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Summary:

Given how hard it is for some developers to get their apps noticed these days (hundreds of millions of apps out there, and counting), it’s n…

Given how hard it is for some developers to get their apps noticed these days (hundreds of millions of apps out there, and counting), it’s no wonder that since Apple (NSDQ: AAPL) shut down one of the more effective marketing tools — pay-per-install, which lets users pick up virtual currency for an existing app when they download new ones — developers have been feeling the pinch. Mobile marketers Tapjoy, which conducted a study of app publishers since the policy change, says it might even drive some away from iOS altogether.

The survey, based on responses from nearly 500 developers (496 to be exact) brings up some of the issues that app developers have been facing since Apple started to reject those apps that feature PPI.

While you can argue that Tapjoy’s data is biased — enabling PPI services is a cornerstone of its own business model, so Apple rejecting apps that feature PPI will have a knock-on effect for Tapjoy itself; and for all we know Tapjoy may have even only asked those developers that were using its own PPI services, thereby not getting the most complete picture of the situation — it is still a sign of one route to revenues and discovery getting closed down, and has undeniably had a negative impact on those developers that were using it. Some of the stats that came out of the survey:

– Half of respondents reported users wanting in-game currency promotions;
– A quarter reported more user complaints;
– Nearly 15 times more respondents reported a decrease in revenues. Around two-thirds of developers said at least 20 percent of total revenues were generated by
the PPI model, and some claiming that over 60 percent of their revenue came from PPI;
– Developers noted that the PPI restrictions has also resulted in sharp decline in daily active users;
– They also complained that taking away PPI restricted one of the key freemium models for apps. In one developer’s words: “Four million people want [our app] for free, while only tens of thousands want it for a buck or two. With PPI, we could offer the app for a ‘discounted’ price of, say, 60 cents, thus getting a larger number of installs, each at a lower profit margin. Win/win for us and purchaser.”

And inevitably some developers said they would be looking more at Android for their offerings — although one recent study from Distimo highlighted just how challenging it is to get mass downloads (free or otherwise) on that platform — which makes that platform look fairly unappealing, too.

When the PPI ban first came to light in April, part of the reason for the change, it was thought, was that PPI was effectively gaming the rankings for most-popular apps in Apple’s App Store — the downloads were getting skewed by those picking up the apps in exchange for currency elsewhere, not because they were actually good apps. Ironically, a decline in popular rankings doesn’t come up as one of the casualties of the loss of PPI in Tapjoy’s survey.

  1. howieschwartz Monday, June 6, 2011

    Incentivized offers have been around for years on the web before we ever downloaded Apps to our mobile devices or iTunes was even invented (remember all the free iPod offers years ago?)

    Incentivation isn’t ‘evil’ (even though my affiliate network won’t run incent offers).  It just needs to be properly balanced as part of a broader marketing budget and correctly valued by all of the players.

    Incent = lower value users / lower engagement not only in Apps but on all forms incentivized media (web).  That is OK again as long as it is valued properly.

    The issue is one of BALANCE.  Developers should have never focused all of their marketing eggs on one marketing channel / basket (incentivized installs).  This always leads to a “bubble” and there is always fall out from “bubbles”.  In this case the fall out was Apple taking a hard line against incentivized CPI (Cost Per Install).  If developers had a more balanced approach to their marketing the impact would have been lighter and Apple wouldn’t have reacted so strongly.

    But its not only the developers fault – it is the early stage venture capital and angel investors FAULT TOO!  (I am an active angel investor including ARC Angel Fund, Hashable, Upnext).  Investors were valuing developers based on the number of installs and their position on the App charts.  Both of these were
    easily manipulated with incentivized CPI and the developers were rewarded by investors for this through both capital and higher valuations. 

    Developers can NOT (and never should have) focused blindly on installs as the key metric.  That metric is WRONG and will change (this change will be accelerated quickly by the current Apple changes).  The proper method to value a developer is DAU (daily active users).  Only with active users can you monetize your installed base with in-APP purchases and mobile advertising.  When developers are properly valued by active users and how well they are monetizing their installs they will be forced to change their marketing campaign mix and not focus so heavily on incentivized installs (which equal low or no value users)

    * I am biased as the co-founder of Offermobi which has an NON-incentivized CPI (Cost Per Install) mobile network, but even I can acknowledge there will always be a place for incentivized offers, they just need to be properly valued by developers and part of a more balanced marketing mix.

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