The false economy of vanity apps and the people who are growing fat by not telling their clients the truth

This blog post attempts to explain three things about mobile marketing, mobile ad networks, apps and analysts that have puzzled – and irritated – mobiThinking throughout 2010. With the help of a briefing with an ad network (Millennial Media), one awards dinner (The EMMAs) and some pre-Christmas drinks and chat, mobiThinking has reached a conclusion. This conclusion, if correct, is a worrying one, as the answers/causes of these puzzles are closely and intertwined, creating a dangerous and self-perpetuating false economy. While Apple and the iPhone have benefited greatly from this false economy, the blame falls, mostly, elsewhere with collective responsibility lying with everyone else who is getting fat off the back of it. It’s not a conspiracy, but there is too much silence from people who ought to know better.
mobiThinking doesn’t expect this opinion to be popular. And those that have been riding the mobile app gravy train are not going to like this prediction for 2011: “Sorry, but it ain’t going to last.”

This is the sixth in our series of six app-related articles. See also:
• It’s all about the design. Essential tips from user experience gurus
• Mobile applications: native v Web apps – what are the pros and cons?
• What is a mobile Web app? Here’s expert opinion from the W3C
• The open market approach: Q&A with GetJar, the No1 independent app store
• Do mobile apps deliver ROI?

The three questions:
1) Why do companies continue to throw away valuable mobile budgets on vanity apps, i.e. mobile apps that would never have been commissioned with the smallest amount of due diligence?
2) Why do ad metrics reports from mobile ad networks always suggest that the iPhone is the dominant smartphone platform, when sales figures clearly show it is not?
3) Why do experts think that in-application advertising – led by Apple’s iAds – is, or is going to be, huge?

Vanity apps
While coming from the mobile-Web-first school of mobile, mobiThinking does believe that there are many excellent download mobile apps. Indeed, the mobiThinking Guide to mobile awards and Guide to mobile agencies are stuffed full of app-related video case studies. Successful/popular/award-winning apps are not vanity apps. Vanity apps are those apps that make you ask “Why bother?” and “Why didn’t someone suggest a better way to spend your mobile budget?”
The concept of vanity publishing has been pinched from the world of books. With books, publishers usually take all the risk involved in printing and distribution and give a share to the author (the music business works the same way), but a vanity publisher will print anything, whatever the quality, as long as the author pays for the print run. Perhaps you see where we are going with this?

The scenario
The CXO (any very senior exec) of company Y has an iPhone, and he’s seen the TV ads, so he wants an iPhone app. The marketing team thinks it’s a great idea because it’s the CXO’s idea. The creative agency happily takes the money to create the app on a no-risk basis, and/or the mobile agency takes the money to develop the app, on a no-risk basis and the app store takes the money to post (but not promote) the app on a no-risk basis. Now the CXO has his app and everyone else has pocketed company Y’s money. Did anyone question if the app was the right way to meet the needs of company Y’s customers, or how many of company Y’s customers even had an iPhone, or whether they really wanted company Y’s app cluttering up their handset? Did anyone guarantee ROI? Now that is vanity publishing. And the Apple App Store is saturated with vanity apps and the Android store etc will be next.
But how long will the CXO’s vanity be satisfied with 50 or even 1,000 downloads for his US $50,000 vanity app? So rather admit that this was a fools errand, the marketing team goes into promotional overdrive to push the app. The app was supposed to be a marketing tool, but now it’s got to be marketed – isn’t that throwing good money after bad?
So now the creative agencies, media buyers, ad networks and publishers in all formats TV, outdoor, print, Web, mobile are getting a piece of the action. You now see mobile app ads everywhere. This isn’t mobile adding value to a cross-media campaign with a short code, mobile URL or quick-response code, which mobiThinking loves to see; here the entire advertising message is now “We’ve got a mobile app, please download it… oh go on, please”.

The mobile ad network
So while all ad media are benefiting from app mania, the obvious place to advertise an app is on mobile, preferably just narrow band of people who use the particular handset only upon which the app will work.
Many mobile advertising networks are pretty sophisticated and they can target ads on many parameters, geography (country, town, street even), channel (i.e. type of content), demographic, sex, age etc (see the Guide to mobile ad networks to find out the types of targeting offered by each ad networks), but the targeting that most advertisers want today is handset targeting and the handset they want to target the most is the iPhone.
Handset targeting is easy on the mobile Web and even easier with in-app advertising (obviously). Targeted advertising costs more, and even more costly when targeting more popular devices, so the networks are happy (they take 30-50 percent of the revenue). Advertisers are happy because they are only targeting iPhone users, especially if they can measure results in terms of cost per download. Publishers of popular (but not necessarily money-making) apps are happy because all failing apps will pay a premium for a piece of their ad space.

