Free iPhone Apps’ Ad-Revenue Still Steadily Increasing

Despite criticism that free iPhone apps are much harder to monetize when compared to paid apps, one company begs to differ.  AdWhirl, an iPhone-based advertising platform, says mobile ad impressions as well as overall revenue has been steadily increasing and will soon match that of...

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Despite criticism that free iPhone apps are much harder to monetize when compared to paid apps, one company begs to differ.  AdWhirl, an iPhone-based advertising platform, says mobile ad impressions as well as overall revenue has been steadily increasing and will soon match that of paid apps in no time.

The debate has continued since Pinch Media released a report a few months back describing some of the trends it had seen as developers tried to monetize their apps.  They found that advertising on free applications simply couldn’t match the payoff from even the least expensive paid applications, and would require an outrageous $8.75 CPM to reach the same income per download/install.

AdWhirl, who launched just last month, says its already signed over 10% of the top 50 applications in the App Store and is serving 250 million ad impressions per month.  Interestingly enough, AdWhirl has already called out the report from Pinch Media stating that it based its information on the fact that a user only produces one ad impression per interaction, when this is far from the truth.

In its short existence, AdWhirl is already reporting that it sees between 3-5 ad impressions per user interaction, which changes things dramatically.  When you take the $8.75 CPM Pinch Media suggested to be on par with paid app revenue, and divide that by 5, the CPM becomes much more attainable and realistic.

To defend its stance, AdWhirl has also released a new report outlining its new findings and statistics.  The report reveals that applications that crack the top 100 in the Free Apps list make $400-$5000 a day – a wide range yes, but even at the low end, it works out to around $12,000 a month.  Among these top apps, AdWhirl is reporting an impressive $1.90 eCPM and 2.6% CTR.

I’ve always maintained that from a revenue standpoint, it makes much better sense to provide your app free of charge to consumers to spread usage as far as possible, and then monetize with mobile dispaly advertising that’s heavily targeted and optimized.  This way, your app makes into the hands of as many people as possible without discouraging some with a price tag, and your revenue is on-going instead of surging and evenutally dropping as is the case with paid apps.

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  1. Greg Yardley

    It’s true, but it – like the figures quoted by AdWhirl for advertising revenues – assumes that you’ve got a very rare hit on your hands. It’s also a peak figure and not sustainable over the long term.

    The point I was making was that paid application revenue potential still exceeds ad-supported application revenue potential on the iPhone. Made it a few months ago, but I believe it’s still true, with one caveat – a few social games incorporating virtual currency have been pulling in some impressive numbers lately.

  2. Douglas Gregory

    35K n one day? Is what Greg says above true? These are amazing figures.

  3. Andrew

    I saw this today and it made me think many iPhone applications could be customized for a large company who could provide it for free to their customers. It would be a great value add for them and they would be happy to pay licensing fees to get access to it.

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  5. Greg Yardley

    Right, but the money paid apps are making is increasing just as steadily. One of the paid applications using Pinch Analytics recently pulled down $35K in a day, after Apple’s cut.

    Ongoing revenue is nice, and I agree completely with you – if people continue to use the application over time. It’s really up to the application designers to create a compelling experience that people will come back to. But so far we still see the typical usage pattern for most applications is very similar to the typical usage pattern for a console game – use it heavily up front and then, when you’ve had your fill, move on to the next shiny new thing. In other words, ad-supported applications see the same surge-and-drop pattern as paid applications. There are applications that are exceptions to this, and therefore well suited to advertising, but they’re still a small percentage of the applications out there.

    That $8.75 eCPM figure used by AdWhirl, by the way, assumes ‘average’ user retention, based on the eight hundred or so apps in our sample back when the report went out the door. So if your application has lower-than-average user retention (like, for example, many soundboard apps), you could be hitting that figure consistently and still be making the wrong decision for your application.

    By the way, the statement “the same income per download/install” in your entry isn’t accurate. Of course revenue per download is going to be higher for paid applications, but free applications are going to be downloaded much more often. Our model takes that into account, so the revenue from one paid download is compared to the revenue from several ad-supported downloads.

    I get that there’s a mobile marketing industry out there that would dearly love all applications to be ad-supported (we make money from advertising too, so I’m right there with you), but right now the situation looks pretty ambiguous on the iPhone. I also worry a bit about the demographics of the free audience, given the large percentage of people making purchases – for many brands, their most desirable audience might be forgoing free applications in favor of paid options. There’s still a lot of research to be done here.

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