The Rise Of In-App Purchasing
I spoke at length with Flurry VP of marketing Peter Farago about advertising apps and advertising in apps on Wednesday and he wasn't surprised that traditional advertising doesn't work well as a way to promote or monetize mobile apps.

"Monetizing by banner ads doesn't pay the bills," he said. "The problem with online advertising is there's way too much inventory." With so many places to advertise, he suggests, advertisers' inventory is basically worthless.

Perhaps not entirely worthless: To date with Blocfall Free, I've earned about $30 from AdMob ads in the game in the past thirty days, based on around 10,000 ad impressions. But I'd need orders of magnitude more users to generate meaningful income from ads. Too bad I didn't design the game to support in-app purchasing.

As Farago sees it, in-app purchasing has become the most effective revenue stream for developers, outpacing revenue from paid apps and revenue from in-app advertising. In-app purchasing involves selling players virtual goods related to the game they're playing or to other games.

"At the end of the day, you can take hundreds of dollars from the same consumer who wouldn't pay $0.99," he said. Farago wrote in more detail about the trend last October.

Flurry's App Circle advertising program can be thought of as a form of in-app purchasing, where apps themselves represent the virtual goods being bought. It allows users to acquire games, with developers footing the bill for every installation. Revenue flows to Flurry and the app developers participating as publishers -- they display the CPI ads for other people's apps in their apps.

Farago likens Flurry's approach to Amazon's in that its system attempts to recommend apps to those likely to be interested. There are some 8000 developers participating in App Circle at the moment, he said, noting that the service opened in August and has been doubling in revenue every month since.

There are other CPI services available, each presumably with its own merits. I hear good things about Tapjoy, though I have yet to try it. There's Burstly and MdotM, too.

Initially, I opted for Flurry because it's supported in Ansca Mobile's Corona SDK, the development framework I used to write Blocfall. And at least until Flurry works out the oddities in its system that allow such unexpectedly affordable user acquisition, I'm likely to stick with it.

Flurry users may appreciate another trick: If your promotional campaign is generating fewer impressions over time, as seems to be natural, delete it, recreate it, and relaunch it. Flurry currently has no memory of whether your ad performs well or poorly, so it begins all campaigns with a high volume of impressions and then throttles back based on ad performance. Thus, recreating an old Flurry campaign relaunches it with at a high rate of impressions, increasing the chances of an app installation.

Farago likens this situation to the movie Groundhog Day, in which the protagonist lives the same day over and over, and suggests the loophole will be addressed sooner or later.

And that's the final lesson I learned: The market and its opportunities change. What worked yesterday may not work tomorrow. Be ready to move when the door is open.