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There’s an App for That. But a Revenue Stream?

Media brands are jumping onto the iPhone. USA Today? There’s an app for that. “The Rachel Maddow Show”? “Entertainment Tonight”? Public radio? Yes, yes and yes, there are apps for those.

Now, if only there were an app that showed media companies how to make money on the iPhone.

Apple iPhone 3G S
AP
Apple iPhone 3G S

For them, the early days of iPhone applications resemble the early days of the Internet. They know they need to have an app for the iPhone , and so they are creating appealing ones that are loaded with features.

“The iPhone has really been a phenomenon, so I think most media brands, at least the national ones, are thinking it’s a place they have to be,” said Matt Jones, vice president for mobile strategy and operations at Gannett Digital-USA Today.

Yet, as with the Web, it is far from clear how much revenue media apps for the iPhone can produce.

“We’re all trying to figure out as we go: is there a subscription model here, is it an advertising model, is there a monthly recurring revenue stream, is it a one-time payment model?” Mr. Jones said. “It’s a very fluid model.”

Media executives began thinking about iPhone applications in 2008, when Apple started allowing outside developers to create applications for the iPhone. (Google and Research in Motion , maker of the BlackBerry, followed Apple with their own application stores, allowing designers to create programs for phones running their operating software.)

Application developers can make money either by setting a price for their applications or showing advertising on them. Media companies have chosen mostly to offer their apps free. In the top 20 free news applications on a recent day, 15 established media brands were sponsoring apps. But in the top 20 paid news applications, only two were associated with big media brands — Al Jazeera and Reddit, a technology Web site that Condé Nast owns.

Jason Spero, vice president and managing director for North America at AdMob, which serves ads on applications and whose clients include CBS, said the big brands his company dealt with were 30 to 50 percent sold out on their inventory for banner advertising, with some selling as much as 80 percent at their peak.

“Most of these apps run considerably below 100 percent full, but they’ve got significant C.P.M.’s they’ve been able to charge,” he said, using the industry term for cost-per-thousand ads. “There’s a very real business model for these companies on the iPhone.”

But the advertising pool is small. Magna, a unit of the Interpublic Group, reported in May that it expected advertisers to spend $229 million this year on mobile media, including mobile Web sites and applications. Though that is up 36 percent from 2008, it is revised down from Magna’s forecast in the summer of 2008 of a growth rate of 43 percent. And $229 million is a tiny slice of the advertising pie.

Executives at some major media companies say they hope to gain exposure for their brand by developing apps, rather than relying on them to be big revenue producers. KCRW, the public radio station in the Los Angeles area, is an extreme example of that, as it has no mandate to produce a profit.

“Our mission has always been to get our content out there — it was just part of who we are as public broadcasters,” said Anil Dewan, director of new media for the station. In June, KCRW introduced three applications: one with KCRW programming, one running videos about food and one showing musicians performing in-studio sessions at the station.

Development of the applications was relatively cheap — the KCRW Radio software cost an estimated $35,000, and the other two cost significantly less — and took about eight months, almost three months longer than KCRW had planned, Mr. Dewan said.

The apps cost 99 cents to download; once people have paid for the app, they can listen to it as much as they like.

“We thought it prudent to charge a minimal fee to help offset some of those costs and also make sure we have funds available for future versions of the application,” Mr. Dewan said. “We felt it was unfair to take revenue coming in from membership, say, and use it to build a platform that as of now only applies to a select few.” He said he did not know whether the app would be profitable.

Even some for-profit companies are not relying on their apps as big revenue generators.

MSNBC.com has introduced applications for the “Today” show, “Rachel Maddow” and MSNBC.com in the last few months.

“My opinion is it’s mainly a branding and content play, getting our content out in additional platforms,” said Catherine Captain, the general manager of TodayShow.com. “I do believe you get a circular effect: someone interested in you in mobile is exposed to the brand and to your great content. They may then be more likely to tune in to the show or go to the Web site.”

Still, Ms. Captain said, the application carries advertising, and the “Today” program application sold out its display inventory for June.

Regarding the ad revenue, she said, “I wouldn’t say it’s the reason for being in the space, but it’s a very healthy side benefit.”

Like the early days of the Web...

For others, revenue is a top priority. “We do mobile user experiences to make money, so we have no interest in funding mobile as a loss leader just for some intangible brand benefit,” said Stephen Howard-Sarin, vice president for the business and finance brands of CBS Interactive.

CBS has introduced iPhone applications for a range of its brands, including CBS Sports, TV.com, “Entertainment Tonight,” CBS EyeMobile, “Harper’s Island,” CBS MoneyWatch and soon, CBS News.

“It is experimental — no one’s moving their TV budget to mobile — but it is a part of every conversation we have with business advertisers,” Mr. Howard-Sarin said. “We have a lot of oars in the mobile water because we think there’s money there.”

For audio apps, the iPhone is a simpler equation: with more people listening to their streams, more can be charged of radio advertisers. “A lot of terrestrial radio stations have their reach extended, and they already have advertisers, so this has given the business a huge boost in that they can get a national reach,” Mr. Spero of AdMob said.

In October, Clear Channel Radio introduced iHeartRadio, an app that allows people to listen to Clear Channel stations broadcast in many localities. It has been downloaded about 2.2 million times, and listeners run the application for an average of 94 minutes a week, the company said.

Despite positive trends, even iHeartRadio’s success has been uneven. “In many cases, we’re highly sold out, and just like on air, some stations are more sold out than others,” said Evan Harrison, executive vice president for Clear Channel Radio and president of the company’s digital unit.

The iHeartRadio application is in the top 10 free music applications for the iPhone, with audio applications from other big brands, like Sirius XM and a coalition of public radio companies. But there are also apps from other developers, like Shazam, which identifies songs by recording and analyzing short clips of them, and FingerPiano Lite, which turns the phone into a piano keyboard.

That mix signals another potential challenge for big brands in the app world, one that also echoes the early days of the Internet. Yes, well-known brands have an edge, but snazzy start-ups can give them a run for their money.

“There’s a head start the online or print brand has in coming to the app store,” Mr. Spero said. “However, you also see lots of innovative smaller companies here taking advantage of the iPhone and really using its functionality.”

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