Developers might end up paying more to acquire subscribers with Facebook's new mobile app ad system

It would seem on one hand, that Facebook is doing developers a huge favor. With its Mobile App Ad for Installs, a click on an sponsored post or ad will send a user to the Google Play Store or the Apple App Store, from where he or she can download and install the advertised app. By going straight to the "stores," the process of clicking on an ad to installing an app becomes a quick and painless experience.

On the other hand, with organic reach dropping (that is the number of people who view your Facebook post via News Feed, Ticker or your page), paid ads will need to be used more, which will raise the cost to developers of acquiring subscribers. In the long run, this might be a better model for freemium apps that make their money on the back-end. Being a numbers game, the more that sign up for a freemium app, the more revenue the developer can expect.

But that means that the developer of a freemium site will have to trust that the numbers game works for his app. Spending more money upfront to market an app when the payoff comes later, requires a sense of trust in the odds. It's the same feeling that a card counter has at the Blackjack table after he loses his first five or six hands.

Freemium app developers with a large bankroll, or those lucky enough to quickly generate enough revenue, will survive, although their margins will decline. Still, the overall bottom line should improve for freemium and paid app developers, as those who click on an ad for a mobile app on Facebook find themselves just one more click away from installing the app on their mobile device.


source: Facebook via Forbes