Mobile App Install Ads & Facebook’s Earnings Report

facebook_arpu_2014

Very interesting tidbit for the #stats hound in Facebook beats the street and Wall Street yawns: Facebook earnings report for Q2/2014 reveals that their App Install Ads may be driving significant revenue increases. [above chart is from the post]

But lest you think that this is a Facebook issue alone, it is really much bigger than that:

1) The rise of App Install Ads (AIAs), which for some reason according to Re/Code’s Peter Kafka “…In [the] FB [earnings] call, [Facebook’s] Sandberg tries to downplay importance of app install ads to mobile biz. Not a ‘great majority’ of $.”

… appears to prove my long-held belief that Context is the key to getting ads to work, i.e. offer people something that makes sense in the context of what they are already doing. In that light, offering people mobile apps while they are using a mobile device and likely app, is exactly the right approach.

(Compare what I wrote here a long time ago:
businessmindhacks.com/post/is-advertising-failing-on-the-internet .)

Pair it with the “Impulse Purchase Territory” pricing of between FREE and $4.99 say, and you have something that works, compared to offering them a refrigerator or car in a mobile ad.

(More on the Impulse Purchase Territory pricing concept here:
businessmindhacks.com/post/from-kevin-kellys-the-satisfaction-paradox-on-why-curation-will-be-the-only-thing-youll-still-pay-for where…

“…I’ve said previously that e.g. Sony is making a huge mistake by not going the $1/month route for complete/unlimited streaming music access with their own new offering: Because that would put it in the complete impulse purchase, don’t-need-to-think, will-likely-never-cancel-for-any-reason category.”

BTW Amazon took another significant step a few days ago in the inevitable march to near $0 book content with its $10/month all-you-can-read Kindle eBook subscription service: nytimes.com/2014/07/19/business/media/amazon-introduces-kindle-subscription-service.html Yes, there are still the “Big 5” publishing houses as holdouts, because they wrongly believe that they have pricing power left… .)

2) The relative ARPUs shown below are particularly interesting to me from the perspective of Web or mobile service monetization strategies. As you can see, the world-wide ARPU for Facebook is creeping towards $10 per user per year, with significant — though expected — variation between various regions:

In the U.S. with $6.44 per quarter = near $26 / year, the revenue is more than double a European user, and 6 times that of a user in Asia.

I have been playing with the idea over the past 6+ months of what would happen if Web services attempted to charge their users $1/month in exchange for never having to bother them with ads, or any other form of targeting or data exploitation, except maybe for where that were specifically requested by the user (OPT-IN), in line with +Doc Searls‘ and others #VRM  ideas.

For FB, the world-wide and European ARPU numbers still show this as a viable option, but for the U.S. of course one could argue that FB would be leaving too much money on the proverbial table if they went this route (they would have to charge a U.S. user $2/month to break even with their current number).

Then again, a non-public company wouldn’t have short-term shareholder interests to answer to, and could well choose to go the longer-term more sustainable route of forgoing some ad revenue for a happier, more loyal user base.

(Not that it is by any means easy to significantly drive up ad monetization on social media, as Twitter has been finding out for a good while now.)

It least that’s my current view/argument, that once ONE successful Social Media / etc. service offers this #privacy respecting option, that they will either clean up big, or force  the competition to follow suit in relatively short order. Yes, we all once thought that G+ could be that option, but it was not to be…

3) Related: This chart shows the rise of FB’s mobile ads going from a mere blip around Q2/2012, to 1.5x or the stagnant desktop ads a mere two years later!

“Where Facebook’s money comes from, via @BIIntelligence”
>>  twitter.com/jyarow/status/492048993053319169

Mobile is rising in the near blink of an eye (and not done yet…), and Mobile Apps have emerged as maybe THE way to monetize it beyond device sales and mobile bandwidth. Stands to reason that selling ads WITH this trend instead of against it would work.


