Take the music-app maker Smule, which currently has five out of
the top 15 grossing iPhone music apps, according to App Annie. For
today's launch of a social video app called Strum, Smule has saved
up 350,000 clicks it's owed for campaigns recently hosted within
its own products, which it will claim this week by running ads in
four partners' apps that click through to Strum's listing in the
"[Barter has] become a more explicit part of our marketing
process," said Smule's GM, Prerna Gupta, adding that barter deals
were in a more experimental phase in 2011, but picked up steam at
Smule early this year. (Her company, Khush, was acquired by Smule
last December, which she says partly resulted from the companies
getting better acquainted after working together on a barter deal
during the previous summer.) "We were sort of doing it ad hoc and
would randomly reach out to a developer or two to give it a try.
Now we're trading inventory with developers on a regular
The economics of barter deals work for Smule largely because it
has its own network to lean on and can market new apps like Strum
within enduring hits like Magic Piano. (Marketing for Strum will
also include YouTube promotion through platform stars like Mystery
The company's savings from barter are potentially considerable,
since a swap of clicks with a partner that converts especially well
and yields 10,000 installs is essentially saving $20,000 (assuming
a $2 cost per install on an ad network), and Smule is trading
inventory it says it's unlikely to otherwise sell.
"We very rarely show display ads that are not barter," Ms. Gupta
said, noting that most of the company's ad revenue takes the form
of incentivized ads where a user might earn virtual currency in
exchange for watching a video ad, for example. "Relative to how
much they degrade the user experience, we don't think they monetize
well enough to be worth it."
Strum's mini ad blitz this week suggests that partners in
cross-promotion need not necessarily have similar products. One of
Smule's partners is Fotopedia, which bills itself as a
"collaborative photo encyclopedia" with a dozen apps for
destinations like Morocco and Italy.
Its senior VP-global operations, Christophe Daligault, said
Fotopedia had tried advertising through ad networks more than two
years ago but found it to be cost-prohibitive, since the
ad-supported product doesn't generate a lot of money per user and
relies instead on the scale of a user base that generates 200
million page views per month. It's done no external advertising
again until now, but has benefited from plugs from Apple.
"We're not competitive with Smule -- everything we do is visual,
and everything they do is around music -- but I think we have
high-quality audiences, in as much as these are people who like the
respective apps and spend a lot of time in them," Mr. Daligault
said, noting that the swap is essentially an experiment from his
Real estate giant Trulia did a deal with another lifestyle brand
for its app earlier this year, swapping mobile impressions, and saw
a 3% click-through rate, according to its director of mobile,
Steven Yarger. However, suitable partners are hard to come by ,
since a good brand fit is a prerequisite and he can't work with the
gaming companies that are experienced barter deal makers.
"In 2013, we'll be looking for more of these," said Mr. Yarger.
"Since there aren't as many obvious partners, it's not something we
went deep on in 2012."
While barter deals have become commonplace, even their biggest
advocates acknowledge that there are logistical problems. An
oft-cited one is scale, since there is a much smaller pool of
developers with enough users to be able to ante up 100,000 clicks
during a given weekend. There's also a trust issue, since even if
you're trading a set number of clicks, there's no way to know which
users your partner is showing your ad to.
"More sophisticated developers can siphon off and send you the
lower-performing users, so you're getting their worst traffic in
return for traffic you're giving," said Chris Akhavan, senior
VP-global partnerships at the mobile ad network Tapjoy.
Even the lion's share of developers that are executing barter
deals honestly may not be providing equal value in their trades,
since one audience may prove more valuable than another and yield
more clicks and installs.
A company called Chartboost spotted a business opportunity in
that disequilibrium. Created by former executives from the Disney-owned gaming
company Tapulous, which ultimately built its own internal
technology to facilitate cross-promotion, Chartboost enables barter
deals by essentially serving as a marketplace, but also enables
direct buying between gaming developers.
CEO Maria Alegre says Chartboost has 8,000 games signed up, up
from 800 at the beginning of the year. Its pitch is that it's an ad
network alternative and also a niche version of LinkedIn that helps
connect developers to facilitate the direct deal-making that will
save them marketing dollars. It's free to use in most cases and
makes money through a revenue share from when companies choose to
sell their inventory to its network as a whole instead of
negotiating directly with another member.
"People start bartering with good faith, but the natural
transition is to start buying and selling," she said.