the it maybe it's the lesser of

  two evils because you know like the if

  they don't run the ad network then the

  third-party ad networks are the only

  choice for developers who have ad

  supported apps rather than just being

  like a backup choice so I wonder like

  you know assuming it's an men see when I

  first heard the the the app network was

  being heard and I thought they meant

  those little templates developers could

  use to just make their you know rather

  than having the whole interactive

  experience it was like this template

  that you as any any developer could sign

  up and you basically get like an image

  and the if you if it was tapped it would

  show like a little App Store slide up

  sheet so you wouldn't have to really do

  any custom programming there wouldn't be

  any custom interactivity it would just

  be a banner image for your app and

  people tap it and it shows the App Store

  page and I actually I did you ever pay

  for those do you ever buy those before

  I've tried them they never worked for me

  I mean I think they only work for an

  application that you are going if you

  are like really going if the value of a

  each customer to you is quite a lot you

  know which I imagine if you're one of

  these like free-to-play game kind of

  things you can probably get two

  where you know if you're paying a few

  dollars to acquire a new user that's

  actually worthwhile to you overall

  because you know the average value of a

  customer is bigger than that but for me

  it never made sense like even for my

  paid applications there's my average

  that the amount of money I typically

  would get from somebody is just so low

  in comparison that it just never made

  sense yeah that's too bad so so it could

  be that they're shutting that down

  because the economics have just made it

  not that effective for most developers

  or it could be that the app network

  might mean running all AI ads in

  people's apps in which case they would

  just because like the the new Apple news

  app still uses I ad and so maybe they're

  saying everything else is being shut

  down except for the ones running in

  Apple's own apps or maybe they're saying

  only those you know special developer

  template ones are getting shipped and

  who knows but assuming it's assuming

  it's the former that like that nobody

  will be able to use I ad in their apps

  anymore which which is which would be

  the part that you're thinking would

  probably be like the worst case scenario

  here where would you go

  what would you do next like are there

  third-party options that are any good is

  is there any kind of like clear winner

  like what what is that what is the

  landscape like as far as you know so

  this is the part that makes me really

  sad like with this news and I totally

  understand you know it's like it's

  always been a bit of an odd thing for

  Apple to be in the advertising business

  because so much of what they do is

  completely orthogonal to that like

  they're not in general they're all about

  like having a really strong privacy and

  having all kinds of things like that

  that are all about like we want to know

  is at least about you and do we're gonna

  give you a premium experience which is

  typically not the advertising model and

  sort of always liked is that like hey

  they have this advertising network and

  so I can kind of like why I just I don't

  actually use and do any backfilling in

  any of my apps like I don't do the thing

  where it's like even though I don't get

  100% Phil I'm okay with that because I'm

  like you know what my ads are good and

  I've never had like seen a Naiad in my

  application that made me feel really

  uncomfortable like I don't feel great

  about some of them but you notice if you

  with just like if you just open the

  floodgates to like every advertiser

  every ad ever we all kind of know where

  that goes like you

  look at the web right now the kind of

  ads that you start to see at the bottom

  of like hey if you liked this story you

  may also like these other stories about

  like horrible things or just total scams

  like yeah like it's it's it's terrible

  and that's where ultimately I imagine a

  lot of advertising will go in Apps as

  well and I like that at least I felt

  like you know like apple with I ad was

  like a firewall against that and I could

  say you know but okay maybe I'm making a

  bit less money doing this but I feel

  confident that what I'm gonna end up

  with isn't like terrible and make me

  feel squirm and you know I'm gonna get

  screenshots from people being like look

  at the ad that your app we're showing me

  and for you know for some awful thing so

  where I'm going now is kind of a weird

  and open question like there are so many

  ad networks that's like it's kind of

  crazy and a lot of them have like really

  complicated or confusing names you know

  like we have AdMob ad colony ad Falcon

  ad rally mod Fox tap it fado be a

  vongole tap jump is real these are

  actual ones that I was recently just

  like I was quickly before we were

  preparing I was like pulling in these

  names and I'm like those are some ad

  networks that exist right now and it

  sounds like like parody names yeah but

  like that's what we have and there's

  dozens of them and I mean I imagine the

  biggest ones like AdMob is probably one

  of the bigger ones because it's run by

  Google who is obviously like one of the

  biggest advertising companies in the

