Gtekna speaks out

Pak said Gtekna has never used “bot farms” — automated computer programs that behave as users downloading apps. And Pak says the same about using “water armies” — masses of users in China and other countries who are paid small amounts of money to download apps.

Rather, Pak said his company charges around $8,000 and higher to market apps with banner ads. The fruits of this marketing can yield about 20,000 downloads a day, he says. The amount of time it takes for the marketing campaign varies.

Some developers suspect Gtekna is operating a bot farm, and many have said so privately with us. But no one has provided proof, because the results of a bot-farm effort and the results of good advertising are quite similar: An app rises in the charts.

In defense of the legitimacy of his business, Pak doesn’t do much to help his own case. He claims he has 10,000 customers among developers but can’t name any. He says Gtekna runs multiple campaigns a day but declines to disclose more about how his company does marketing. He also won’t share any details on his sole business partner.

While Pak denies all associations with bot farms, these automated downloading agents aren’t hard to find in other markets.

“A lot of these content farms are poisoning relevancy,” said Andy Yang, the chief executive of PlayHaven, which has a platform for cross-promoting apps in a legitimate way. “Some developers will try to get away with it. Others won’t take the chance. It is universally good news if Apple cracks down on them and the marketing dollars don’t go into bot farms.”

Chen Cheng, a computer science student at the University of Victoria in Canada, went undercover to fight as a soldier in a water army — a paid human poster on Chinese websites. He and his colleagues then used what they learned to write software that can detect the presence of bots.

Cheng said China-based marketing companies use thousands of Apple IDs — faked logins for Apple accounts — to help human workers download apps en masse. The marketing companies also use proxy services to change Internet Protocol address to help prevent the human workers from being detected by Apple, Cheng said.

“Since Apple has showed a more aggressive attitude toward this malicious manipulation, the [third-party marketing] firms hire paid posters to download and write reviews for the apps, just like what normal users would do,” Cheng said. “In this way, their behavior will become even harder to be discovered. The firms also suggest that attempts to enter into Top 10 or Top 3 are very dangerous and can be easily detected by Apple, but the Top 30 to Top 50 would be OK.”

Largely due to privacy reasons, Apple is moving away Unique Device Identifier numbers, or UDIDs. Each 40-digit number is a specific code associated with a particular iOS device. In late March, Apple began rejecting apps that tap into UDID code, and the company has signaled it is phasing out UDIDs entirely. But the more Apple distances itself from UDID in the defense of privacy, the harder it may find analyzing data that could lead to identifying market manipulators.

“To be able to discover the hidden behavior, a large amount of data is a necessity,” Cheng said. “For example, you can try to collect all the reviews from a certain Apple ID and then analyze the trends of downloading and commenting. Incorporating the name of apps, you may notice that a certain Apple ID has a higher probability of appearing along with the known hyped apps. Then this ID should be considered a malicious one. And if a set of these malicious IDs appear together under a new app, then the new app may be hyped by the paid reviewers.”

One developer who spoke on condition of anonymity believes that bot operators use the following strategy in the larger scheme toward automated downloads: “They put some code in an app through an SDK, tricking users out of their unique device identifier, the UDID. This code then seems to operate as a bot assisting in downloading [new] apps, or at least in acquiring valid UDIDs to use to automatically download apps.”

Cheng added that the Chinese marketers might be tapping into databases of iTunes accounts that have either been hijacked — “users might not notice extra apps” — or generated for bot activity.

“These accounts are sent to the bots along with ‘jobs’ from a central control that instruct the bot on which app to download,” Cheng said. “The central control program then uses chart positions to adjust the flow of installs to match the campaign. This is how they can ‘hold’ an app at a position for a long period of time.”

Rising costs drive app makers to the back alley

Some developers and app marketers have told us that Apple unwittingly created the illegitimate marketing economy by cracking down on legitimate app marketing techniques, such as Tapjoy’s incentivized installs, which are permitted on Android. They say desperate app makers may have turned to the “backstreet methods,” particularly in the fourth quarter of 2011, when rates for promoting apps tripled in some cases.

During the same quarter, the cost of acquiring new app users via ads — a legitimate form of user acquisition — hit an all-time high. Fiksu, the mobile ad firm, said that it saw the cost of user acquisition rise from $1.10 per user in May 2011 to $1.81 per user in December. That number is somewhat alarming, as many apps sell for 99 cents. The number dropped on a seasonal basis earlier this year and is now at $1.26 per user.

Mobile advertising costs fell during the post-holiday slowdown in January, but these rose again in February. Costs have since taken off on an upward trend thanks to spending by the mobile social network Gree, which is moving into the U.S. market after building a billion-dollar business in Japan.

Some developers are getting priced out of the market: The bigger ones can afford to spend a lot of money on advertising, but the smaller ones don’t have the budgets. To deal with that, some developers might have turned to the third-party marketing services, a less expensive promotional option.

“The number-one place you can get customers today is through the Google promotions, and the number-two place you can get customers is through paid advertising,” said Neil Young, the CEO of Ngmoco and an executive officer at Japan’s DeNA, the maker of the Mobage mobile social gaming platform. “The number-three place is chart position. So that’s one of the reasons, in aggregate, that the cost is rising. You’re having to spend money on paid advertising. And being experts at customer acquisition through paid advertising is not a trivial challenge for lots of developers.”

Nonetheless, Young believes it’s appropriate for Apple to crack down on bots and human water armies. He has little sympathy for developers who try to game the App Store simply because they have no better legitimate alternative.

“You could make the same point about crime,” Young said. “Crime exists because society is not serving the need of a segment. It doesn’t make it right to do it. I think that Apple’s right to crack down on it.”

Young also believes that Apple’s acquisition of Chomp — an algorithm-based app recommendation engine optimized for real-language queries — shows it intends to solve the market manipulation problem. Relative to the App Store, Chomp is much less focused on ranking charts and much more focused on helping users find great content through clever app discovery.

What’s more, Young says Ngmoco itself hopes to alleviate user-acquisition problems via its own Mobage social gaming platform. If enough users use Mobage to share games with each other, developers won’t have to spend as much money to acquire users. Apple offered some relief in the past week with the launch of iOS 6, which will allow users to “like” apps in the App Store, helping them spread in a more viral way on Facebook.

Naoki Aoyagi, the chief executive of Gree International, said that his own mobile social gaming platform became more popular after Apple’s crackdown announcement. In short, Aoyagi says developers became fearful of using illegitimate channels and have gone back to above-board platforms for marketing games. “The developers understand that manipulation is not working,” Aoyagi said. “[Apple’s crackdown] makes the market a better place.”

The sentiment is shared by an app developer that’s never resorted to bots or water armies: “I have heard the rumors and seen articles about our competitors,” said Ben Liu, the chief operating officer at mobile game publisher Pocket Gems. “We are aligned with Apple’s efforts here. The most fun app should rise to the top.”

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