Under the Radar

Under the Radar 49: App Store Search Ads


  welcome to under the radar a show about

  independent iOS app development I'm

  Marco Arment and I'm David Smith under

  the radar is never longer than 30

  minutes so let's get started

  so last week Apple launched App Store

  search ads finally after we first heard

  about them in June now they are launched

  they're running and you can buy them and

  we have and we like to share our

  experience with that and I think we've

  had I've had a lot of questions from

  developers about just what some of the

  terms mean with what you're buying

  they're reporting that you get from the

  App Store search ad system so I thought

  first we go over a quick introduction to

  the basic terminology of buying and

  selling ads on the Internet

  and this will lead into specifics about

  the App Store search ads so first you

  know I wanted to first go over some very

  basic stuff so what is you know things

  like impressions taps conversions so

  very very basically here I'll try to go

  through this relatively quickly an

  impression is just how often an ad is

  shown it's one showing of an ad to one

  person click or tap that's obvious and

  then a conversion is when somebody who

  has clicked on or tapped on that ad then

  does what the advertiser wanted so

  usually it's buying something in a store

  or it's like creating signing up for a

  new account on a site or a service or in

  the case of search ads for apps

  installing the app so that is the

  conversion is you know and ads are

  priced in different ways one of the most

  common kind of the baseline is CPM which

  stands for cost per Mille a which is the

  French word for a thousand which I'm

  probably mispronouncing it basically

  cost per thousand impressions so caught

  how much you pay per thousand people who

  see the ad the CPM model strongly favors

  publishers generally in like where it

  places the risk if I'm showing the ad

  and somebody sees it but they decide not

  to click on it or they decide not to go

  through and buy it who bears that cost

  of somebody seeing the app but just the

  ad not working with CPM the publisher

  gets paid regardless of whether the ad

  has has you know worked it does however

  have some weird incentives it

  incentivize the publishers to put as

  many ads on screen at spot as possible

  that's why you have pages that are

  absolutely full of ads there's also kind

  of no guarantee that that people are

  actually really seeing it like it's

  showing some way

  err and there's kind of no relation

  between what the advertiser is paying

  and how interested the viewers are in

  the ad or whether they even saw it so of

  course this also creates high fraud

  potential you can kind of set up like

  big farms and and things to generate

  fake impressions or impressions that are

  just from BOTS or from things that will

  never lead to anything so then there's

  kind of this middle ground cost per

  click or tap CPC advertising is kind of

  in the middle it kind of splits the risk

  between publishers and advertisers you

  know the publisher is paid when they

  deliver interest to the ad their payment

  somebody clicks on the ad but then it's

  kind of up to the advertiser to turn

  that click into a sale if they if they

  can with this there is still fraud

  potential that's that's fairly fairly

  significant you know it kind of

  incentivizes publishers to place ads or

  they're gonna be accidentally clicked

  there's not a very high cost to generate

  fake clicks through BOTS and farms and

  stuff and then the third kind of ad

  payment is CPA this is cost per action

  or acquisition and that's kind of

  translated as cost per sale basically or

  cost per conversion this strongly favors

  the advertiser in the relationship this

  kind of places all the risk of whether

  the ad will work or not on the

  publishers you know the publishers are

  not gonna get paid unless somebody

  actually not only clicks on the ad but

  goes and downloads the app or creates an

  account or makes a sale there is very

  low potential for publisher fraud here I

  mean you could theoretically like and

  I'm sure people do create farms and

  people to go buy things for stolen

  credit cards or to go install apps on

  fake accounts aren't fake devices but

  this is a lot more involved than just

  like you know basic click fraud or

  impression fraud if you are if you are

  buying the ad as an advertiser you

  generally want this last method CPA

  because you're only paying if somebody

  actually buys your app or creates an

  account under site or whatever else and

  commit you know makes a sale on your

