Estimates show that 29 billion apps were downloaded globally in 2011, up from 9 billion
in 2010
Geetika Rustagi
New Delhi: The spurt in demand for feature-laden smartphones is a boon for applications
developers—and advertisers.
Credit Suisse Group AG forecasts that annual sales for smartphones will cross one
billion units by 2014. Add to that the hefty 39% growth in sales that Gartner projects
for 2012 and the excitement of app makers is understandable.
As for mobile applications, ABI Research estimates that 29 billion apps were downloaded
worldwide in 2011, up from nine billion in 2010, the market growing at 12% month-on-month.
And according to International Data Corporation (IDC), the global mobile app downloads
are forecast to soar to 182.7 billion in 2015.
App developers, expectedly, are finding ways to take advantage of the spurt, mostly
by placing advertisements in scores of applications ranging from gaming and social
networking to banking.
The Indian market for advertising in apps is in its infancy. The Internet and Mobile
Association of India and the Indian Market Research Bureau in a joint report predict
that the country’s mobile advertising market will reach Rs. 144 crore by 2013. Only
20% of this will be from apps, so the challenge for the developers is to grow the
base, while looking for alternative revenue models.
Typically, a developer and an app store split revenue in a 60:40 ratio. But with
most apps available free, developers need new ways of monetizing them, which is
why the in-app economy is fast becoming a focus area.
The revenue model for in-app advertising is of two types: cost per click and cost
per impression. In-app purchasing entails spending money to buy virtual goods or
unlocking certain features or levels as in games.
Nokia Store, the app store run by the phone maker, claims to have 13 million downloads
a day globally, with about 12 million a week from India. “With every 100 downloads
on Nokia Store (formerly Ovi), we make $1. For developing a single app, whether
paid or free, we spend about $3-4 (as one-time development cost over and above which
is the cost of upgrading the apps). There is a 70% profit margin for developers,”
said Virat Singh Khutal, chief executive of Twist Mobile Pvt. Ltd, an Indore-based
app developer and a publisher firm on Nokia Store.
Free versus paid
According to an IDC report, the shift towards in-app monetization is more in the
free app category. This is reiterated by Dippak Khurana, chief executive and co-founder
of Mumbai-based mobile ad network Vserv.mobi, who said Indian users are more interested
in free rather than paid content. “In India, 85-90% app downloads are for feature
phones. Smartphones such as iPhone (from Apple Inc.) are not that deep inside the
Indian market. iOS (Apple’s mobile operating system) is a better network for paid
apps, whereas Android (from Google Inc.) and products based on Java (from Oracle)
are a better option to distribute free content,” he said.
Adds Vishwanath Alluri, founder and chairman of Hyderabad-based IMImobile Pvt. Ltd
that develops mobile and tablet apps for brands such as Samsung Electronics Co.
Ltd and the UK’s The Spectator magazine, “The iPhone has changed everything in the
West, including in Europe. But the Indian market has predominantly been a voice-related
one where smartphone penetration is very low.”
In India, the freemium model supported by ads is the best business model because
the market for paid apps is far too small to support the revenue model, said Khutal
of Twist Mobile.
Under the freemium model, the app is given away for free, but users can spend money
to add more features. “This gives a lot of scope for small companies to make an
impact. The Indian app market is 80% underserved. It is a huge opportunity for app
developers,” he said.
Advertising prerequisites
Generally, in in-app advertising, either a banner ad or a full screen ad with interactive
features works best for brands in terms of awareness and engagement and for mobile
content companies, said Khurana of Vserv.mobi.
Transition ads are also popular for users to view during “breaks”. For instance,
Vserv.mobi designed a campaign for Tata Photon Plus in which it placed the ad while
transiting from one level to another in a game. Yahoo! Inc. promoted its cricket
app by publishing a full screen in-app ad. It clocked 285,000 downloads in 25 days.
The client is charged only on successful installation of the app and not on the
initiation of a download.
Ads shown at the launch of an application are hard to miss and offer a clutter-free
exposure of the creatives. For enhanced interactivity, there are rich mobile media
ads running either as a billboard or a video.
For instance, InMobi ran a rich-media campaign for Unilever Plc’s weight-loss product
Slim Fast. It created a motion-activated ad where users had to shake the phone to
discover a new flavour. Once a user reached the new flavour, she could expand it
to see the nutritional value and contents.
Mostly, ads are provided by mobile ad networks such as Google AdMob, InMobi, vServ.mobi
and MobiSolv. They are the meeting points for publishers and advertisers.
“These mobile ad networks also act as application distribution intermediaries cross-promoting
apps with their ad network through embedding ads of one programme in another,” said
Prakash Sreewastav, CEO of Hyderabad-based Winit Software Pvt. Ltd, an app strategy
and development firm working with clients such as Cisco
Systems Inc.
The future
With the mobile application development world highly fragmented owing to the proliferation
of multiple handsets and mobile platforms, the cost of application development is
usually very high. According to Alluri of IMImobile, trends change on the fly. “Ads
need to have two things: specificity and sensitivity. They need to be specific to
the target audience so that there is no mismatch, and sensitivity matters for the
recall rate that the ad carries. This is only possible in TV or print or radio.
Mobile advertising might not be a great medium,” he adds.
Many experts say the in-app advertising and the application industry will need another
two-three years to take proper shape. The main reasons for the slow growth are the
lack of a large base of smartphones in the market and poor infrastructure such as
Internet accessibility. “The hybrid model of driving revenue after the download
will play an increasingly large role for many developers in future,” said Jasmeet
Gandhi, head of services marketing at Nokia India. “In-app advertising and subscriptions
combined with large operator billing footprint are at the forefront of these new
models.”
Small and medium enterprises (SMEs) in India are yet to explore the mobile phone
as a medium for ads. “Indian publishers and mobile application developers will gain
and profit only after these SME B2Cs (business-to-consumer firms) start adopting
mobile advertising, as only then they can develop apps that specifically target
growing Indian mobile-savvy consumers,” said Sreewastav of Winit.