I think I posted something on this some time back also - that since we all know by now that the best paying ads (generally) are the App advertisement ads. Those not only may pay more - but they also have a greater click-through compared to ads about washing machines etc.
For the free app makers - they are essentially being funded by the OTHER app advertisers. You know - the Clash of Clans ads etc. So Clash of Clans is paying for the small develpers making free apps.
Now what is Clash of Clans doing - they are doing what they are doing for some time - because they make money from their users per app - which justifies the money they spend to acquire users. In fact they may be spending a big chunk of their earnings on advertising - so they can retain their top spots.
Now this is not necessarily a zero-sum game - if Clash of Clans could advertise in the New York Times and get downloads they would do so - so they are not limited to app advertising only. But they probably get better bang for the buck when they advertise in other apps (probably more so if they advertise in other game apps vs. tools apps).
This means that tools apps will necessarily suffer compared to games/novelty apps - because Clash of Clans will be preferentially advertising in the games/novelty type apps.
Now this is just an example - and there are other advertisers as well - but Clash of Clans represents the “typical” of big chunk type of example. I am sure there are tools apps which are also advertising.
Then you have apps which are trying to gain a foothold in the Google Play store rankings - which primarily seem to value number of downloads per day (maybe also include uninstall/install ratios and other stuff - but primarily it seems to be new downloads per day).
So you will have spending to rise in the ranks - so they can unlock the natural installs they can get by being in the top rankings.
Of course if the app is truly weak - then after having spent that - the app may never be able to sustain itself on it’s own (beyond the spending download boost) - and the model may be unviable if the developer finds that their paid install campaigns are accounting for a MAJORITY of the new downloads (even at the top ranking position).
So regarding the advertising traffic - there is probably a whole lot of “legitimate” i.e. stable and continuable advertising revenue flowing through the system (pumped in by Clash of Clans and other apps which DO have viable user profitability per user). AND then you have developers who are pumping in money just to get some standing in the rankings - and or who consider it essential to spend - and these will succeed eventually in making profits for themselves - or they may fail in making profits for themselves. In the case of failure it will be typical “overspending” which happens in any startup/speculative environment - for example like Silicon Valley where one in 10 startups may succeed. The reason Venture Capital (VC) outfits are able to justify is that they invest in a subset of these - and they then expect that the one in ten startup that DOES succeed will succeed by MORE than 10 times - so overall they will gain.
I am sure there are VC outfits which still fail to generate profit - and those go away probably.
So there is probably a lot of money and effort spent in Silicon Valley or any such situations where a product is looking for buyers - that you will always have a significant amount of the “investment” going down the drain.
If something similar is happening with app advertising - there may be 10 times more app advertising happening than is actually realistically viable.
That is - Clash of Clans may be viable - but many others of the new apps may not be. However as far as the small developer is concerned - it may all be good - as they live off this advertising.
So I suspect there is a lot of advertising “inflation” that takes place - compared to the real profitability.
And as new entrants try to win in this market - much like customers of casinos - there will be a lot of money being wasted by advertisers as well (especially if all new app developers feel they HAVE to advertise also).
One thing I HAVE noticed though is that the PAID app market seems to be picking up on Google Play as well. That is while paid apps are miniscule usually compared to the free downloads - usually one paid for every 100 free downloads (for apps which have free and paid (pro) versions) - I have found that for the best quality apps - or for apps which really are providing some value - that there ARE users who will pay. So even if you have 100 free downloads and 1 paid download - and you get paid $1 (let’s say you charge $2 and you get $1 eventually) - then that is about a $10 revenue per 1000 new user downloads. So if you have 1000 new user downloads - you may get $5 or $10 ad revenue from it. But with paid apps you are likely to get just as much.
However Google Play paid apps are still not available to all developer countries - and this is a major weakness still (compared to Apple App Store - which is more open to more countries).