iAd for Developers cost effectiveness in doubt

Anecdotal evidence indicates Apple's fledgling (NASDAQ:AAPL) iAd for Developers initiative does not yet offer an economically viable model for driving application sales. iAd for Developers, introduced late last month, offers registered iPhone developers a channel to market their applications inside other apps at a cost per click rate of $0.25--startups test-driving the program include Cross Forward Consulting, whose founder David Smith broke down the firm's experience following a weeklong campaign promoting its Audiobooks Premium app. "This campaign [was] the last in a series of trials with just about every mobile advertising platform to try and find an edge in promoting our apps. The goal is to find an economically viable way to introduce our apps to new customers, who might not find them through the typical Top Charts within the App Store," Smith writes on the Cross Forward blog. "I was really curious if Apple had finally cracked the puzzle of discoverability with a way to put our apps directly in front of users and provide a seamless way to buy them."

Cross Forward's iAd for Developers campaign ran from Aug. 19 to Aug. 25, built around a banner ad reading "3,500+ Classic Audiobooks--Download this great app for just $0.99." On Aug. 19, the banner generated 400,991 impressions and 1,020 clicks, a click-through rate of 0.25 percent yielding just 19 Audiobooks Premium downloads, translating to a one-day spend of $255.00 and a cost per acquisition rate of $13.42. The numbers did not improve in the days to follow, and by the time Cross Forward pulled the plug six days in, its total iAd for Developers cost reached $1,251.75, generating just 84 downloads in all at an average cost per acquisition of $14.90. "I want to eliminate any doubt that the campaign's performance was lackluster because the app it targeted wasn't compelling," Smith adds. "Our audiobooks app suite has generated well over 1.6 million downloads since it was launched and has consistently been in the Top 10 Book apps for its lifetime."

Curious to determine how iAd for Developers compares to Google's rival AdMob network, Smith invested $75 in a "quick blast campaign" running the same banner image and message. This time around, Audiobooks generated 145,093 impressions but 1,944 clicks, a click-through rate of 1.34 percent--at a cost per click of $0.04, Cross Forward's one-day cost was $77.76. "AdMob is 6.25X cheaper than iAd, and surprisingly had a CTR that was 5.5X better," Smith notes. "This surprised me given all the marketing about how Apple believed that their putting an iAd badge on their advertisements would induce a level of trust and excitement with users." He nevertheless expresses serious doubts about the in-app advertising model as a whole: "I have tried just about every advertising platform around and have generally found none of them to be demonstrably effective. I think that this stems from the fundamentals of why people buy apps. I believe most people buy apps based on receiving a recommendation, either directly from word-of-mouth or indirectly by their position in the Charts. There is no way to realistically replace either of these recommendation systems by throwing money at the problem."

For more on Cross Forward Consulting's iAd for Developers experience:
- read this blog entry

Related articles:
Apple expands iAd platform to iPhone developers
iAd sales top $60 million in advance of iPhone 4's debut
Apple's iAd could generate $825 million for developers this year

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