Does The Value Exchange Model Work on Mobile?

Alex Spencer asks whether offering users rewards in exchange for viewing ads truly leads to better engagement, or just encourages them to game the system.

Value exchangeEarlier this year, we reported on the closures of two companies in quick succession. First, in March, Ovivo – a mobile network which rewarded its users with free airtime in exchange for watching ads – closed its doors unexpectedly “for reasons beyond its control”. Then, just over a month later, Samba Mobile – based on a similar idea but offering free 3G data through a dongle connected to a laptops USB port – suffered a similar fate.

Closures are hardly an unusual occurrence in this business, but what these companies had in common was their use of incentivised advertising, and the value exchange business model, where users are offered services or products for free in exchange for viewing ads.

Sambas statement at the time claimed that the company had, “to a large extent, proven that people are happy to consume advertising if they are in control of the experience and if they get something meaningful in return.” However, looking at these two closures, and the likes of Blyk and Textmedia before them, its hard not to question how sustainable this business model is. Can the value of a users engagement be relied on to offset the cost of the incentives?

Adpoints Martin Pugh
Adpoints Martin Pugh

Whats a user worth?

“Our intent is to reset the contract between consumers and brands when it comes to the value of ads,” says Martin Pugh, CEO of Adpoints. “Consumers today have something incredibly valuable to advertisers, and that is their time and attention.”

Adpoints, which launched on mobile in May, is partnered with the Nectar loyalty scheme. Its site offers users Nectar points in exchange for watching video ads. The service uses a pull strategy, based on users actively seeking out the ads by signing into the Adpoints site and picking the video ads they want to watch.

Traditionally, value exchange services have concentrated on pull rather than push. Its an obvious fit, with ads acting as the gatekeeper between users and the rewards they want. There are downsides, though – not least that a sufficiently large group need to know and care enough to visit the relevant site or screen for themselves – and it certainly isnt the only option.

From push to pull
Over the past six months, incentivised ad platform Tapjoy has moved into push marketing for the first time. Since it was founded in 2008, the companys mobile ads have been presented within freemium apps stores, as an alternative to paying real money for in-app purchases. However, in most cases this screen is rather well hidden and Tapjoy estimates that, on average, only around five per cent of an apps users will access it.

As the company courts big names looking for branding opportunities, rather than direct response, the full-screen interstitials offer video and rich media ad units which will be seen by all users. These ads are more opt-out than opt-in, though, and according to Tapjoys own research from June, 74 per cent of users find automatically-served (ie, push) in-app ads annoying.

In this case, it seems that the role of incentives is to offset this reaction. Tapjoy VP of Europe Paul Bowen admits that the involved companies have to be careful “not to shove it in the users face”. Tapjoys solution? “Finding the correct moment in the users journey through an app,” according to Bowen. “That might be the point where they fail a level, or where they go to the shop and then quit out because they dont want to buy currency.”

Finding the balance
The kind of rewards which users are being offered in exchange for their time can vary hugely between each company, and each comes with its own cost. Samba said its closure was principally due to the rising prices charged by its wholesale data partners, which “makes the current model of offering a meaningful value exchange of mobile broadband unsustainable”.

Tapjoy offers a virtual currency which is effectively infinite, though Bowen says “developers are still quite conservative about how they use currency, especially in games, as giving away too much can can ruin the experience for other people”.

One venture offering a more real-world incentive to consumers is Wi-fi Metropolis. In partnership with Odyssey Mobile, it recently launched an ad-funded high-speed wi-fi service at Londons St Pancras station, which grants access to the network only after they watch a 15-second video ad. At this point they can choose between an unlimited high-speed connection, in exchange for sharing their details, or a slower connection with a 20-minute cap without logging in.

While the main cost for Wi-fi Metropolis is presumably setting up the infrastructure, there is certainly a difference between someone connecting to check their route home and those people who download 15 GB in as many minutes.

Tapjoys Paul Bowen
Tapjoys Paul Bowen

This kind of behaviour seems to be a common problem with the value exchange concept – especially when whats being offered has a tangible value. “We dont work with loyalty currencies or real world rewards because what weve seen is that users behave differently, and not always to the benefit of the advertiser,” says Tapjoys Bowen.

Hes talking about farming, where people abuse the system to get the maximum rewards. Obviously, this isnt conducive to user engagement with ads – so how do you make sure people arent only interested in accessing their reward, at the expense of paying any attention to your ad?

Explicit communication
Tapjoy, which sees users engage with an average of three ads per month, has internal controls to spot any individuals who are abusing the system, and ban them from the platform. Adpoints, perhaps because it offers something with a direct cash value – one Nectar point is worth half a penny – takes a more preemptive approach. Its video ads are overlaid with a button in a random location on the screen, to ensure the user is constantly watching.

But ultimately, its impossible to directly control the behaviour of consumers – at least, until someone patents a mobile version of the machine from A Clockwork Orange. Thats true of any form of advertising, which arguably all works on a value exchange basis. Users understand that the free site or app theyre using wouldnt be available if it couldnt rely on ad revenue. According to Tapjoys Bowen, incentivised advertising is just a more “explicit communication” of this trade-off.

At the end of the day, its not the value exchange element which will decide whether these companies succeed, but how they capitalise on the unique opportunities of mobile to keep users engaged.

In the case of Wi-fi Metropolis, that means offering up the first episode of the TV show being advertising for free streaming or download over its high-speed connection, hoping to get viewer hooked. With its interstitial ads, Tapjoy is attempting to reach users at the moments in-app when they want the rewards most. Finally, Adpoints is closing the loop for advertisers through its links to Nectar, which enable it to attribute product purchases in Sainsburys back to the initial ad view.