Sramana Mitra: What trends do you see in the industry’s treatment of the users that are not going to be high-monetizing users. I have one observation about the industry in general. I’m not talking about just mobile. The Internet is really saddled with an incredibly high number of free riders.
Steve Wadsworth: I think that’s totally accurate, but it’s accurate largely because of the implementation paradigm for most advertising on the web and mobile. The reason I say that is because I think the Internet has done a bit of disservice to advertising by demonstrating to people that the content is free, and around the outside, there are these annoying things that are trying to get your attention. What is lost in that is the traditional model of advertising, which is the value exchange. I’m watching linear television. In order to continue watching, I have to sit through an ad. The clear value exchange is this is part of the experience, something needs to pay for this content. It’s high production value. People understand that they need to sit through this because it’s helping to pay for this premium content experience.
I think implementation of advertising on the web has really taught people that content is free and you can ignore and skip these annoying things. Therefore, that has informed the model that Tapjoy’s using for advertising on mobile. Why I said our focus is freemium apps is because the implication of freemium is that there’s a certain amount of engagement in this app that publishers are prepared for you to have and which is free. But if you want to engage in the freemium experience or move farther and deeper into the experience, you either have to purchase things in that game or you could get our model as you engage in advertising in exchange for access to that premium content.
We apply a value-exchange. Let’s say in a given app, the thing that provides access to premium content is virtual currency. Our model is built on the basis that, “You can buy those coins and then you exchange them for goods that get you farther and deeper into the experience.” Or you can engage in advertising. My belief is that it makes the advertising value proposition much more transparent to the user. The user will realize, “This ad is benefiting me. I could be paying for it but if I engage in an ad, this ad is sponsoring my access to that content.”
It’s great for the advertiser because they’re the sponsor of the experience the user wants. It’s great for the publisher, because now the publisher gets a user who’s more engaged. Then you get a user that’s happy because they can now go deeper into this experience that they like. That model is a critical model for advertising going forward in mobile particularly given the limited real estate in mobile and the fact that advertisers want to have 100% share of voice.
I agree with you. I think there are quite a few people who are free riding. Our goal is to change that mindset and convince them that there’s a value proposition here – access to premium content requires someone to pay for it either you directly or an advertiser can sponsor for you.