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App Economy – Hidden Story Behind the Rosy App World

Apps Are Disrupting The Web

August 2010, Chris Anderson, editor-in-chief at Wired co-authored a controversial yet thought-provoking piece announcing the death of web due in large part to the prevalence of a new breed of simpler, sleeker service – aka apps, a shift driven fundamentally by the rise of the iPhone/Android model of mobile computing. It seems to him that the ubiquitous of apps would eventually strip away everyone’s needs to go through the Web to Internet. Aided by a disparate set of apps on different mobile devices, one now can hang up to Internet all day long without accessing to Web. Case in point. You wake up to numerous emails on your iPhone/Android phone. On your way to the office you read Wall Street Journal and Economist for a while and then flip through Sina Weibo and Facebook and switch back and forth between those – of course – apps. The list can go on and on till you finally come to realize what I’m trying to get at – we’re already surrounded by apps that could virtually enable us to interact with technology, Internet and the real world around us in as profound a way as the Web could.

Apple App Store, which opened On July 2008 and currently hosts 425,000 apps for various iOS devices as well as over 100,000 native to iPad topped 15 billion downloads as of this July. Android Market, the late-comer curated by Google hit 7 billion download mark in this November with over 370,000 apps according to a latest research. Even Samsung announced in early October that its Samsung Apps, the world’s first HDTV-based app store made it to the milestone of 1,000 registered applications and crossed the 10 million downloads mark, signaling that the Korean giant is right on its way to build a global Smart TV ecosystem. Apps, be it on iPhone, Android, iPad or SmartTV, are growing rapidly in popularity and are shaping the world in a unprecedented way that never seen before. With the wild proliferation of apps and momentous change in the way we connect with each other as well as the world, Apple and its iDevices (iPod Touch, iPhone, iPad) and Google’s Android mobile operation system is creating a new world in which apps are painting the future picture of mobile computing, while what behind the scenes, are the whole app ecosystem – be it Android or iOS platform – mobile vendors, operators and app developers. Manufacturers and operators are covered in gold through contributing to the grand picture. HTC has successfully pulled off a transformation from OEM manufacturer to the market leader in Android phones in more than two years after the company launched the first Android phone in 2008 while MOTO turned around since the launch of its first Droid phone in late 2009. Operators also reaped big amounts from the data plan spawned by mobile connection.

The Revenue Dilemma

And, how about the app developers, those who literally crafted and perfected all these apps?

The convention wisdom tells us that there’re two major revenue sources for app developers, charge the app or give it out for free with ads. According to a late report, it’s quite hard to charge users given the market condition and customer habits here. The pitfall was evidenced by s startup’s gloomy sales in one of the companies Android-based freemium video player which has over 3 million downloads for its ad-included free version whereas only less than 5% people pay for a ad-free version.

That’s why a vast majority of Android developers and even some iOS developers resort to mobile ads platform and mobile ads.

In a concerted report by market researcher iResearch and mobile ads optimizer Guohe Ad, there’re currently three types of different mobile ads platforms in Chinese. The first one is in-app-store ad platform by operators or mobile vendors who own their own app store, typified by Admob (Google), iAd (Apple) and 189Works/Ad (China Telecom) while mobisage, Vpon, SmartMAD, Adwo and domob are the post child for the second group, mobile ad platforms. Adwhirl, mobClix and Guohe Ad fall under the third category, mobile ads optimizer and optimizer aiming at generating more revenue in apps through optimizing ads impressions. Some other means include automatically switching between different ad platforms when one fails to maximize revenue. Mobile Ads Optimizers To The Rescue

Founded in early January, Guohe Ad is one of those optimizers trying to help app developer getting rid of the revenue dilemma as well as to facilitate Chinese app ecosystem.

According to Neo Zhang, head of Guohe Ad who mainly engaged in financial business in his early career days, the main purposes of mobile ad platform are to serve the best interests of the advertisers while for optimizers their major targets are to serve app developers, to help them get the most value of their apps, by displaying as many impressions as possible to make more money. On top of displaying more ads, Guohe Ad also introduced a bunch of innovative algorithm and well-devised mechanism to max out app’s revenue potential. For instance, Neo said that Guohe Ad could learn to match app users’ tastes and display more relevant ads – through understanding users’ likes and hates by learning their clicking behavior.

Although as compared to single ad platform, optimizers can bring in more revenue by ways of showing more ads. But users won’t click on them if the ads aren’t suit their preference. Guohe Ad is trying to solve the problem, by understanding users’ app usage and click history. Hence Guohe Ad could show more relevant ads in apps per user. More relevant means more clicks which eventually leads to more revenue.

Apart from Guohe Ad, there’re several other players like Adview, AdsMogo and so on that each are trying to grab a bite from the lackluster-for-now-yet-promising app economy, and the concerted efforts by ads platform, optimizers and developers could be taken as a significant sign that bodes well for a more encouraging app ecosystem here in China.