I noted that warning for investors in Sears (SHLD) in this tweet on December 18th:

Looks like a red flag for $SHLD longs. MT @portfolioarmor Hedging Bruce Berkowitz stks.co/1avF $AIG $BAC $C $BAM $CIT $BRK.B $JOE

— David Pinsen (@dpinsen) December 18, 2011

And then on Tuesday of this week, SHLD fell out of bed, dropping 27% in one day on news that the company was closing 100+ stores following awful Christmas season sales.

The left side of this chart reminds me of the rock in Close Encounters

Update:

Congrats to NFC champs #Giants! Enter coupon code NFCCHAMPS for a 15% discount on @PortfolioArmor this week: portfolioarmor.com/join-now $$

— Portfolio Armor (@PortfolioArmor) January 23, 2012

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I blew $145 on useless Tapjoy ads and all I got was this lousy ecard

The Trouble with Tapjoy

Here’s the tl;dr version: if you have a paid app, and are thinking of using Tapjoy’s pay-per-install program to advertise it, don’t. You can get the same result more quickly by taking cash out of your wallet and setting it on fire. The two screen captures below offer an illustration of this.

My Tapjoy sales report for December 10th

This shows 10 paid downloads of the Portfolio Armor iOS app, for which Tapjoy charged me $145. That’s $14.50, or 50% of the sale price of the app, per paid download. If these had been legit sales, my cut would have been $57, or $5.70 per app: $28.99 – $14.50 – $8.70 (Apple’s 30% cut) = $5.70.

My Apple iTunes ales report for December 10th.

Actually, this shows there was no sales report available for December 10th, because, according to Apple, there were no paid downloads of Portfolio Armor that day. So, instead of paying $145 to Tapjoy for $203 in revenues from Apple iTunes [70% of ($28.99 x 10) = $203], for a net gain of $57, I ended up paying $145 to Tapjoy for $0 revenues from Apple, for a net loss of $145. Note, too, that I capped the number of paid downloads at 10 on Tapjoy that day. Had I not done that, who knows how many illegal/phantom downloads Tapjoy would have charged me for.

Tapjoy’s position on this

This was the second time I tried advertising on Tapjoy. The first time, Tapjoy showed 14 paid downloads during a period where Apple iTunes showed 10; when I pointed out the discrepancy to them, Tapjoy agreed to refund me for the 4 illegitimate downloads as a one-time courtesy. They claimed the other 4 downloads were pirated ones (FWIW, my iOS developer doubts that the app has been pirated, and suggests there is another cause for this discrepancy). I figured a ~35% slippage rate might have been a fluke, so I tried one more time, and got the results you’ve seen above.

Before I advertised with Tapjoy, their rep told me that as long as I set my bid (Tapjoy’s cut, which it shares with the app owners in its network that hosted ads for my app) at their minimum level (50% of the sales price), my ROI would be positive (since that would leave 20% for me, after Apple’s 30% cut, and 20% of any positive number is positive). After I advertised with them the first time, they said that their model might not work for higher-priced apps such as Portfolio Armor.

When I pressed them on this, asking what price I should drop Portfolio Armor to so it wouldn’t lead to illegal or phantom downloads, they essentially conceded that their pay-per-install program isn’t viable for any paid app that generates all of its revenue through paid downloads.

Update: A senior software engineer from Tapjoy saw this and responded, first via Twitter and then via email. I’ve asked his permission to share his email here.

Second Update: Below is his email.

Hi – this is [name redacted at Tapjoy's request] from Twitter. I’m a senior software engineer at Tapjoy, working on the advertising platform and the new Tapjoy.com. Developers do get the support emails, but because of the sheer volume that we get, we can only really look at specific ones pointed out by account managers. In this case, I actually do recall having a brief conversation with [the two Tapjoy employees I had spoken with] recently (outside of email) about an high-priced app getting fraudulent charges from Asian countries – it’s likely they were talking about Portfolio Armor.

As I’ve mentioned on Twitter, we have some simple checks built in to the SDKs that checks if an app is jailbroken. Fraud detection is definitely something we take seriously and strive to improve here at Tapjoy – we were the first PPI platform to have jailbreak checks implemented in SDKs. Traditionally these have been good enough to catch most of the fraudulent cases in the past, but we may need to dig a little further, as jailbreaking methods/technology keeps changing. In the case of your particular app, since you told us that there should have been 0 conversions, I’ve banned these devices while I look into this further.

Again, I apologize for your experience with Tapjoy.

Third Update: TapJoy refunded the $145 charge.

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@margbrennan You nearly died once from riding 90 mph on the NJ Turnpike without a seatbelt. Was that emblematic of your approach to risk? $$

— David Pinsen (@dpinsen) December8, 2011

I was hoping to embed a clip of Ms. Brennan reading that tweet (Bloomberg helpfully added some footage of Corzine’s horrible wreck), but I couldn’t find it on YouTube or Bloomberg TV’s website. So instead, here’s the tweet from her producer letting me know the tweet was going to be aired:

@dpinsen that question was brilliant! you’re in the show at the top of the 10a!

