Israeli start-up puts cash in developers pockets

Israeli start-up gives applications developers access to global advertising market, putting more than 100 ad networks in one package.

By DAVID ROSENBERG / THE MEDIA LINE
Helping developers advertise (photo credit: REUTERS/Fabrizio Bensch)
Helping developers advertise
(photo credit: REUTERS/Fabrizio Bensch)
Measured by downloads, mobile applications are a huge business. Apple announced over the weekend that users had downloaded 25 billion of them since it opened its application store in 2008. 
But measured by revenue, the picture is very different. More than four fifths of all applications are free, which means developers have to find other ways to make money. Advertising is an obvious solution, but the mobile application advertising market is something of a Wild West, with competing platforms and few tools to monitor performance.
Enter Inneractive. The Israeli start-up gives applications developers – the people and companies making everything from games to bus-schedule trackers – access to the global advertising market by putting more than 100 ad networks, including Google’s AdMob, into a single package.
“By working with so many ad agencies – premium agencies – we’re able to provide the developer community with global coverage of locally targeted ads,” Itay Gadot, the company’s vice president for marketing, told The Media Line. “Anywhere on earth where an end-user is using an application, we’re serving this application with the most relevant and highest paying ad.”
Practically speaking that means that if an application developed by an American is being used by someone in France, the ads he sees will be in French and will be part of campaigns for products and services in his home market. That increases the odds the user will click on the ad, boosting the revenue the application developer earns.
“For example, an advertiser would like to target entertainment applications on iOS [the Apple platform] in the UK, according to specific demographics, carriers and the like. We’re able to pinpoint those applications and users and serve them with the most relevant ads,” explained Gadot. “The same goes with sports and news and info, financial, weather and others.”
That is a major advantage for application developers and advertisers, because the mobile ad market is as chaotic as it is full of promise.
People spend 23 percent of their time on mobile devices – second only to television – but mobile draws just 1% of ad spending, according to the application analytics firm Flurry. Analytics, measurement and targeting are nowhere near as sophisticated as they are in the on-line world and neither Comscore nor Nielsen rank the top mobile applications.
But with mobile growing so quickly, advertisers can’t afford to ignore it. eMarketer, a company that tracks digital marketing and media, estimates that spending in the segment broke through the one-billion-dollar mark last year for the first time and is set to grow by three-fold by 2015 to $4.4 billion in 2015.  Others estimate the market will be considerably bigger.
Application developers range in size from big publishers like Halfbrick and Digital Chocolate to people working out of their garages and in their spare time. What they have in common is that their expertise is developing software, not managing advertising or dealing with the complications of working with multiple ad agencies and dashboards.
By using Inneractive’s software developer kit, an application developer can get the basic tools he or she needs to begin running ads within quite literally seconds. A single dashboard lets the developer monitor the ads he or she is running across multiple platforms.
In exchange for its services, Inneractive takes 35% of the ad revenue that results, which means even small-time developers can achieve recurrent monthly dollar income in the three-, even four-digit, area.
Founded in 2007 by Ziv Elul and Offer Yehudai, Inneractive began life as an on-line advertising network for games. The company, which is based in the Tel Aviv suburb of Petah Tikva, transitioned to its current business two years ago. Backed with $5 million in venture capital financing, it has 40 employees and offices in San Francisco, Boston and London that soon will be complemented by one Singapore.
Inneractive’s ad services encompass traditional banner ads as well as rich media, meaning videos and interactive banners. For application developers, rich media is particularly significant because the revenue per thousand impressions is higher than for banner ads – $5 to $20 for rich media versus 50 cents to $2.50 for traditional banners.
The company’s latest offerings, which were unveiled at the Mobile World Congress in Barcelona last month and will be available to customers in the next few weeks, are hyper-local ads, which pinpoint ads to where the user is actually located at any time; ad revenue from searches done within an application; and virtual currency.  The latter is credits end users get in exchange for providing information or downloading, for which advertisers are prepared to pay the host application developer cash.
The Israeli company is not alone in this segment and its competitors include the US companies Mobiclicks and Smaato. Inneractive’s advantage over them is its single dashboard that operates across all its advertising and other revenue channels. The other is its global coverage.
The North American market was the fastest growing in the world, according to data compiled by Inneractive from its network, with the number of ad requests jumping 983% in 2011. But other markets are growing by the triple digits, too. Europe and Asia also have double internet growth.