Bribery, Porn, and Spam Are the Path to Riches in the App World

Photo: jkr_photo/Flickr

From Wired:

As money floods into their market, and the stakes get ever higher, app makers are getting paranoid. Paranoid that competitors are buying traffic spikes, using porn to attract users, and spamming everyone and their mom on the way to the top of the leaderboards. Above all, app makers are paranoid that the competition is playing dirty better than they are — tricking users out of their time and investors out of their money.

“I do believe people try to manipulate their download numbers and chart position around a financing,” says Matt Murphy, an investment partner at Kleiner Perkins Caufield & Byers. “It seems everybody raising money has just hit some inflection in their numbers, so either they wait until that happens or manufacture it.”

If the web is dead, and the open ecosystem of the browser is being replaced by tightly controlled apps, then it’s more than just venture capitalists and software creators who should take heed of such questionable practices. In the exploding app universe there are more hiding places for unscrupulous startups to violate your privacy, waste your time and toy with your reputation. And if current trends in capital and user flows continue, it’s only going to get worse.

The situation is exacerbated by the opaque nature of apps. On the web, advertising, kickbacks, and questionable content is, for the most part, right out in the open. In apps, user activity is locked inside proprietary software, and transactions occur on company-owned stores like iTunes and Google Play, and on closed ad exchanges like Tapjoy and Flurry. That creates an ideal climate both for tricks and fears of tricks.

And there are plenty of tricks to be scared of. In private, seasoned app makers will happily enumerate the levers that can be pulled to produce strong, if unsustainable, traffic surges. Here are a few:

Buying users. Let’s say you’re playing a game on your Android phone. You’d like some virtual currency to buy a new weapon, or farm implement, but you’d rather not whip out your credit card. No problem: An in-game ad informs you that you can earn several gold coins simply by installing a different app on your phone.

This scheme is known as “pay-per-install” and has been described by one venture capitalist as “crack for app developers.” One broker, Tapjoy, was reportedly on track to make $100 million per year on pay-per-install before Apple banned the practice from iOS last year. Now paid installs are largely confined to Google’s mobile operating system.

Advertising. This can be as simple as pumping money into Facebook or Google AdWords to promote an app. But as targeting technology grows more sophisticated, app makers are increasingly turning to ads within each other’s apps. In-app advertising is expected to surpass mobile web ads this year with almost $3 billion spent.

Referrals. Networks like Tapjoy and Flurry’s AppCircle pay app publishers for sending traffic, registrations, and in some cases installations to other app publishers. It’s a booming business: Flurry VP Peter Farago says his company’s referral business has grown wildly since it launched a year and a half ago, and is now generating “tens of millions” of dollars annually.

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