[Reading] Why ad-supported mobile apps are better off to be on the web

Tuesday, December 11th, 2012 at 1:29 pm

From time to time you come across a very courageous and well-written post and just tweeting about it isn’t enough.

Vibhu Norby’s “Why We’re Pivoting from Mobile-first to Web-first ” is one of those. It is brimming with interesting information on how the web is a great opportunity for entrepreneurs today and debunks a lot of mobile myths in the process. In essence it is a grim piece showing how messed up a purely ad-driven business model for any app is.

In detail Vibhu repeats a lot what Pinboard.in’s don’t be a free user mentioned in the past:

Ads are the Internet’s tax on users who want free apps and websites. All free apps and services have ads. I consider virtual goods like ads because everything I’m going to say about ads is also true for virtual goods. Ad-supported companies are akin to the government in the sense that they are both really good at finding ways to charge you without it seemingly coming out of your pocket. Many people’s taxes are taken automatically out of their payroll, so they don’t think of that money as being theirs to begin with. Similarly, we feel like everything that we don’t directly pay money for on the Internet is free, but that is simply not true.

The big dirty truth, however comes immediately after:

Unlike taxes, however, ad-based services target lower-income and lower-education audiences because that’s where they make all of their money. To take the largest example, Google makes $30.00 ARPU (Average Revenue Per User) per year and charges about $1/click on average to advertisers. That’s 30 ads clicked per user per year. I’m certainly not clicking that many Google ads per year and neither are you. I usually know where content stops and ads begin, partly because I’ve had access to the Internet longer than others. I think ads target the same audience that Nigerian scammers do, on average; read this Quora answer on that if you haven’t because it’s interesting.

So you need to grow immensely fast in order to succeed, Vibhu goes on to explain that this is how VC funding past the seed phase works, and there is not much that can be done about it. And as the above shows you need to pander to the lowest common denominator to get the most users. He has a very good point there. Who do you know who is a developer who clicks ads or does not have blockers installed?

This should also reflect in your UX - if you are doing a social product your sign-up and getting started process should be as quick as possible. Sure, we do that, especially when you can piggy-back on existing systems like Twitter, right? Not according to the experiences of Vibhu:

Out of 300,000+ downloads and 250,000 unique website visitors, 200,000 people have signed up. So right away, chop off 60% of your audience whom are just window-shopping. As an aside, I have heard privately from an app maker with a 100m+ downloads that 50% of people don’t even open their app after downloading. And that’s not counting people who can’t find your app in the store or decide not to download it after seeing your app rating (4.5 stars, in our case).

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We also used to have a social network sign-in screen to automatically create groups for our users. Another 25% don’t want to sign-in to a social network, don’t see the skip button, or get bored by this time. We have since removed those two steps, but it took us a while to get there because we had to re-engineer how onboarding worked.

So that takes our original 550,000 eyeballs + people to 100,000 users. Now that the user is in our app and has an account, we want them to create a group and add their friends or family to the group. 25% of users won’t create a group and another 25% won’t add anybody to the group they created. Now we need them to share something to those people. Then the people they share with need to see the value, understand what is going on, and go through most of the steps above.

At best, we retain 5% of users through the entire onboarding process. Attempts to fix it have raised it only nominally. We are not alone on that count even amongst apps with much better onboarding and many more app versions than our own.

Vibhu goes on to explain that you need to ramp up your numbers ridiculously high to succeed. That can be done with advertising but as explained, it will kill you:

If you paid Google’s $1 CPC for people to enter your funnel, you’re really paying $20 per user and you will never recoup that cost.

There is much more proof in there and Vibhu explains that the turnaround time of app changes is a big issue. You can not be agile in fixing and improving your app (or changing the interface and A/B test) as the closed platforms don’t allow you to do that and your users are not happy to update the apps all the time. The non-atomic update of apps are a killer in this case, something the web excels at:

You have an entirely different onboarding story on the web. You can test easily, cheaply, and fast enough to make a difference on the web. You can fix a critical bug that crashes your app on load 15 minutes after discovery (See Circa). You can show 10 different landing pages and decide in real-time which one is working the best for a particular user. You can also close a viral loop: A user can click an email and immediately be using your app with you. You can’t put parameters on a download link and people don’t download apps from their computer to their phone. Without the barrier of a download + opening the app to try your product, you can prove value to the user immediately upon their first impression, as is with Google. I

Vibhu also praises simple sign-up on the web as browsers do autofill and the interfaces are much easier to use. Typing on a phone is not a good experience. Even worse, according to Vibhu there is not much interest in improving that:

The open eco-system of the web and 20 years of innovation has solved many of the most difficult parts of onboarding. With mobile, that kind of innovation is lagging significantly behind because we create apps at the leisure of two companies, neither of which have a great incentive to help free app makers succeed.

All in all this is a very interesting read, have a peek there. I have a lot to ad about ads in general, but this is long enough for now.

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