  site that's ideal for you as the

  advertiser because first of all it'll be

  easier to figure out what to pay because

  you'll know what you'll make and also

  just kind of you don't really take any

  risk there you know the risk of a

  thousand people clicking on your ad and

  then none of them buy anything you're

  not bearing that risk because you're not

  paying for people who don't buy anything

  right so

  as a buyer of ads you want CPA as a

  seller of ads whether you're running a

  website or running a store front that

  has search ads in it or if you're

  running a podcast pockets worked this

  way too as a seller of ads you want CPM

  because you want to be like well I

  delivered a bunch of people who who were

  exposed to your ad the rest is up to you

  so CPC the cost per click or tap is kind

  of the compromise nobody really loves it

  there are still problems with it but it

  is probably the most pragmatic

  compromise between them in most cases

  and then there are just a few little

  terms you might see around that are

  useful to know here eCPM which stands

  for effective CPM is when you are paying

  per click or per action you you

  basically just divide it out by the

  number of impressions so it tells you

  roughly what you are earning per

  thousand page views or impressions or

  whatever or what you're paying per

  thousand pages impressions even if

  you're not paying per impression

  technically you'll see on apples reports

  for this you'll see terms like CTR or

  TTR this is a click-through rate or tap

  through rate

  TTR is one of the last columns in the

  search ads you will see it if you do

  this that stands for tap through rate

  which is the percentage of impressions

  of the ad that result in taps on the ad

  and then see are at the very end of

  Apple's report see R stands for a

  conversion rate so this is the

  percentage of clicks on the ad that

  result in installations of the app or

  sales or whatever else that's it for the

  basic give anything to add for that no I

  mean I think the important thing I

  though to keep in mind with all of this

  stuff is that like this type of

  advertising is usually it's this like

  this is basically a numbers game where

  you the purpose of the advertising is to

  drive people to do something that the

  advertiser wants and the way you do that

  is you know you have these didn't they

  call it a funnel is the fancy term for

  it so if you ever see that's like a

  sales funnel or something that's where

  it's coming from but it's it starts off

  where you cast this very wide net which

  is where you start to get into the

  impressions a sight of thing it's like

  you just say you throw something out to

  thousands of people and then a certain

  subset of those will pay attention to

  that and a smaller subset of that of

  them will take some action as a result

  of that

  and then perhaps an even smaller set

  will actually do the the final thing

  whatever that is that's download the app

  in this case and so all of the terms and

  things are all about trying to

  understand that that process and in many

  ways it's just a numbers game at a

  certain point that obviously each person

  who's deciding whether or not to click

  on an ad is making a choice and

  obviously but from a you know the

  holistic perspective there are far too

  many people making far too many choices

  for that to be something you could

  really think about and that's why you

  tend to roll it all up into these you

  know you don't think about a impression

  you think about thousands of impressions

  gives you a sense of the kind of scale

  that this process tends to work in and

  that's why I'm gonna get advertising is

  so numbers based is just you know it's

  not really it's not that same thing of a

  sales thing where you're making a cook

  you know making a cold call to a person

  in trying to have a direct interaction

  you are just blasting out ads to all

  kinds of different people in the hopes

  that a small and a small subset of those

  people will find what you're doing

  interesting and that's why that's it's

  so data-driven and it's just I can tell

  like that's most of advertising is this

  this kind of dialing things around to

  try and hit the point where you're

  making money but not losing money or

  getting the you know if you have a

  target for the number of acquisitions

  you have you can work out well how many

  impressions do I need to generate that

  amount of interest and it's all kind of

  just you know damn multiplying and

  dividing with these kind of numbers all

  right so moving on to specifics about

  the Apple search ads first of all it's

  important to understand how the pricing