The handset share pie chart in ad networks’ mobile metrics reports
In a trend that was started by AdMob’s Media Metrics, then picked up by others, including Millennial Media’s Mobile Mix and Mojiva’s Mullet, mobile ad networks produce monthly pie charts showing handset share on their networks. These pie charts will often show Apple with 25-30 percent share of traffic from mobile phones and 35-45 percent share of smartphone traffic. This is bewildering for people that know that Apple’s global share of actual sales of mobile phones is 2-3 percent and 15-17 percent of smartphones as Gartner or IDC. (See the Compendium of global mobile stats).
What these ad network reports actually represent is never properly explained. The charts are based on ad impressions (the amount of people who view the ads). But people are only shown the ads if they fit the advertiser’s target group. So, if more advertisers want to target iPhone users than Nokia users – as they will if they are promoting iPhone apps – then the iPhone will have the biggest portion of the pie in the chart.
The charts do not mean that people with iPhones do more collective surfing than people with Nokia phones, and they certainly don’t mean that more people have iPhones than Nokias or even more iPhones than Nokia smartphones, but naïve journalists will misrepresent the data in both ways. And naïve journalism helps to mislead badly briefed CXOs into thinking that more of his customers have iPhones than is actually the case. Of course, well briefed CXOs may look at real cell-phone sales data and may still decide to focus solely on one niche handset, based on demographic data about the handset user – there is no problem with that.
So why don’t ad networks stop producing these charts? 1) An ad network that looks strong among the iPhone user base will look more attractive to advertisers who are promoting iPhone apps; 2) even if a journalist misrepresents the data, it is free publicity for the ad network.
N.B. The best of these mobile metrics reports contain some very useful insights, but only when taken in context: i.e. this is what media the advertisers are buying, so it is not necessarily a true representation of how mobile users behave. (see this review of mobile metrics reports).

Mobile ad network market share
Only one analyst house makes an attempt to measure mobile ad network market share. This is IDC and it has only attempted this for the US. While welcoming IDC’s efforts, mobiThinking has always treated these estimates with caution – we have yet to add it to the Compendium of global mobile stats – because it appears that the mobile ad networks are not sharing revenue data with IDC. While we have always warned against choosing an ad network on size alone, it is clear that some media buyers continue to purchase on the basis of “big is best”. Therefore, it is essential that ad networks reveal revenue, so we can see a true picture of mobile ad network share.
The most puzzling estimate in IDC’s September 2010 figures was that Apple’s fledgling iAds (which only focuses on ads within apps on Apple handsets, with no exclusivity) was predicted to be 21 percent of US mobile ad revenues for 2010. Last week IDC slashed this (gu)estimate to 8.4 percent. Even with this massive 60 percent correction (this is equivalent to a reduction of US $110 million in Apple’s iAds at IDC’s current estimate of the worth of the US ad network market: $877 million), it still puts iAd in second place, behind Google. The most incredible stat in IDC’s December figures is the (gu)estimate of Google’s share at 59 percent of the US market, not least because in September IDC predicted Google’s share would be 21 percent (These monster corrections over three months do little to inspire confidence). Let’s not forget that it was only in May that the FTC cleared Google’s takeover of AdMob, so what are we supposed to conclude here: a) the FTC doesn’t think that 59 percent of the market would give Google too much market power; b) Google and AdMob didn’t tell the FTC the truth or c) IDC is wrong about Google/AdMob’s share?
However we digress. The most revealing figure here is not Google which plays in mobile search (the biggest bit, mobiThinking suspects) mobile Web display and in-app advertising and across all handsets, but Apple, which only sells in-app ads for Apple handsets.
So, why do the experts, IDC is not alone in this regard, think in-app advertising – led by iAds – is such a big business? Well, five things contribute to this: 1) the ad metrics reports read wrongly suggest that iPhone users rule the mobile Web; 2) the ad metrics reports read correctly suggest advertisers are desperate to target ads at iPhone users; 3) the App Store is awash with unpopular vanity apps that need lots of promotion; 4) the App Store has lots of popular apps that are desperate to earn some money from advertising; and 5) brands are expected to pay extra for iAds because of the association with Apple (the media like writing about Apple, so you get lots of free publicity).
While the profiles in the Guide to mobile ad networks clearly show that ad networks are deriving plenty of revenue from app ads, it’s difficult to see how this economy is sustainable in the long term.

The house of cards
As long as CXOs continue to commission expensive vanity apps for niche platforms… that need to heavily promoted to the limited amount of users of those niche platforms… which will continue to skew the mobile ad network reports… which all encourages analysts to make inflated predictions about mobile apps and advertising… which all encourages CXOs into commissioning expensive vanity apps… while nobody spills the beans… which they won’t while the creative agency, mobile agency, app store, media buyers and ad networks continue to get fat on the proceeds… then this happy merry-go-round continues to go round. But it can’t forever.

Maybe it’s a Scrooge-like prediction for the New Year, but this ain’t going to last. We need more agencies to arm their clients with the facts about apps. Mobile budgets are slim, and if companies don’t get ROI, they are going to pull the budget altogether – and that isn’t going to help anyone.

mobiThinking doesn’t expect you all to agree, so please let us know what you think. Comment below or email editor (at)

P.S. (20-12-10) Thanks to Volker on Mobile for including this post in the latest Carnival of the Mobilists, a monthly roundup of the best in mobile and wireless blogs.

Don’t miss:
• What is Mobile 2.0? Three expert opinions
• Guide to mobile agencies
• Guide to mobile industry awards
• Guide to mobile ad networks
• Compendium of global mobile stats
• The insiders’ guides to world’s greatest markets
• Conferences & awards for mobile marketers, with offers
• The big page of essential links

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