To understand why naive first-time developers have this mindset, you only have to turn to the figures being tossed out by the major iPhone ad networks.  Last summer, Admob was talking about $30 CPM brand ads and calling that “low end.”  Similarly, Medialets talks about their Dockers ads which paid in the $20-30 CPM range.  Even in today’s tough advertising market, Admob company continues to cite rather high “$12 to $14 average CPM” figures.

Ready for the brutal truth?  Most iPhone ads networks today pay around $0.50 CPM. In case you don’t know how to digest that statement, I’ve rewritten here in plain english: 1000 people have to look at your application’s ad just to earn you a measly 50 cents.  What about those $30 CPM figures?  They’re just marketing fluff.

If you want the truth, ask the folks on the front line: actual developers.  Bo Wang’s Galaxy Impact, an ad supported app with over 160,000 downloads, showed an eCPM (effective CPM) of $0.23.  App developer John Kelsey says he sees about $0.50 CPM. Pinch Media CEO Greg Yardley’s “appstore secrets” presentation reports a typical CPM range of 50c – $2 CPM (slide 24) and then in the comments section, Greg quotes developers saying ad rates had dropped to $0.38 CPM. Another developer running CPC ads says he sees $0.01-$0.03c / click.  The truth is that “Most Ad-Funded iPhone Apps Don’t Earn Enough To Buy A Sandwich”

Why the discrepancy?  Fill rate is partially responsible.  Even if a $30 CPM premium ad does exist, it’s not going to run in your app 100% of the time.  In fact, most of the time apps displays remnant (ie NOT premium) ad inventory.  As one developer says “NO ONE can maintain the fill rate at decent cpm”.

Additionally, every ad network wants to attract app developers bad.  Really bad.  So they pitch journalists with juicy stories of high CPMs and ‘case studies’ on developers making sick amounts of money.  Greystripe gets a press piece penned about an “iPhone Beer Pong App Making $7,000 A Month From Ads.”  Adwhirl gets Techcrunch to write “Just How Much Money Can Free iPhone Apps Make? Quite A Bit” which claims apps can make $5000 a day.  And Medialets highlights their $20-30 CPM Dockers ad.  These are the exceptions rather than the rules.  It’s marketing as usual.

The purpose of this post isn’t to point fingers at the ad networks or accuse anyone of lying.  I love ads and I love free apps.  And I love the entrepreneurial spirit in these impressive iPhone ad network companies.  But there’s an important message here for first-time app developers: if you’re considering quitting your cushy job to make $5,000 a day with a fart app, don’t do it.  Always run your back of the envelope calculations first, and don’t assume your app will get anything higher than a $0.50 CPM. Basing your assumptions on $30 CPMs will leave you high and dry.

As usual, readers, I love hearing your comments and questions.  So don’t be shy!

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Early this morning Muckrack began selling “one line press releases” (1lpr anyone?) — twitter-style short form press announcements.  Muckrack.com is a site that aggregates and categorizes the tweets of hundreds of journalists.  Among its loyal visitors are journalists using the site to keep tabs on their colleagues.  By purchasing a 1lpr, you essentially get your message in front of journalists in a form they’ll actually read.

In its current implementation, these are basically sponsored advertisements.  However I see today’s product as part of the first move in a series that will forever change the world of PR.

I first took an interest in PR trying to learn how best to do the press outreach effort for Exit Strategy NYC.  I attended Internet Week’s PR for Startups event and quickly got it:  journalists are drowning with information overload.  As Allen Stern said that night, journalists get pitched hundreds of times each day.  The vast majority of the pitches are misguided and border on spam.  To the startup struggling to get their announcement noticed, relationships are golden.  Second best is identifying the exact journalists who cover your niche and then writing them short, personally tailored emails which are easily scannable.

A few weeks later, I saw a company called MatchPoint present at New York Tech Meetup.  The audience couldn’t have cared less about this product.  But to the people who *got it* and understood the core problem that MatchPoint is attempting to solve – PR professionals struggling to identify the right journalists, and journalists struggling with the information overload caused by mismatched PR pitches — the presentation was revolutionary.  MatchPoint is a communications tool designed for the PR Professional to “help identify and interact with the journalists and bloggers who may actually care about what you have to say.”  Given a press release or several keywords, the software engine produces a list of journalists, ranked by relevance based on a large database of their past news sources.

What I find fascinating and revolutionary about both Muck Rack and Matchpoint is they’re two different solutions to the same signal-to-noise issue plaguing the world of press releases.  Matchpoint solves it with a smarter matching engine.  Muck Rack solves it with bite sized pitches (reinforced by their pricing model: $1 per character with a $50 minimum) — ie constraint and smart pricing.

Right now, both companies are only halfway there in their attempts to solve information overload.  Their products currently give PR professionals a better way to get their message out.  But the real value will come from getting the journalists on board too.  When journalists start trusting these services as reliable sources of personally relevant information, they will become extremely valuable. Once the journalists get on board, there’s a nice network effect and lock-in that will make these services worth millions.

Silicon Alley Insider calls 1lprs the “smartest development in public relations since the canned quote.”  I couldn’t agree more.

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