  works this is it's priced in a way

  that's known as a Vickrey auction or a

  second-price auction this is exactly the

  same way that Google AdWords works as

  far as I know or at least you know in

  the ballpark and it's also if you ever

  bought anything on eBay it is very

  similar to how standard eBay auctions

  work basically the highest bidder for a

  certain keyword or whatever the highest

  bidder for that keyword wins and gets

  their ad shown and pays but they only

  pay the amount of the second highest

  bidder on that ad so you basically bid

  what's the most you're willing to pay

  for this keyword and so if you bid $0.50

  and someone else bid 25 cents you

  we'll win the auction but you'll only

  pay 25 cents or some incremental thing

  over the 26 cents or you know whatever

  it is this actually is very favorable to

  the to the buyer to the advertiser

  because you only pay just enough to win

  the auction but no more than that so

  anything else that's between that and

  your bid you guys get to keep that money

  that that's your surplus there are some

  big limitations in the Apple search ads

  that other advertiser systems don't

  necessarily have or don't usually have

  one of the biggest ones is that you

  don't have a lot of control over the

  look and content of the ad itself the ad

  is kind of these fixed format things

  that Apple has it has your apps title it

  has your app store description does it

  does it have star ratings I think it

  does right in the example when it does

  on the in the search portal it shows the

  rating but I've seen some in the app

  store that don't and some that do so I

  don't know if it includes it or if it

  only includes it and if it has a certain

  number of ratings or if there's

  something more going on there but it may

  or may not include your star rating

  right so it's basically it basically is

  like a tiny version of your app store

  entry of your search entry so title like

  the first line of the description

  sometimes screenshots sometimes star

  ratings and one of the problems with

  this is that you as the as the

  advertiser you don't really have a good

  way to a/b test anything so like if you

  want if you want a B test two different

  description lines there and see like

  which one generates more tap throughs or

  more clicks or more sales the only way

  you can really do that is to change your

  description every so often but then like

  you can't test those at the same time

  with the same impression so it's it's a

  little it's a less scientific test it

  makes it harder to to know what is an

  effective description or whatever

  fective screenshots to show there or

  whatever else you know again you can

  test them just by changing them but then

  that changes them everywhere and you can

  only do that within a certain you know

  time granularity so it's not a great

  test yeah and I think it's also probably

  good point to point out there that what

  you're doing the what you're showing is

  the same thing that you'll show on your

  app store page

  and so you could potentially imagine

  wanting your ads to be geared towards a

  particular demographic or type of

  customer that is more specific than your

  generalized app store page which is

  something that we can't do and you know

  so you could imagine you're having a can

  add that you were running on a website

  that's geared towards a very a fan of a

  very particular thing or a particular

  style you're just try different colors

  see what people like but it whereas what

  we have here is just whatever you kind

  of have that you're doing for your

  general purpose app store description is

  the same thing that will be shown here

  and so that's you know it's nice and

  that it's less there's less work for us

  to do I suppose yeah that actually is

  really nice like I didn't have to come

  up with a creative for this I think this

  is a fancy if you ever are in marketing

  and they call it like get me your

  creative the creative ideas like the the

  picture or the text or whatever it is

  that you want to put in the ad but yeah

  we have nothing to do with that it

  should be no in many ways Apple is

  making it appear it looks just like a

  regular search result and so just

  whatever you put in there is what's

  going to show up and so your app you you

  have to make sure that you're appealing

  you know it's appealing both as a search

  ad as well as appealing as a search page

  that dholtze me that they're gonna go to

  and look at in the app store which is

  probably good practice anyway sure are

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  all right so now that we've discussed

