Apr 13 AT 1:42 PM Guest Blogger 5 Comments

Monetization in the Android App Marketplace

Everywhere we look, there are reports touting the soon-to-be dominance (or at least, spectacular growth) of the Android App market. The latest, from mobile ad network-turned metrics guru, AdMob, boasts that Android’s share of the app market has grown 12 fold in the last year, from 2% in February of 2009 to 24% in February 2010, mainly at the expense of Symbian.

These are tremendous statistics, and sure to give every Android app developer the warm and fuzzies, but there is a stark reality to this growth, as well as the statistic from Mobile Entertainment’s Guide to Android that there are 2-3X as many free Android apps as there are iPhone apps, which are now or eventually will be ad-supported. As any freshmen Economics student will tell you, that kind of dramatic increase in supply, without a similar increase in demand, results in significant downward pressure on price.

That’s the bad news. The good news is that there are three major developments in the mobile advertising market that will help to secure the future of ad-supported Android apps well into the future.

The first is that, according to Nexage Metrics, application inventory is selling at a substantial premium to mobile web inventory. In the month of January 2010, application inventory, on average, sold for 50-75% more than mobile web inventory. It’s an engaging environment for the user, and offers a great branding and direct response atmosphere for the advertiser… a winning combination that’s translating into more ad dollars.

The second is that the nature of mobile advertising selling and buying is shifting in favor of the publisher and app developer. Ad mediation and optimization services are creating both scalable and effective solutions for app developers to monetize their content without diverting resources and focus from their core competency — developing great apps.

The ad network business model didn’t fit the size or scalability of most app developers who were forced to choose between low fill rates, albeit with little resource investment, or decent fill rates earned at the expense of a dedicated team member’s time and attention.

Ad mediation companies have taken the best parts of the ad networks — huge amounts of targeted, global inventory — but made them scalable by offering a single point of integration and reporting.

Further, the optimization layer goes one step further than traditional ad exchanges to enhance the yield of app inventory. Rather than finding a price match for the inventory, an optimization platform will select for the highest yielding ad network to fill the inventory, exacting upward price pressure and staving off eCPM erosion… all without diverting resources from actual app development.

The third development is yet to be realized, but with the rate of change in the industry, it will likely be the standard by the time you’re reading this article. When utilized appropriately, data enhancement overlaid on a mobile ad impression will take targeted advertising to a new level, creating as yet untapped value for all participants in the value chain — from the consumer who will receive relevant offers and be more apt to respond to the publisher, advertiser, and ad networks, who will see increased returns on their investments. To date, online behavioral and re-targeting strategies have largely been successful in a handful of verticals, such as automotive, telecom, retail, and travel. Mobile has the unique advantage and capacity to tie elements such as location, time, and past interests/purchases together which are game changing ingredients for both consumers and advertisers.

There’s no question that the continued growth of the Android app market is going to have an enormous impact on mobile advertising — bringing huge quantities of targeted, global inventory into a burgeoning marketplace. However, in order to make it a truly vibrant and sustainable marketplace, it’s requisite that the sellers of that inventory have the tools and the knowledge to capitalize on their asset and investment, generating capital to fuel the next generation of great Android apps.

This article was submitted by Nexage CEO, Dev Gandhi.

From time to time we invite guest bloggers to contribute articles about various Android topics. This is one of those times...

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