A blog post last week from Flurry, which asserted that US app inventory is “poised to absorb the equivalent of the entire US internet display advertising spend by the end of this year,” has sparked some debate among the app industry.

Flurry calculated the potential of the app advertising market using a calculation based on available ad spaces (inventory) and a “conservative” cost per 1,000 impressions of US$2.50. Much of the criticism centred on the fact that in a market driven by supply and demand, an excess of inventory is likely to see the cost of impressions falling, and that unappealing slots may end up being left empty.

The Guardian quotes Matt Gillis of ad network Millennial Media, who observed “all impressions are not necessarily equal.”

For the unwary developer, there is a danger that a focus on headline figures could create the impression of a gold rush, where everybody stands to make a killing. What is more likely is that while a few developers will get rich from mobile advertising, many will not.

This reflects the app market a few years ago, when some app developers made a killing from US$0.99 App Store products, but a far greater number saw a negligible income.

As Nielsen noted last month, in the US the top 50 apps account for 61 percent of usage. For an advertiser, these apps, with their large and installed user bases, are a massively attractive target. But for the remaining 250,000+ apps, the picture is a whole lot less rosy, with reduced advertiser demand and increased competition from rival products likely to see significant sales much harder to achieve.

Essentially, the message remains the same for the developer, even if the source of the revenue changes. The key is being able to generate a large and loyal user base, meaning the quality of the app remains tantamount. A good app can generate per-unit sales from customers, and a good app can generate interest in advertisers wanting to appeal to its user base. A bad app is still bad, using either business model.

What is encouraging about Flurry’s study is that there are clearly opportunities for advertising in mobile apps, and as this becomes a more established channel for brands, other are likely to join the fray.  While acceptance of mobile in the advertising channel has come on in leaps and bounds in recent years, in-app advertising is still something of an unknown quantity.

But this will change, creating more opportunity for the developers who are best positioned to capitalise on this.

Steve Costello

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members