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iAd economics may not pay off for app sales

Apple is quick to advertise their new iAd platform for iOS devices as a way for App Store developers to get more exposure for their apps. In theory, it's a great way to set your app apart in a market saturated with more than 250,000 apps. In practice, the numbers tell a different story.

David Smith, the founder and owner Cross Forward Consulting reported that the results of a recent ad campaign that they ran for their most popular app, Audiobooks Premium, were underwhelming and economically unsustainable.

Cross Forward Consulting spent a total of $1251.75 ($0.25 cost per click) on iAds over the course of six days that displayed 2,052,929 ads, generated 5,007 clicks (a clickthrough rate of 0.24%) and a grand total of 84 in-ad sales. The cost per acquisition comes out to a staggering nearly $15; in other words, for a $0.99 app they paid around $14 for every sale.
David speculates that customers buy apps based on direct and indirect recommendations, which is why Apple's New and Noteworthy, What's Hot and top seller lists are so important to the success of an app. David also comments that a more engaging ad experience -- ironically the very thing Apple launched iAds for -- would also help sales by drawing customers in rather than simply presenting them with a simulated App Store page.

There are a few other possible factors at work here as well. First, with 1.6 million users of Audiobooks Premium, some ad viewers may already own the app or at least be familiar with it. The iAd platform may also need to mature more before all users begin to perceive iAds as quality-controlled advertisements they can trust not to jump them out of the apps they are using. It's also possible the people seeing iAds -- often in free, ad-supported versions of paid apps -- are the users who tend not to spend money on applications in the first place.

Interestingly, David also ran a much more limited ad campaign using the same banner on AdMob and found that while the analytics are bit different (since AdMob can only track the clicks, not the actual purchases), the clickthrough rate was significantly higher (1.34%) for ads that only cost $0.04 per click.

In the end, David ends on a positive note: "The expense of this experiment is at least cushioned by knowing that 60% of the price went straight into the pockets of my fellow developers, so I guess I just made a $751.05 donation to the beer funds of my peers. Drink Up!"


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iAds

Apple is quick to advertise their new iAd platform for iOS devices as a way for App Store developers to get more exposure for their apps....