  kind of you know ad basics and a few

  things that make the app store ads a

  little bit different let's talk about

  the actual process of buying app store

  ads for your app the first obvious

  question here is how do you know what

  you can pay per tap so so app store ads

  are billed per tap as I mentioned

  earlier they're different different

  methods how much you can pay per tap of

  course depends on a lot of things

  what is your app cost or how do you make

  money what is the average amount of

  money that you make per new user and and

  of course then like you know how how do

  you translate between the number of taps

  on your app store page or your ad and

  how many people will actually install

  the app and make you money so this is

  obviously easiest for paid apps paid

  upfront apps where you know that every

  installation of the app will get you X

  amount of money don't forget apples

  Commission okay you know look at that

  look at you X amount of money

  and then you just have to figure out how

  many views on my App Store page does it

  usually take to make one sale and this

  is very easy to find in iTunes Connect

  analytics there's there's a bunch of

  ways to do this and people have found

  out in the various graphs and stuffs

  will be linked to that in the show notes

  was a good blog post about it basically

  paid apps is fairly easy if your app is

  not paid upfront you have to figure out

  basically what is the average amount of

  money you stand to make from somebody

  who installs your app and that is not

  necessarily straightforward depending on

  how you make your money

  it is certainly doable and you probably

  have better bracer than I do don't you

  sure I mean this is probably one of the

  harder things that I've been trying to

  work through recently is the under is

  especially for a lot of my apps that

  make their make their money from

  advertising in so it's it's this big

  video this big fantastic circle of

  advertising is enterprising to get it to

  get someone to download the app to show

  them ads to give me money so that I can

  buy more ads and you know that the cycle

  continues but for them it's much more

  complicated because yes there's no

  upfront one-time purchase it's you know

  that person who you know I'm paying for

  a tap a certain number of people who tap

  will then install the app they will then

  use the app at a particular for a

  particular a number of you know I'm out

  of time which is if you're looking at

  your analytics you're looking for

  something called retention which is

  showing you you know roughly how what

  percentage of users will continue to use

  your app after a particular time you

  know so if you had say a 30 percent

  retention after 30 days that means 30

  days after someone downloads it there's

  a good chance that they are continuing

  to use it so you can kind of get a sense

  of how often they'll use it then you

  have to work out how many sessions they

  typically do per day of those sessions

  how many impressions you're showing on

  your ad network and then you work out

  that from there how much revenue you get

  per impression and so on and so you it's

  much more inaccurate and you know I've

  been trying as best I could over the

  last you know a couple weeks as such as

  became a thing to try and really get a

  good number for my apps but at this

  point I just kind of have a vague

  estimate of like it costs I get maybe

  this much per user and I'm just kind of

  basing my advertising on that because I

  think it's also probably worth pointing


  well it's the most straightforward way

  to price this is just in the sense of

  you know if I pay a penny less then I

  make from that user for the ad then I'm

  making money but you could also just

  view it as a marketing expense that

  certain kinds of marketing you're just

  trying to get people interested in your

  application and exposed to it and kind

  of it's more I guess what you'd call

  brand advertising that you're I'm glad

  we're you we can worry less about it and

  you know and certainly some of my

  experience early on that's kind of what

  I'm doing I'm just kind of curious to

  see how inexperienced what it costs to

  get users and thinking in some ways that

  you know having my app in more people's

  hands will have a bigger impact down the

  road then they're not and it may not

  necessarily match up one-to-one in terms

  of you know I paid 25 cents I made 26

  cents so I'm good it may be that I'm

  paying overpaying by you know 10 cents a

  user which isn't sustainable necessarily

  in a direct sense but it may be if that

  those extra downloads are broadly make

  you know helping your app you know from

  an exposure perspective so it's Tiffany

  it's really tricky thing to work through

  but you know you just kind of have to

  sit down in your analytics whether

  that's you know something like fabric

  that you're using which is what I use

  and I think what you use is or iTunes

  Connect analytics can do a lot of this

  for you as well

  and you just kind of have to sit in you

  take the numbers put it into Excel and

  you do some crunching to see what makes

  sense for you yeah I mean you know thing

  to think about is like how what

  percentage of your new users come

  through clicking adds because like you

  know if you're thinking that like you

  make 25 cents per user but you know 10

  percent of your users come from clicking

  ads and the rest come from other ways

  then like you actually might be able to

  bid a lot more than what that is to get

  those users you know and again it

  depends on like what are your priorities

  are your priorities to get more users to

  spread it wider and then you know to me

