The App Flap

That didn’t take long. It hasn’t even been 18 months since the first iPhone app launched, and now with more than 140,000 of them, marketers are finding it tougher and more expensive to get their branded apps in wide circulation.

More competition means apps require a lot more downloads just to land in the same spot in Apple’s 100 most-popular rankings than they needed a year ago. Making the list often means the difference between success and failure. A high-ranking slot becomes self-reinforcing as customers often download those apps out of curiosity.

“Marketers have to spend more to get the same result,” said Jason Spero, vp and managing director, North America, for AdMob, the mobile advertising network Google is in the process of trying to acquire. Spero added that the upside is that apps that do break through have a larger base of customers — 30 million vs. 15 million a year ago.

Such mobile ad networks promote new apps by embedding them into other popular apps, but at a price. Spero estimated that a marketer who spent $15,000 a year ago to promote a new app would have to spend $50,000-$55,000 now to pursue a comparable number of downloads.

But, properly used, that investment yields results in an ever tougher marketplace. For client AutoWeek, AdMob ran a “burst campaign” of ads across more than 3,000 apps in its iPhone network on Nov. 10-12, moving AutoWeek’s rankings to No. 10 from No. 37 in the news category.

Using mobile ad networks like AdMob is not the only way to get noticed, of course. Marketers use social media, word of mouth, corporate Web sites and include app references in offline media communications to pique consumer interest.

Another approach is to lobby Apple itself for a spotlight on iTunes or as a       staff pick.

“While it’s definitely church and state — those decisions are made by Apple’s editorial and merchandising team — we can take steps to help influence those selections, and it’s important in how you market within the applications store itself,” explained Ken Willner, CEO, Zumobi, one of the first app publishers to appear on the Apple iTunes store in August 2008. Last week, two of Zumobi’s apps were featured on the App store site. Apple didn’t return calls seeking further clarification of how apps are chosen to be featured on its site.

Apple lists 20 categories on the App Store, and another way developers can grab more attention is to be creative about selecting the category in which their apps are ranked. Willner says his company focuses on “refreshable” content –which attracts consumers who go back to the apps more frequently for updates –than the kind of static content found in app games. For instance, Zumobi listed Motor Trend in the news category rather than automotive. Another way to think about which category to list: Smaller ones give an app a better shot at a higher ranking.

But whatever the strategy, marketers have to work harder to gain traction.

Things don’t seem to be letting up, either. In the second half of 2009, app development for Google’s Android operating system began to catch up to that for the iPhone, according to Flurry, a mobile analytics firm. But as speculation mounted about Apple’s pending launch of the iPad, app development rocketed to more than 1,600 new apps in January, nearly triple that of December.

But for marketers hoping to launch an app, there are new opportunities outside of iTunes. In March, Flurry plans to launch a new mobile cross-selling system, AppCircle, which operates like Amazon’s recommendation model, inviting users to try a new app that might be of interest based on those the consumers are already using.

The difference with AppCircle is that it is based on actual app usage, tracked by Flurry Analytics, not just downloads. “There’s way too much product on the shelf, and app discoverability is a serious pain point,” said Peter Farago, vp, marketing for Flurry.

Android, Google’s smartphone operating system, also has its own rankings system. Now with 20,000 free and pay apps at the Android Market, Google said users download almost 80 apps on average. Much like with Google search, the apps rankings system is still not entirely clear to outsiders, combining a mixture of download numbers, elements of search engine optimization and YouTube-style community rankings. A Google rep describes the process: “From Android’s perspective, the most effective way to build something, which has good rankings, is its core app functionality and user feedback.”

Meanwhile, some might wonder if mobile app-vertising is worth the trouble and expense. Recent research from Flurry, for instance, found that from about a high of 40 percent retained users for both iPhone and Android apps the first month of download, the number drops to just 5 percent six months later. Given that app life span and the increasing costs associated with promoting them, some question whether the ROI is worth the ongoing investment for many marketers.

“Now that the novelty has worn off and everyone has an app that doesn’t work anymore, you have to think, ‘Do I really need an app?’ The mobile space is like the early days of the Internet where people are just doing stuff because it’s cool,” said Greg Sterling, senior analyst, Internet2Go, Opus Research. “It can be a great marketing, loyalty, e-commerce tool, but it’s not for everyone. Maybe people just need a Web site that’s optimized for a smartphone.”

See also: “Mobile’s Conundrum”