  world if not the biggest

  I'm sure Apple loves that there's you

  think you can do some things with

  Facebook there's a few others that are

  kind of big but what I'm gonna facing

  now is like it's this weird question of

  like well do I just pick another one and

  hope for the best do I use kind of an

  aggregator which is a lot of the way a

  lot of people do this type of thing

  where you'll download this big massive

  blob of like third-party code you'll

  shove it into your application and it

  includes the all the SDKs for like

  dozens of different advertising networks

  and you'll sign up for all of them and

  you'll kind of be bidding back and forth

  between them so that whoever has the

  best ad for you right now you'll show

  and they'll switch between them

  dynamically but like the more you do

  that the less control you ultimately

  have and what you're showing in your app

  and also like thing that always makes me

  nervous is now like the more third-party

  code I have

  put in my application like that's really

  scary both from like customer privacy

  concerns and things like they could be

  doing all kinds of things in my

  applications that I maybe wouldn't

  really like you know it's like you for

  all I know like they're gonna be popping

  up all kinds of permission requests in

  my application that my customers assume

  are me asking for it rather than them

  like that's not something that they

  could entirely do because I'm running

  their code that I probably can't see the

  source Oh not to mention like making

  Network requests or anything like that I

  mean like or even even just like like

  any kind of use of like private API is

  if they get in trouble for that then

  really you're getting in trouble for

  that like it's it's a huge risk yeah and

  I love that I add at least like it was a

  system framework like it shipped in the

  OS I had to bundle nothing it was just

  in the same way if that's just like me

  including you're using healthkit in my

  application or using AV foundation like

  using I add there's just a thing and if

  I'm not going to be able to do that like

  at some point I'm going to have to

  include some code that I don't really

  want to include or I have to decide that

  you know what I'm just going to have to

  radically change my business and move

  away from this because there's

  ultimately like there's going to be some

  kind of a line that I have to find

  between like how comfortable I am I with

  you know whoever they are and I'm sure

  if I talk to the the salesman at these

  various companies I'm sure that all the

  oh no we're you know we take privacy

  very importantly very seriously it's

  very important to us oh sure but like I

  felt comfortable when Apple did that but

  I there's very few companies that I

  would feel comfortable about that and

  ultimately I'll probably like my gut

  says I'll end up at least experiment

  least initially planning to go to

  something like Google if not not because

  I think Google's are you know like a not

  creepy company but at least they're big

  enough company that if they were doing

  something truly dubious like it would be

  well known and they would probably be

  held more accountable to it than like

  some kind of fly-by-night VC funded

  thing that just sort of appeared one day

  and I was like oh you know we have great

  rates and awesome ads like maybe you do

  but I don't really you don't have a lot

  of history there in a way that you know

  more unless worried like if goo if

  Google's beings really sketchy at least

  I'm at there's people who are going to

  know that

  and like you know hold them accountable

  to that at least somewhat but I don't

  know it's really something that I'm kind

  of struggling with through right now is

  exactly where I'm gonna go cuz you know

  if I had truly did just go away and just

  disappeared from my app it's like there

  goes you know 40% of my business like in

  terms of revenue just disappeared and so

  I need to work out how far down that

  road I feel comfortable with with you

  know like other people's code other

  people's that you know showing things in

  maps that really maybe I don't agree

  with or like but you know ultimately I

  have to ship a product that I feel

  comfortable with so it's gonna be a

  really interesting next couple of months

  as I'd kind of filter through that

  all right well best of luck I think your

  plan sounds about right I think I agree

  that you know going to go into like one

  of the biggest companies that is most

  reputable and you know admob or Google

  it like you know but that that makes the

  most sense I think you're right I think

  like even though any ad company is

  creepy to some degree I think the the

  giant ones like Google like that's

  probably they're probably the least

  creepy among a bunch of very creepy

  companies yeah like the smaller ones are

  way scarier to me so all right oh that's

  I think that wraps it up for today and

  best of luck with that and I hope I'm

  sure we'll be talking about this more as

  as you get new experience with these

  things over time and so I look forward

  to hearing more about it and as as this

  whole thing unfolds yeah so thanks a lot

  to everybody for listening please

  recommend us an overcast and if you can

  reviews on iTunes if anybody still uses

  that and we will talk to you next week

  thank you for everyone for listening and

  we'll see you next week bye