  maybe reap the rewards of that down the

  road with just a wider bigger user base

  and word-of-mouth marketing like there

  or you know or do you really need to

  care about like absolutely minimizing

  cost of acquiring these users to begin

  with and there's every app will be

  different in this way what you know your

  needs your priorities these will all be


  and it really depends a lot on your app

  and how much you stand to make per user

  really and this is actually one thing

  that I think this is actually helpful in

  this new environment because III think

  this will make people think about their

  business models a little bit more and

  maybe charge more money and charge

  higher prices for apps that really that

  that that can earn it that deserved the

  higher prices so I think this actually

  might help raise App Store prices as

  people figure out you know it would be

  really a lot better if I could bid on

  these keywords and be a little more

  competitive on the ad side but in order

  to do that I have to charge a real price

  for my app or I have to have some kind

  of recurring revenue scheme or something

  like that so ultimately I think this

  might actually help ad pricing

  substantially yeah or at the very least

  it'll help I think it's definitely been

  a constructive exercise for myself to

  have to try and put a dollar amount on

  each user yeah which it for someone who

  loves numbers as much as I do is

  something that I've never really done

  and so it's definitely been a

  constructive thing - if forcing you to

  think down sit down and actually be like

  okay what is a customer worth to me and

  to put that into a number because even

  beyond advertising that's a very useful

  and important thing I think to

  understand because even when you're

  thinking about things like customer

  support or things like other support

  expenses or server hosting or things

  where you if you can put your a number

  on what a user is worth monetarily to

  you then you can probably make more

  informed decisions about the other

  things that are involved in that are

  costs for running an app yeah all right

  and then I figure we spent our last few

  minutes talking about keywords you know

  what keywords do you bid on how you know

  what do you buy what what do you bid

  against apples and apples implementation

  here is a little bit restrictive in that

  they even mentioned this during the

  during the the introduction of this that

  if Apple does not deem the keywords that

  are being searched for relevant to your

  app and that's relevant by whatever

  internal standards they're using that's

  kind of a black box to us but basically

  if Apple does not deem keywords relevant

  to your app your ad will not be shown

  against those keywords no matter what

  you're going to bid on it which is

  interesting for example like one of the

  things I decided a bid on an overcast

  sad campaign was some terms related to

  the word

  I do because podcasts are kind of like

  listening to the radio and so I want to

  kind of get those people to and all of

  those if you look at their horse those

  all have zero impressions and so it

  seems obvious that Apple does not deem

  the word radio relevant to my app and so

  even if I'm willing to pay that's I

  can't get those key words and this you

  know so this is this is actually this is

  probably a good thing so what it means

  is like I couldn't bid against something

  like Twitter or Instagram for overcast

  to try to you know cash in on big search

  terms that aren't actually relevant to

  my app at all but also that means that

  all of us small indie developers we

  can't all be outbid in every single

  category by things like clash of clans

  and like casinos like apps that make

  tons of money per user to the point

  where they're willing to spend whatever

  whatever it takes to even get users who

  are searching for podcast apps because

  they don't care it's it's a user as a

  user to them and they they make so much

  money they can do that so this basically

  makes that impossible and it kind of it

  kind of gives people a more fair chance

  of their ads being shown in categories

  that are not that hotly contested for

  things like you know high profit games

  if you actually make a game well that

  might be harder but I'm sorry about that

  I don't any harder for you anyway though

  that's actually true your upside is

  generally higher but it's harder to get

  it anyway there's also this big question

  about whether to bid on your competitors

  app names and and we've had some

  discussions on Twitter here and there

  about this but my my position on whether

  I've been in competitors names is yes

  you should do it and that's just part of

  the game and your competitors are gonna

  bet in your name too and that's just

  part of the system and that in general

  it not only should this be considered

  like you know unnecessary side of this

  but I wouldn't even call it like a

  necessary evil I'd call just a feature

  of his system because you know you're

  thinking you know if you're offended by

  the idea of competitors bidding on you

  you're probably thinking of bigger

  competitors bidding on your apps name

  but if you think about it the other way

  you can bid on bigger apps names and

  that is more powerful because that you

  think like you know like one of the

  biggest podcast apps out there is

  stitcher right and and I'm I bid on

  stitchers name B and I've gotten click

  throughs and installs based on that

  because I even if somebody's not

  searching for overcast

  irrelevant it's it's a perfectly valid

  alternative in my opinion it's a lot

  better alternative obviously and so I

