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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For a good example, check out this screenshot of the description for ‘Wobble• Bikini• Fun.’  The app’s developers have cleverly included the names of all the top applications and terms like ‘fart’ and ‘weather’ so that their app will show up for any of these search terms and get more traffic and downloads.  In other cases, I’ve seen descriptions that ‘also recommend these fun apps’ and then proceed to include the name of every top application.  Very smart.

Let’s also talk about the name of this app for a second: ‘Fun’ is part of the name…brilliant!  Guess what the top search result for ‘fun’ is?  You guessed it.  As long as they’re going this route, why not just name the app ‘fun• naked• girls• inside’? By the way, this 99c app is the #5 best selling paid application as of press time (or clicking ‘post’ rather).

One last thing.  Notice the final line of the long paragraph:  “And – people of both sex will love it.”  Isn’t the grammatically correct term “sexes”?  And wouldn’t writing “both genders” or “guys and girls will both love it” say the same thing in a less awkward way?

Alas, these clever developers have realized the power of the popular search term “sex.” This app ranks third for a search of “sex”  — right behind the official Sex and the City application.

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The idea is simple — click the ‘start’ button and as soon as the background changes color, click ‘stop’.

Dumb little game, right?

A Sneaky iPhone Web App

But wait!  Look closely at the screenshot and you’ll notice a google advertisement placed adjacent to the stop button.  When the background color changes, the user panics and grabs for the stop button.  This panicked movement combines with the inexact finger navigation inherent on the iPhone to cause the user to click the advertisement by accident (I did this repeatedly in my attempts to play the game).

Furthermore, because the ads are contextually targeted to the ‘reflex’ theme, medical and legal ads appear which surely fetch the developer a pretty penny each time someone accidentally clicks the ads.  Brilliantly evil, no?

Check it out for yourself.

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