Mandalay Digital buys Appia for $100M to bring carriers back to the app market

Mandalay Digital Group announced Thursday that it is buying Appia, the largest independent mobile app marketer outside of Facebook, in a $100 million stock, options and debt deal. Mandalay Digital plans to combine Appia with its own mobile business, Digital Turbine, to create a marketing network that will bring mobile carriers back to the app distribution table.

If this all sounds a bit confusing, it helps to explain how apps are now distributed in the U.S. Consumers find them largely through app stores like iTunes and Google Play, but increasingly downloads are being driven by targeted advertising networks like Facebook’s. Ads on [company]Facebook[/company] point users to specific apps and, in the case of Android, can prompt a download with a single click.

Appia, formerly known as PocketGear, runs an app marketing network similar to Facebook’s except it works with independent developers to put its ads in their apps. According the company, it has driven 85 million app installs in total from those placements.

Digital Turbine is operating in a similar space except it’s focused on generating app revenue for carriers — a money spigot that largely dried up in the U.S. after the launch of the first iPhone. Digital Turbine is still building and managing app stores for carriers in overseas markets, according to Mandalay Digital CEO Bill Stone, but in the U.S. Digital Turbine is now trying to build app distribution platforms that put targeted apps in front of consumers.

For instance, Verizon is now using Digital Turbine’s Ignite service, which replaces the standard bloatware on phones with targeted apps that download when the consumer first activates a device. So, for instance, instead of sticking Verizon’s FiOS TV app on every smartphone Verizon sells, it would only download to devices sold in a FiOS territory, Stone told me in an interview.

That probably still sounds like bloatware to many of you, but Stone said that “bloatware is in the eyes of the beholder.”

If a carrier were able to target these apps very specifically it could wind up providing some useful content to its customers, he said. Customers that register for service with a Yahoo email address might automatically get the Yahoo Mail app. Subscribers living in Uber or Lyft cities would find those ride-hailing apps on their phones on activation, while subscribers living in Montana would not.

So that brings us back to the acquisition. Stone said Appia has a huge developer and advertiser network, while Digital Turbine has relationships with carriers all over the world. By combining assets and including other technologies like [company]Mandalay Digital[/company]’s recent acquisition of contextual advertising startup Xyo, the two companies can create a powerful marketing network that would bring carriers back to the table when it comes to app distribution, Stone said.

From a business standpoint, that makes perfect sense, but from a consumer standpoint I’m still skeptical of the value this kind of app network can bring. Carriers were booted out of the app value chain because they frankly did a horrible job acting as intermediaries between consumers and the larger development community. I doubt that will change no matter how refined their app marketing tactics become.