  can get users that are searching for my

  competitors apps who are bigger than me

  and that is that is a very kind of

  freeing opportunity that I have it like

  that that's a grab from you take

  advantage of so if you think about it in

  that direction I think it makes a lot of

  sense why they allow that and that's

  that's just part of that like all

  advertising kind of works that way

  that's I think that's part of the game

  and I think that's a fair game and if

  you decide that you don't find that

  ethical that's fine you don't have to do

  it but but i think i think standard

  practice is going to be almost

  everyone's going to do that so if you

  don't do it you're probably gonna miss

  out on some some pretty good sales

  opportunities there sure I mean it's

  also probably worth saying that the way

  Apple's system works and this is

  actually to your point about relevancy

  if you're curious what Apple thinks is

  relevant to your application the easiest

  way to do it once you have been running

  a campaign for a little while is to just

  go into there the you sort of if you tap

  down a little bit into your campaign

  you'll get the breakdown of where what

  your impressions are by keyword and many

  of those keywords won't be things that

  you put in they'll just be terms that

  Apple thinks are relevant and so at a

  high level I like I'm in my mind if it's

  on one of those if it's in that list

  that Apple is doing they're automatic

  matching with then that's probably

  roughly the universe of what Apple

  thinks is relevant to me so if you're

  kind of curious with that relevancy is

  and the reality is in that list with me

  putting nothing into it I'm seeing the

  names of my competitors apps because

  Apple knows that they're very relevant

  like the in many ways the most relevant

  results are when someone is very

  specifically looking for an application

  that is very similar to yours and I

  think like you said it's just that is

  just the nature of the app stores that

  it's very competitive it's very um I

  wouldn't cut throats the wrong word but

  like that's the reality is that we were

  you know we were competing for a very

  limited number of of users attention and

  so if it's like just not doing it like

  not then just like don't buy ads be

  and don't go down sort of into this road

  because the nature of what we're doing

  here is we're just paying money to get

  Ateneo to pull the attention away from

  something else because whatever was

  gonna be the organic first hit there you

  know this is what we are now pulling

  money away from by buying it and that's

  maybe kind of weird but that's the

  reality that's the system that Apple's

  building and if this is the marketplace

  in which we want to work and operate

  then I think taking full advantage of

  that as best we can is serve the

  responsible appropriate thing for us to

  do yeah exactly

  and I would say like the the biggest

  takeaway I have is you know you might

  have some idea of what you can pay what

  things will cost how effective ads will

  be but nothing beats actually trying it

  and Apple made it is really easy on us

  because they sent everybody $100 promo

  credit and I don't know if all new

  accounts will get that or if only the

  existing dev accounts got it last week

  but the hundred promo credit is awesome

  because you couldn't you use get $100

  worth of free advertising and that can

  be your cap and that can be it so you

  couldn't literally get free ads and then

  learn the data from those ads you can

  learn what keywords are working you can

  learn what your average cost per tap or

  your average cost per installation ends

  up being and that can further inform

  what you do if you don't get the free

  promo credit or if you want to go past

  that you can actually learn a lot with

  not that much money relatively speaking

  to the cost of computers and developer

  accounts and developing apps and stuff

  like if you want to put in 50 bucks a

  hundred bucks that seems like a lot of

  money into a lot of people but if you

  put that in there you will get so much

  data out and you will find out like

  really what these things are what these

  things do for you what they cost and

  that's true of all advertising like

  nothing beats just trying it and a lot

  of times like you know a lot of times

  you won't learn you can theorize as much

  as you want you can you can run

  theoretical numbers but you have to just

  try it and sometimes it doesn't work out

  and that's kind of the risk you take by

  trying it but usually it and if you can

  make enough money per user of your app

  to to cover what these things tend to

  cost and like it like my my cost per tap

  is in like the 20 cent range right now

  and it's going down as everyone's promo

  credits run out so to give you some idea

  what you might be paying what might be

  spending here

  you know if you can figure out how to

  make that work for your app just try it

  and and just and see what it does for


  this is now just part of the it part of

  the reality of working in the App Store

  and so you got to try it put some money

  into it and understand that sometimes

  it's like I've put our money into

  advertising and it kind of feels I'm

  just throwing money away and in some

  ways maybe that's the case I'm not doing

  it right but the reality is just the

  cost of doing business and you owe it to

  yourself if you take your business

  seriously to at least try it I think and

  understand it rather than just just

  counting it out of out of hand

  exactly all right well we're out of time

  this week thank you everybody for

  listening and we'll talk to you next

  week bye