— Sonja Van Sacker (@svansacker) December8, 2011

BTW, the ability to embed tweets like those examples above was just added to Twitter. Fred Wilson blogged about it earlier today.

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There was plenty to occupy his time, even if he did nothing but sit and read. He would plug his foolscap-sized Newspad in the ship’s information circuit, and scan the latest reports from earth. One by one, he would conjure up the world’s major electronic papers [...] Switching to the display unit’s short-term memory, he would hold the unit’s front page while he quickly searched the headlines and noted items that interested him. Each had its own two-digit reference; when he punched that, the postage-sized rectangle would expand until it neatly filled the screen and he could read it with comfort.

In the film version of 2001 (the screenplay of which was of course co-written by Clarke), the astronauts Bowman and Poole watch the BBC  news report about their mission on devices that look similar enough to iPads that Samsung used them as evidence in its defense against a lawsuit by Apple against Samsung’s Galaxy tablet (as Mashable noted in August):

Ironically, though, in his 1973 book Rendezvous with Rama, which was set in the 22nd century, Clarke seemed to have forgotten about the implications of the Newspad. In one scene, an astronaut examines a missile sent from colonists on Mercury, and finds this inscription on a panel (p 213 of the Bantam paperback):

Department of Power Engineering
Section D
47 Sunset Boulevard
Vulcanopolis, 17464
For information apply to Henry K. Jones

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That presented something of a challenge, as we’ve got new features in the works for the web version of Portfolio Armor, and I wanted to get the word out about them to those who’ve already downloaded the iOS app. In surfing the web, I came across a blog post that mentioned a couple of books on marketing iOS apps, so I looked for them at my local Barnes & Noble, in the hopes they might offer an idea or two. I remembered something Mark Cuban wrote years ago:

I would continuously search for new ideas. I read every book and magazine I could. Heck, 3 bucks for a magazine, 20 bucks for a book. One good idea that lead to a customer or solution and it paid for itself many times over.

Skimming through Book #1 at the store, I found nothing useful in it. Book #2 looked detailed enough that I decided to buy it (I make a point of buying stuff whenever I go to Barnes & Noble. I’d hate to see them go the way of Borders). Most of it turned out to be stuff that was obvious or irrelevant to me, but there was one interesting idea in the book I had never thought of: using the boot up screen of an app as billboard. So that’s what we did as part of version 1.5 of the app, which was approved by Apple and released last weekend:

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More functionality isn’t always better

Last week, a developer/entrepreneur (and MBA, as his email signature advertised) asked me to look at his iPhone finance app. He had heard about Portfolio Armor, and mentioned that his app “covered the full spectrum of corporate finance, including options”. So I checked it out, and indeed it did include a standard options calculator. It also included mortgage, college finance, and about 20 other calculators. His app was packed with so many different tools that it was nearly 10 times the size of Portfolio Armor — almost 7MB.

Pick one problem and solve it

I hadn’t recalled seeing the developer’s app before on AppShopper’s ranking of top-200 grossing finance apps; I would have noticed, too, since I bookmark that list ranked by price, and, at $49.99, the developer’s app would have been one of only a handful priced higher than Portfolio Armor. Also, at $49.99, one sale would be more than enough to put his app on that top-200 list for a day. That I can’t recall ever seeing his app on the list in the last several months suggest he hasn’t had any sales of it during that time. That got me thinking about why some iPhone owners have been buying Portfolio Armor but not his app. I boiled the answer down to 140 characters last week:

Easier said than done

Easier said than done, obviously, and even if you accomplish that, marketing your app is another challenge (something I’m still trying to master). But I think that’s the heart of it.

All things excellent are as difficult as they are rare

If the way which I have pointed out as leading to this result seems exceedingly hard, it may nevertheless be discovered. Needs must it be hard, since it is so seldom found. How would it be possible, if salvation were ready to our hand, and could without great labour be found, that it should be by almost all men neglected? But all things excellent are as difficult as they are rare.

– Benedict Spinoza, from his Ethics, Book 5

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As you know, the time decay is given by the Greek “theta”… the problem is that to compute an option’s theta you need a model (Black-Scholes, or some alternative), which goes against the whole premise of Portfolio Armor:  it is model-free and relies on no parametric assumptions [so there's no chance of model errors].

Here he notes that you don’t need a model to figure out the time value on an option:

We can figure out the time value on any option without a model:  it is the difference between the market price and the intrinsic value, where the latter is Max{(S-K),0} for calls and Max{(K-S),0} for puts.

And then here’s his epiphany to use a little calculus and discrete math to time the roll of the options before theta burn kicks in:

We can look at the discrete-time differential (approximation of the first derivative) of the time-value component and try to find the point before time-decay is accelerated (the second derivative) [...].  Once that trigger is hit, you can start emailing out reminders to users that they may want to roll their protection.

I think this feature is pretty exciting. We’re planning to add it in Q1 of next year.

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