Earlier quoted context omitted.
The article doesn't have to say it because it's just the way that google ads work. It's a bidding-based system, so at the most basic level the person who bids the most wins the auction and their ad is shown. If the LTV of a customer is $100, and there's a 3% processing fee for web transactions, then Tinder will bid up to $97 to acquire a customer. So Apple has to pay at least that much to acquire that same customer i…
I agree that that's one way it could work, but it seems really unlikely to me that Apple would be willing to lose so much money on a project like this. Some other possibilities that I think are more likely: * Apple has a higher LTV estimate than Tinder for this traffic. * Tinder has less available capital, so they are not able to outbid Apple even though they think that they would still earn lots of money at that pri…
As to your bulletes points:
- Tinder is owned by Match Group who - before Tinder - spent 20 years building a paid acqusition machine. In order to do paid acquisition you have to deeply understand the LTV of your users. That methodology, refined iver years at Match was ported to Tinder (just read Matchs earnings calls). While Apple has access to all ybe transaction data of apps on iOS, so do then defelopers, who are highly resourced and highly motivated to understand their LTV/CAC. So no, I dont believe for a second that Applr has an advantage here. And even if they did, applr only collects 30% of the revenues - how could they ever guy profitable when bidding for the same slots as the developers who Are getting 70%?
- Capital - nope. Match produced close to a billion dollars a year in cash flow. HBO billions. Capital isn't an issue for either of them.
- I disproves this hypothesis with the LTV illustration above. To be clear: Theres no scenario where apple can be profitable on this spend when they can only ever get 30% of what the consumer spends.