The business model behind social apps

Bambi Francisco Roizen · February 3, 2009 · Short URL: https://vator.tv/n/698

Buddy Media's Lazerow on why $1 per app subscriber is the new model on social networks

It seems difficult to believe, but it hasn't been a decade since the establishment of auctioned-based, CPC (cost per click) pricing for search results pages. Prior to this new model, many search companies, including Google tried different forms of monetization, including licensing out search listings.

Today, the search to make money with social applications is underway as half a billion people are on social networks.

Buddy Media is experimenting with an interesting model to help its brand customers, such as Fox News, Budweiser, InStyle and Hollywood.com find a way to reach and pay for an audience across social networks.

It's so successful, says founder and CEO Michael Lazerow, that the company has 50 customers.

There are a number of companies that provide services to brands to help them reach this audience, such as Watercooler and appssavvy. But unlike Watercooler, Buddy Media provides a full service, including promotion and marketing of a campaign. Its customers are brands, which pay a $1 per application subscriber. Watercooler creates its own applications and works with sponsors.

In this interview, Lazerow explained the economics behind InStyle and Hollywood.com's campaigns. One of Buddy Media's first campaigns was with InStyle. The app allows women to change their hairstyles. The app was installed 340,000 times and each user stayed on for an average of four minutes.

What was InStyle’s ultimate goal? i asked. According to Lazerow, InStyle managed to attract new users from Facebook who ended up buying more magazines. Additionally, InStyle got to package more inventory with their magazine pages.

InStyle paid Buddy Media $1 for 100,000 members, or $100,000. The campaign worked out so well that InStyle managed to attract 340,000 members. Lazerow explained that the results demonstrate the value in paying per subscriber vs per impression. After all, it takes millions of branded impressions to sign on the first 100,000 users, he said. To that end, the brands get a lot more bang for the buck, he suggested.

Lazerow also talked to me about the economics behind Hollywood.com's app, what the site's goal was and how engagement was and continues to be measured.

Importantly, I asked Lazerow why a member (who may be inactive after signing up to an app) is ultimately more valuable than someone who sees a banner. Watch the interview for his explanation.

Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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