Image by DavidErickson via Flickr
iAds have landed and they are ringing the bells of the cash registers for developers/media owners. One reported on hacker news earnings on their first day of $1,372.20. That’s a fair chunk of cash when you consider the effective cost per thousand (eCPM) ad displayed worked out at $147.55.
Based on the chart above the developer (publisher/media owner) has shown the iAds on their app a total of 9,300 times. Although during the reported period the app could have displayed a single iAd 26,651 times, hence the low fill rate of 34.9%.
The low fill rate could be explained by the advertiser only wanting to show ads in a certain country (for example AT&T would not want to advertise in the UK), or it could be explained by Apple having more space than it can fill with ads right now. No doubt this will change, and the supply and demand game that surrounds advertising will kick in.
A quick demo of what we are talking about: more after the video
The numbers… explained
Apple’s claims they charge advertisers a $10.00 CPM + $2.00 CPC give 60% of this to the developer.
CPM = Cost per ‘000 = Good, because it doesn’t matter if the ad is crap, as long as it appears the media owner get paid for each time it is seen.
CPC = Cost per Click = If the ad is good, you could get loads of clicks. Advertisers are happy to pay because, they are paying for performance. Potentially the media owner (developer) can earn a decent amount, sometimes more than on a CPM if they get a high number of clicks per ‘000 ads served.
If you could get a 1% click through rate on 1000 ads that would be 10 clicks = Each click being $2, you’d earn an effective $20 CPM. Because it is performance based the advertiser is will to pay more for a click because they can be more certain about the ROI (ultimately their is less risk attached).
A CPM + CPC combined model = Clever Apple. Basically they are in a win win in a monopolistic market. If the ad tanks and doesn’t perform then they get paid a decent CPM. However if it performs well then the money can get ridiculous each click pays out a nice bonus on top of what you’re guaranteed to earn. (Think sales person getting basic pay and then getting commission on each £1 they bring in)
More numbers – you can switch off here if you like (adapted from hacker news)
Number of clicks the iAd received = 9,300 imps x 11.80% CTR = 1,097 clicks
Cost Per (M) thousand ads served = 9.3 mille x $10.00 CPM = $93 from CPM
Revenue on Clicks = 1,097 clicks x $2.00 CPM = $2,194 from CPC
Revenue on Clicks and CPM = $2,194 + $93 = $2,287 advertiser owes
Developers share = $2,287 x 60% = $1,372 to the developer (as reported)
If you’re still with me….. Apple own this market now, they can build their pricing model how they like, personally I think it is very clever to do a combination. iAds are a novelty at the moment, so the Click Through Rate (CTR) is massively high. Over time that will come down, as people get used to the ads and become blind to them. Just like we all switch over when the ads come on TV, or forget to look at the right hand side of a website because we all know that the ads are there. Even if the CTR falls from 11.8% to 1%, the advertiser will still be paying out around $18 per thousand ads.
At an eCPM of $18, that’s way way higher than app developers are getting from their in app iPhone advertising or from the likes of admob which will be closer to $0.50 eCPM.
Apple should now march victorious down the streets of silicon valley all the way to madison avenue. Am I seriously impressed, damn right I am.
[Originally posted on überBusy]
