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Comment by krschultz | Hacker News Reader

This is a huge change. I personally am very excited about it. At the moment if you want to drive installs to a mobile app, the primary channel is Facebook. It's hard to reach customers any other way. I have worked on apps with a relatively high customer LTV, and we could afford to pay for something like this, but there was no way to do it.

Generally speaking I think it will be good for consumers in the long run as well. This will surface the apps that are making money (which is in some way a proxy for providing value, usually) faster than the apps that are simply most popular.

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I don't have a degree in economics and I never tried my hand at advertising, so please forgive my ignorance. To my uneducated ears, what you just said sounds like:

"Advertisements are a good thing because they help surface the products that are making money (which is in some way a proxy for providing value, usually) faster than the products that are simply most popular."

If I think of any advertisement I see, ever, then value has absolutely nothing to do with it. Axe, Jack Daniel's, any laundry detergent, McDonald's, cars.

In fact, most advertisements themselves stopped trying to pretend to be "better". Of that list, only laundry detergents talk about how they are better than competitors. Which is still complete bollocks, of course.

Since when do ads have anything to do with the value of the product? How would that be any different for apps?

I'm not trying to be coy, I seriously don't understand what you said.

Engineers love to hate it, but sales & marketing matters. It works. Making a product, throwing it up on the web and walking away doesn't work. I'm not going to argue that point, it's a fact. For more on that, read Peter Theil's 0 to 1, or anything by patio11, or listen to the podcast Startups for the Rest of Us, or any one of a dozen other sources from people that have made money in the space.

If you agree with that, then my argument is that over the long term, the amount of money a company can spend on marketing is related to the amount of money they make per customer. If you sell a $1 product, you can not afford ads that cost $3 per conversion. If you sell a $30,000 product, you can afford pretty expensive ads. Of course n the short term this can get skewed. A company can dump money into ads in an unsustainable way, but that always seems to correct itself (see: Fab).

Given that a product is generally priced to some extent related to its value, the higher value products will have higher revenue per user, which will allow them to bid more for advertising.

That means we are more likely to see these ads bought by companies that make decent money on their apps. I'd love to see more high quality apps at the top of the listings, and I'd also love to be able to promote my (hopefully) high LTV apps at the top of the listings.

You are assuming that price and value are positively correlated. They aren't necessarily. Anecdotally I find price has little to do with value in the App marketplace.

Buying users, which is in fact what sales and marketing is for indirectly does not mean the marketed product is provides more value nor does it mean the app, in this case, is performing better. All it means is the marketed product has backers willing to spend more on marketing.

>Anecdotally I find price has little to do with value in the App marketplace.

I think this is what they're getting at, or at least what took from it: Valuable apps are incorrectly priced.

I'm being a devils advocate by saying this, but the paid promotion could actually force apps to start charging relative to their value, rather than everyone charging at a flat $0.99. This would put pressure on and help sort out apps that are not very valuable, while giving valuable apps a mechanism to rise to the top.

Of course, this all breaks with apps that monetize through in-app purchases, and I honestly believe there needs to be a seperate marketplace for those Skinner boxes.

Or the opposite: the amount of money a company makes per customer is inversely related to the marginal cost per product. Which, usually, negatively impacts product quality.

Another thing that influences that is economics of scale, and I fear that is what is more relevant, in this case: big players will drown out the small ones.

KFC is as expensive as a little mom & pop shop around the corner, but the quality is lower, yet the amount of advertising is higher.

I understand what you're trying to say, now, but when I look around me it does not apply. At all.

EDIT: PS: For the record: this is not about whether or not advertisement works, it's about the quality of advertised products versus non-advertised ones. Of course it works, as in, advertisement leads to more sales. But from a consumer point of view: do we end up consuming, on average, higher quality products in a world with advertising, compared to a world without?

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