"App" is short for application, and refers to programs available for mobile phones and tablets. These may be games, business software, learning programs or specialized applications. From 2008, when the iPhone App Store released its first app, through 2012, there have been an estimated 1.6 billion apps created for major platforms. Most are free, and many of these include advertising.
1. Calculate ad impressions per 100,000 users who download an app, test and discard it. A 2012 Stanford Venture Lab presentation notes that 90 percent of 100,000 users install the app and then delete it after about five minutes of use. About 80 percent of these have an Internet connection needed to download ads. Multiply 0.9 by 0.8 by 100,000 to determine the number of users per 100,000 who download apps with ads and then delete them. This equals 72,000. Divide five minutes by 30 seconds to find ad impressions, which equals 10. Multiply 10 by 72,000 users to find total impressions. This equals 720,000.
2. Calculate ad impressions per 100,000 users who download an app and retain it. The Stanford Venture Lab presentation notes that 10 percent of 100,000 users install the app and retain it. Eighty percent of these have Internet access. Multiply 100,000 by 0.10 by 0.8 to find the number of users with Internet access who retain the ad, which equals 8,000 users. The lab also notes that users who retain apps use them for about 10 minutes a day for 21 days. Multiply 10 times 21 to find total minutes, which equals 210. Each ad lasts 30 seconds, so multiply 210 minutes times two to find total ads, which equals 420 ads per user. Multiply by 8,000 to find total ad impressions per 100,000 users who retain downloaded apps with ads. This equals 3,360,000.
3. Calculate revenue per 100,000 users. Add 720,000, the number of ad impressions by users who don't retain the app, and 3,360,000, the number of ad impressions by users who do. This equals 4,080,000. Use Stanford Venture Lab's average revenue estimate of $3 per 1,000 add impressions: 4,080,000 impressions divided by 1,000 times $3 equals $12,240 mobile ad revenue per 100,000 app users.
- Internet access
- If you're planning to make a living from app development, note that the trend is increasingly toward income from ads on free apps rather than from app sales. According to MacTrast, in 2013 the percentage of free downloads has risen to 90 percent of total downloads and is projected to rise to 93 percent by 2016.
- Most ad revenue goes to a few publishers. In 2012, 50 percent of the total was earned by the top 25 developers. MobiThinking statistics show that most app developers -- roughly three out of four -- have ad revenue of less than $500 a month.
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