Free With Ads or Ad Free

Every so often an app comes along that breaks the sacred rule of ads: they include some form of advertising in a paid app. The most recent was Angry Birds, a hugely successful $0.99 app, by including a house ad on their pause screen. That’s pretty innocuous – most players will rarely, if ever see that screen, and the ad was for other Angry Birds products. But where did this rule come from?

Free With Ads
Most people seem to have accepted that a free app with some ads is an acceptable compromise, allowing the developer to collect some revenue to (help) pay for the development & maintenance of the app. This model appeared on the web too, where many sites carry ads to pay for their content being free.

Unfortunately, it rarely brings in enough money to truly pay for the development of the app, or the creation of the content. As the news industry is discovering, ad supported web sites alone just don’t pay the bills. The solutions for the web are well known:

  1. Less content, which is a vicious circle, since less content means less ads;
  2. Lower quality content, also a vicious circle since you less readers;
  3. Subscriptions for accessing some or all of the content;

In the app world, especially in an app world where updates are expected to be free for life & the initial purchase price as near to $1 as possible, the choices are more limited. The Angry Birds idea of adding discrete ads later in the life of the paid app seems like it might become more the norm as developers loom for ways to at least subsidize ongoing maintenance of very low cost apps that are in the long tail of their sales volume.

Old Media
The odd thing about the fuss over ads being included in a paid app is that most of those complaining are probably happily paying for newspapers, magazines and television content, and at rates often much higher than $0.99 for life, yet all of those include ads as well.

My Comcast cable bill makes my app purchases look insignificant, and yet almost all the channels on there show ads. Even the premium HBO channels show house ads between programming; essentially the equivalent of the Angry Birds pause screen ad.

Watched a movie at a theatre recently? Over $10 to enter, and they spend 15+ minutes before the movie plays showing ads for all kinds of things.

Why is it acceptable to pay for these types of content and still see ads, but it breaks an inviolable law for a paid app, charging a fraction of the price, to include even discrete house ads? Seems like there is a double standard there somewhere.

Free Updates
There’s no such thing as a free update, at least not for a developer. Every update, no matter how small, involved time and effort. It also requires an annual subscription to the developer program(s) for the platform(s) the app is being supported on, and continuous outlay for expensive hardware to make sure the app works on the latest devices as well as a selection of older ones.

I don’t want this piece to become a whine about how developers are not getting paid enough for their apps though. If you’re not getting paid enough to keep your business working, you need to look for a (creative) solution to that, or change business!

With enterprise software, the cost of updates is covered by, often very expensive, annual maintenance contracts. For shrink wrapped or downloadable desktop consumer software, the initial purchase price includes some maintenance, and major updates normally have to be paid for (if you’re lucky, at a discount rate). But for mobile apps, free updates for lifetime have become the rule. A developer who tries to charge for an update by making the next version of their app a different app that must be bought again is likely to called greedy & given lots of bad publicity online.

In some segments of the market that is less of a problem – games, as an example, have a short life before they are replaced by the next great idea. Apps that are expected to have a longer useful lifetime find it harder to maintain a revenue stream that can pay for new features, or even maintenance of existing ones.

Options
What options are available in the current app world to a developer wanting to keep improving their app?

  • Ads, even in an app that was initially paid for;
  • Subscription for content and/or a service;
  • Charging for new features via in-app purchases, or by creating new apps on major releases;

If your app does not lend itself to a service you can charge for (or Apple’s ever changing rules on subscriptions outside of the app store payment mechanism concern you), then your options are charging for new features or running ads.

In the near future, in expect we will start to see more paid apps including some form of advertising. I hope it is better than the generic & poorly targeted banner ads we see today from networks like AdMob and iAds.

1 thought on “Free With Ads or Ad Free

  1. I stumbled across your post. I believe (and see first hand) the answer is virtual currency. We see everything from large companies from one – two person developer teams making significant amounts of money through our offerwall, combined with incentivized ads. On the order of a couple hundred dollars to a couple thousand a day.

    Obviously this lends itself better to games, and games built with virtual currency in mind. Feel free to drop me a line if you have any questions. brian.sapp@tapjoy.com

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