Tangentially related posts on Mobile and Pricing issues:

stratechery.com/2014/microsofts-mobile-muddle/
authorearnings.com/july-2014-author-earnings-report/

Stats hound Tuesday: Box’ storage financial internals

A Look Inside Box: Competition, Product Plans, And Unit Economics | TechCrunch

A stats hound Tuesday (or any day…) item – A Look Inside Box: Competition, Product Plans, And Unit Economics | TechCrunch

Interesting look into the financial internals of Box’ (mostly storage) cost for the #Free accounts portion of their Freemium model, which they actually count as “marketing costs” (because they “warm up” the users for some of those later sales):

According to their pre-IPO  S-1 filing $171 Million for 2013, for 25 Million registered users, of which something like 7% are paying “Premium” customers.

To keep the math simple let’s say that 2M are paying, so that leaves the remaining 23M costing 171 / 23 = about $7.50 per user per year. Obviously all of this is on average, as there will be plenty of abandoned accounts among the 23M, and plenty of even the actives using only marginal portions of their allotted X GBs of storage, asf.

Still, that shows that if Box could convince currently free users to pay them as little as $1/month, they would more than break even! (I’ve been arguing for about 6-12 months now that this is the route to go from here on out:

Cover infrastructure costs with a nominal (very low) monthly fee in the “Impulse Purchase Territory”, in return give to the users freedom from data harvesting, snooping, etc. etc. of all kinds.

Yes, that could include end-to-end encryption for non-collaboration files stored in your account among other things. And so forth.

(Additional #b2bsales and #enterprise relevant portions further down in the piece.)

Freeconomics New Generatives + Impulse-Purchase Pricing = Kickstarter. Better Than Gov’t Grants for Artists!?

Screen shot 2012-03-02 at 4.11.56 PMKickstarter project crowd-funding is a fantastic example of how you can still sell, even when everything (at least in the digital/content realm) is trending toward $0/FREE.

1) Notice the way that the Kickstarter set-up allows for “donation” sales of $1, what I call pure Impulse Purchase territory: The amount is low enough that the vast majority of people don’t need to bring their rational/doubting/calculating brain into the equation at all.

2) More importantly, the various donation levels (=offers) all include the New Generatives principles that can still work with #Freeconomics:

Priority/exclusive access and experience/embodiment (live stream of the performance art event), plus patronage (the self-satisfied feeling from being a patron for the arts, etc.).

Next level up: Input into the creative process – experience/participation.

Next level up: A piece of the paper canvas – embodiment, uniqueness/authenticity/personalization.

Next level up: Lunch with the artist – personalization, experience/embodiment, exclusive access, etc.

And guess what? It works like a charm… almost 4 times the stated fundraising goal!

These principles apply to music and bands just as much as by the way.

[UPDATE: And Jason Calacanis is predicting that we will soon see a multi-million $ independent movie project on Kickstarter, possibly by the likes of Quentin Tarantino. Get the movie you want made by the director/artist you want! -> More here on this Google+ post. ]

Amplify’d from Mashable – Could Kickstarter Be Better Than Government Grants for Artists?

Artist Molly Crabapple has just been given $17,000 to lock herself in a paper-covered room for five days and make art until the walls are covered.

But that sum didn’t come from the National Endowment for the Arts or a wealthy patron; Crabapple, like many in her subversive art-making shoes, turned to Kickstarter to find funding for the stunt.

In her Kickstarter proposal, she outlined the basic premise of the project, dubbed “Molly Crabapple’s Week in Hell.” Anyone who donated a dollar to the effort would get to watch a live stream of the whole five-day shebang. Anyone who pledged $10 or more would get to name an animal for inclusion in the artwork; donations of $20 or more would get an actual piece of the ink-filled paper sent to them. And backers who fronted $1,000 or more would get an absinthe-infused lunch with the artist.

Crabapple set a $4,500 fundraising goal; so far, the total raised is $17,000 — enough to make a short film about the project, which Crabapple says will debut online shortly after Crabapple’s Week in Hell wraps.