Here’s the second instalment of highlights from our panel discussion on the “Monetization of Mobile Apps” at the mBillionth Awards South Asia 2012, where our panelists – Dr. Abhinav Mathur (Spice Labs), Ashay Padwal (Vserv.mobi), Dev Khare (Lightspeed Ventures), Jonathan Bill (Vodafone India), and Rajiv Kumar (RockeTalk) , discussed issues related to monetization models, native apps vs web apps, and in-app ads, among others:

Nikhil: So how do developers decide between Mobile apps versus Mobile web?

Dev: My advice is to developers is – if you want to target feature phones, go mobile web, if you want to target smartphones, go for apps.

Nikhil: But what about monetisation then?

Dev: That should not be a key focus right now. If you look at models in the west, it is not advertising that is making money for people – it is in-app transactions. It’s paying for an app, it’s subscription. It’s certainly not advertising. Advertising pays some bills.

Abhinav: We have been seeing the blackberry ecosystem as a low hanging fruit, applications were there, and they were enterprise focused. The Blackberry ecosystem have been going down, and the consumers of our apps have asked us to put the app on the iPhone or Android. Now we’re seeing healthy numbers on Android, not because we have been really great in terms of putting our apps on the app store, but the reason is that consumers who have used our app are seeking us out.
Another thing that we have done is that we have gone and used facebook for distribution: we’ve put an app which is tied up to our device, on facebook,and ensured that the consumer is virally spreading the world across app stores.

Nikhil: Does advertising pay bills for developers?

Ashay: There will be differences in the way in which advertisers will monetize across geographies. What works in the US, what works in Western Europe, I don’t believe it would work everywhere. If you’re thinking that the way things have worked out in the West, and other parts of the world should follow suit, I don’t think that (will work).
There are developers who are making $2000-3000 per day, on the 20-30 apps they have. It’s just the starting of the whole thing. Each service, each app is unique as such. If you’re looking at entertainment as a category, the emerging countries are too complicated a gameplay and in-app purchases: people don’t quite get that (concept) easily. They want a semi involved experience, and casual gaming, for which advertising is the best way.

There are three types of apps – information, communication and entertainment. If you’re looking at communication apps, each will have to find its own revenue model, and what fits into the user experience and when. Information apps would go well with
a mix of advertising. For entertainment, a try and buy and a mix of pay per play(should work). Pushing users to get some power up etc. There are not so avid gamers, and the volume of avid gamers will not be too high in this market.

Dev: Asking what is the monetization model for the mobile is like asking what is the monetization model for the web. Too broad a way to think about this. If you think about what has happened on mobile app stores across the web, gaming is 60-70% of what is being downloaded out there. How are they making money? Certainly not through pure advertising.

The other way to think about this is that the whole interactive advertising market is roughly $350 million a year, of which mobile advertising is 10%. It’s a tiny market. So when you think about eCPMs and ask all these questions, it’s interesting, but the sell through rates are low – 10% to 15%. Yahoo has a 35% global sell through rate. The rest is remnant. Maybe for branded sales and developer ad sales, we’re talking about $3, $5, and this is what Admob did – they started with remnant inventory at 10 cents, 15 cents and rock bottom prices, which is where the market is today. We need to differentiate between what is sold and what is up.

Nikhil: does advertising pay your bills, or is it VCs like Dev who pay your bills?

Rajiv: Right now it’s VCs who pay our bills, but that’s because we’re still in the early stages of monetization. We’ve also started running experiments on user monetization. Very simple stuff is what we’ve started doing. India is a very aspirational society, and most of our users come from tier two and tier three cities. People want to get on top in a community. We ran an experiment, and our help center was flooded from people who wanted to pay (for being featured on top in search results). It was Rs 500 per week, and Rs 2000 per month. That was the benchmark, and we had hundreds of users who went to SBI and deposited money in the bank account. It’s hard to scale up by sending people to SBI, and now we’ve signed up with Vodafone, and hopefully that will become better coming through operators like vodafone. We see that as being a greater part of what could pay our bills than advertising.

Ashay: We believe that in the emerging world, advertising versus transactions will be 50-50. I’m not saying that advertisng will be the only thing, you need to balance out your revenue streams.

Nalin, from the Audience: How many programmers do you have, what is the size of your team,and what’s your daily revenue?

Abhinav: To get your best case $5,000 a day advertising revenue from the products that we are working on, takes a team of 25, and if you were to take a mix, there would be around 2 product people, 15 developers, graphic designers, quality assurance people and rest will be admin guys.

Nalin: How much of your inventory goes unsold? Most ad networks offer you ads of $1-2. So how are you getting $5

Ashay: What we have is a different ad format: we have a full screen launch ad and a full screen exit ad. We show full screen ads. We ask develoeprs, for gaming apps, not to have ads in the game. This ad format is what gives high eCPM. We provide free mediation – if you look at how ad networks work, different networks have different campaigns at different times. Ideally, as a developer, you need to have some means of pulling ads from networks. Once you’ve ad enabled your app, you can specify the network that you want to work with. For India, our own fill rate is around 70%, and that is by aggregating across networks,
your fill rate can go up to 80-90%, depending on different geographies. On an average, we are able to deliver somewhere around 70-80% globally through mediation.

*Disclosure: VServ.mobi was the panel sponsor