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Free apps with relevant ads curry favor with Americans: report

Americans continue to prefer free, ad-supported mobile applications to those that cost money, pointing to how app developers are struggling to build a sustainable revenue flow from apps, according to a new survey conducted by Zogby Analytics and commissioned by the Digital Advertising Alliance. 

Of respondents in the DAA?s survey of 1,015 United States adults who downloaded apps, 58 percent preferred free, ad-supported apps to those that required some form of payment, either at download or in-app, the survey found. The growing preference for free apps as mobile usage swells is turning up attention on monetization strategies.

?Marketers, more than perhaps anyone else in the world, intimately understand that customers respond to relevancy, and consumers appreciate low-cost, high-quality content made possible by advertising,? said Lou Mastria, the DDA?s executive director.

?Marketers, of anyone, would not be surprised by the poll?s findings that users who expressed an opinion preferred relevant ads by a margin of nearly 5-1. If anything, these results should further validate the ongoing movement in marketing toward greater relevancy and interest-based communication, backed by the transparency choice and enforcement that the DAA has brought to the desktop Web and will soon be brining to mobile environments,? he said.

Real time
Only 8 percent of users said they would download all of their free apps again if they were required to pay for them. Forty-six percent said they would not download any of their free apps again if they were forced to pay. 

Pandora, a top free app.

By a margin of nearly five-to-one, Americans who expressed an opinion preferred seeing mobile ads that were relevant to their specific interests. 

More than 65 percent said they would be more comfortable receiving relevant mobile ads if the companies providing them followed some privacy principles.

With mobile application usage rising in tandem with smartphone penetration growth, app developers are struggling with how to build a sustainable revenue flow from apps. As consumers increasingly get used to being able to download apps for free, developers need to figure out how to derive advertising revenue from their apps as well as how and when to charge users for content and other features.

Initially, most mobile apps were paid. But then the freemium model ? which lets users download an app for free but then charges for additional content later on ? started to gain steam, with consumers clearly expressing a preference for being able to download apps for free.

This has proven to be a boon to the popular platforms for downloading apps, as they take a percentage of the sales.

Nearly 60 percent of respondents said they would feel more favorably toward companies and brands that provided ubiquitous, real-time choice regarding their advertising practices using a transparency icon, a tool provided by the DAA, a group of the nation's largest media and marketing associations.

The DAA transparency icon is a small blue triangle that informs users that they are receiving relevant advertising, and provides them an opportunity to opt out of ad-driven information collection. When users click on the icon, they can learn more about the ad they are seeing, and set their preferences regarding other relevant ads.

Survey shows that free apps rule the day.

The icon represents companies that have certified their data collection and use practices with DAA principles and stands as a signal to consumers that these companies have invested in privacy controls which provide consumers with convenience while respecting their privacy practices.

The poll revealed a sophisticated understanding of mobile functionality and content, as well as a desire for tools, similar to those DAA provides in the desktop environment, that offer transparency and choice regarding the collection and use of data in this emerging medium. 

The poll comes shortly before the DAA is to launch AppChoices, a downloadable tool that allows users to manage their relevant advertising preferences in mobile apps. 

The survey found that 71 percent of respondents agreed that tools that provide them transparency and choice regarding relevant ads and data collection should be available wherever and however they access the Internet. 

Sixty-six percent said that transparency and choice tools should let them pick and choose which companies bring them relevant offers. 

More than 66 percent of respondents said they wanted access to similar protections and controls for advertising-related data collection, such as opt-out choices, on their smartphones or tablets that are available currently on desktop and laptop computers.

Paid apps resurgent
Amazon?s recent decision to not accept a settlement with the Federal Trade Commission over in-application purchases points to growing pressures facing freemium apps as regulators take a closer look at possible misuse and the market for paid apps becomes more clearly defined.

Instagram app, another big freebie.

Some consumers are also losing trust in freemium apps because they have had to deal with unauthorized charges. 

At the same time that regulators take a closer look at freemium apps, there is also something of a resurgence in paid apps under some specific circumstances.

?The research further confirms that effective transparency and choice tools, such as the DAA Icon, DAA Choice Page and Forthcoming DAA mobile choice tools are critical prerequisites for relevant advertising and marketing,? Mr. Mastria said. 

?When marketers and advertisers empower users, users reward us with far greater receptiveness to relevant ads and offers.?

Final Take
Michael Barris is staff reporter on Mobile Marketer, New York.