I read an interesting and insightful but ultimately misguided post the other day, from Newsosaur. The thesis was that retail apps should freak out publishers, by allowing a direct advertising channel from marketers to customers. It is true that all these apps can provide powerful channels to do just that – but it doesn’t necessarily follow at all that media outlets should view them as direct competition. Why? Basically it comes down to the distribution of eyeballs
The app economy follows a clear power law distribution – app downloads are highly concentrated at the top of the frequency list, and app usage is even more highly concentrated. A fairly common power law distribution is “Zipf’s Law” – the #1 has twice the frequency of the #2, three times the frequency of the #3, and so on. This matters because the top apps, the ones that can actually compete in terms of frequency with major media outlets, aren’t retailer apps. They’re Instagram, and Facebook, and the built-in iOS/Android apps. Retailer apps have pretty low penetration, and something like the Safeway or CVS app has quite low penetration compared to the New York Times or ABC. Their share of mind is even lower, and they tend to command very low levels of usage time.
Incidentally, newspaper subscriptions also follow a power law distribution, mainly because city populations are governed by Zipf’s law. To give a hometown example, the San Jose Mercury News has a daily circulation of around 575,000 – who tend to be overwhelmingly concentrated in the Bay Area. I really, really doubt there’s any retail app that has anything near that level of local penetration. If I’m a retailer in San Jose, I still want to advertise – maybe not through the newspaper, but through other media targeted locally. Retailer apps are an effective way of improving your marketing sophistication with customers that are already committed to your brand, but that’s not the audience you’re attempting to reach with local ads. Within the marketing arsenal of retailers they play completely different roles – apps are for retention and monetization, advertising is for branding and acquisition.
In short – it’s all about power law distributions of attention. Media will always have a much, much greater reach than app usage, and so advertising can’t really be supplanted by relying on an app user base. Furthermore, advertising and CRM marketing serve totally different functions to marketers. Publishers have much to be concerned about – but retailer apps shouldn’t be a top concern.