Advertising Biz for Mobile App Developers. Joshua Maa, CEO & Founder, Madhouse Inc. April 2010

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1 Advertising Biz for Mobile App Developers Joshua Maa, CEO & Founder, Madhouse Inc. April 2010

2 Table of Contents State of Mobile App Advertising Role of Mobile Ad Ecosystem in Mobile App Marketplaces How Should an App Developer Position Themselves? Free Apps Are Essential to the Success of Mobile App Marketplaces Ad Revenue is Crucial for App Developers and App Marketplaces How Can We Get Started?

3 State of Mobile App Advertising

4 Major Acquisitions Reflect Growing Importance of Mobile Ad Business Acquired For US$750 mm in Nov-2009 Acquired For US$275 mm in Jan-2010

5 Many Developers & Publishers Utilize Mobile Advertising - Brand advertising - Mobile VAS/content + ~80% - Mobile apps

6 iphone & Android Users Are Accelerating Mobile Internet /App Usage iphone/android: 2-4x share of mobile internet usage as share of units shipped Source: Morgan Stanley

7 Mobile Internet Ads Will Become More Important Than PC Internet Ads Money flows where the eyeballs go; mobile internet usage will become more important than pc internet usage We can make more money in mobile than desktop eventually because the mobile computer is more targeted. You carry your phone everywhere, it knows all about you, it knows what you re up to. We can do a very, very targeted ad. Over time, we ll make more money from mobile advertising. -Eric Schmidt Source: Morgan Stanley

8 Role of Mobile Ad Ecosystem in Mobile App Marketplaces

9 Mobile Ads Are an Essential Part of Monetizing Mobile Apps Users OS Handset App Stores - Free apps - Paid apps - Try-and-buy App Devs Ad Biz Enabler - In-house ads - Reseller agents - Ad networks -Brand marketer -App marketer -Other marketers (CP/SP etc.) Brand Advertiser Advertiser

10 Effectively Promoting an App is Becoming Increasingly Difficult 500 apps in Jul-2008 to 150k+ in 1.5 years Apps doubling every 3 months. Source: Distimo Mar-2010

11 Internal Ad Sales Force Is Not Justified 92% of developers use a 3 rd party to help monetize ads. Internal Sales Force 8% Outside Sales Force 6% Source: Quattro Wireless, n=147 Network or Mediation Layer 86%

12 App Developers Need a Sustainable & Scalable Revenue Stream 80%+ of mobile devs are entrepreneurs & spend months developing an app Mobile Developers are Primarily Entrepreneurs And Most Utilize Advertising for Monetization Client-side Developer (work directly Agency for advertiser) Developer 2% (work with multiple clients) 10% Publisher Developer (work for destination site) 5% Entrepreneur (develop as a business) 83% Both Ads & App Sales 56% Only Ads or Sponsorship 17% Only App Sales 27% Source: Quattro Wireless, n=219 Source: Quattro Wireless, n=147

13 The Most Effective Way to Promote Mobile Apps is Through Mobile Advertising What options do developers have to market their products? -Try and game app store system: Top 100 list can increase usage by an average of 2.3x. Top iphone download ranking is calculated according to formula that suggests concentrating promotional efforts across approximately 4 days. -Adjusting product and pricing: Developers can try to play with the timing of pricing cuts in order to increase usage, but significantly adjusting an app to increase uptake can be very difficult and both time and resource intensive. Aside from these tactics, the best way to market applications is to directly via mobile advertising.

14 How Should an App Developer Position Themselves?

15 Developers Play Multiple Roles in the Mobile App Ecosystem Users OS Handset App Stores - Free apps - Paid apps - Try-and-buy -Brand marketer -App marketer -Other marketers (CP/SP etc.) App Ad Biz Brand Advertiser Advertiser Devs Enabler Publisher Build Pubsuser base, traffic, and earn $$$ via ads - on In-house that traffic ads - Reseller agent Paid app/service provider Generate direct - Ad networks $$$ for app/content sales Marketer/advertiser Promote new apps

16 Free Apps Are Essential to the Success of Mobile App Marketplaces

17 Free Apps Are an Important Part of the Mobile Ecosystem Free apps comprise a significant portion of all apps Source: Distimo Mar-2010

18 Users Spend Much More Time on Free Apps than on Paid Apps Users download free apps 4-7x more frequently than paid apps. Developers should consider utilizing free apps to drive paid app sales. While Time Spent per Paid App is Slightly Higher Free Apps Are Downloaded 4-7x More Often Source: Pinch Media Source: Admob, n=963

19 Almost All Users Download At Least 1 Free App Per Month 98% of iphone & Android users download at least 1 free app/month 70% of users download >4 free apps a month Source: Admob Note: Slightly higher percentage of non-downloading webos users may be due to higher webos app prices in general.

20 And 1/5 of iphone Users & 1/2 of Android Users Never Download Paid Apps Many users download free apps exclusively Free apps are important for expanding user base Source: Admob

21 Ad Revenue is Crucial for App Developers and App Marketplaces

22 Paid App Sales Are Concentrated Among a Small Set of Players The top decile of paid apps in App Store generates significantly more downloads than other apps Source: Pinch Media, iphone App Store

23 Free Versions of an App Can Help Drive Premium Sales & Drive Overall Usage The try-and-buy model can help mobile app developers drive premium app sales A good free version will help drive usage of premium apps Free Versions Can Drive Premium App Sales and Free Apps Exponentially Increase Usage 7.5x Unique Visitors for free vs. paid 6.6x Times Used for free vs. paid 3.9x Time Spent for free vs. paid Source: Fabernovel, RATP iphone Application Source: Pinch Media

24 And In-App Mobile Ads Help Provide Consistent Revenue Mobile ad revenue offsets more unpredictable paid app revenue Both paid and free app versions are important Source: Fabernovel, RATP iphone Application,

25 Developers Can Monetize Mobile Apps in Two Methods Paid app sales Ad sales

26 How Can We Get Started?

27 Serving Ads on Mobile Apps Poses Many Challenges Lack of browser means NO: UAs Etc. Monitoring ad display and response is more difficult

28 Mobile App Ad SDKs Solve These Challenges Provide ad display and click mechanism Ad SDK should handle ad display & clicks Click/impression fraud handling Recognize click/impression fraud Maintain/provide high-quality user experience Utilize caching mechanism Engaging consumer ads Report impression/click data to platform Periodic data upload to the ad serving platform

29 MadServing Mobile App Ad SDK MadServing Mobile App Ad SDK: app developers must integrate SDK into apps to serve ads SDK communicates to MadServing platform, renders ad views, caches ad creative, logs ad impressions, and displays post-click mobile websites. MadServing Mobile App Ad SDK Mobile Apps Gateway MadServing Core Platform Mobile Apps Ad Serving Platform

30 iphone/android Mobile App Ad Formats

31 The SDK Provides a Plug & Profit Solution

32 To Summarize Free apps are essential for mobile app marketplaces to succeed Ad revenue is crucial for app developers and marketplaces Mobile app ads are the best way to promote new apps Steady revenue Revenue/time Ad sales Paid sales Time

33 In Mad We Trust!