How big is this force? Line, the Japanese mobile messenger with more than 200M users is on a $400M run rate, 60% of which is derived from app distribution. Kakao Talk will pay out about $600M to developers this year – which is about 10% of iTunes global developer payout in 2012. Remember, Kakao only serves Korea. Facebook’s mobile revenue will reach $2.5B this year driven by mobile CPI ads. In short, these networks are huge user funnels and money-making machines.
To achieve this scale, these mobile social networks offer cost-effective customer acquisition by combining two network effects: user data aggregation and ad targeting data learning.
In Line, Kakao Talk and Facebook, users sign up, create profiles and communicate. Their frequent brief sessions during the day create torrents of demographic, interest and behavior data for ad targeting. Additionally, as the user base grows so does the ad inventory and app downloaders for developers to target.
Ad performance is the second data network effect. After a user clicks to download an application, his profile information and the app’s metadata (and sometimes usage data) are fed into a machine learning system that finds similar users and learns what works and what doesn’t. Additional ad performance data across a larger set of developers and app types compounds the effectiveness of the ad targeting system, reinforcing its superiority.
These two data advantages enable mobile social networks to create the most cost effective paid mobile customer acquisition channels for startups.
*Reposted from Tomasz’s personal blog, which you can read here.