Monetization of apps has been Android’s Achilles heal for a while now. It is rather strange that with some very strategic assets such as Check out, The surging numbers of Android phones and more, Android has not been able to put it resources behind apps which could lead to higher levels of monetization. It is more challenging for developers in the Google Android Market than in the Apple App Store to monetize using a one-off fee monetization model. The Android eco-system suffers from lack of monetization and paid applications have a higher chance to reach high download volumes in the Apple App Store for iPhone than in the Google Android Market. This actually puts onus on the Android team to make monies through in-app and store level advertisements.
The difficult task for Android developers is to monetize applications in the Google Android Market using a one-off fee monetization model, which is why developers have turned to advertising to monetize their applications. the recent introduction of in-app billing should give developers more opportunities to monetize applications
Android has been criticized for the lack of discover-ability which is why the team is putting in quick amendments:
1. Android takes a long term performance of apps into account in order to rank apps. They are looking to reverse the ranking logic to include top trending new apps and all time apps
2. Android is putting steam behind local content as a differentiator for the Marketplace.
Will Android get the act right?
Followed from an earlier post. Read here
High-end smartphone users today tend to be early adopters of new mobile applications and more trustful of billing mechanisms, so they will pay for applications that can meet their needs. Average smartphone users will become less tech-savvy as smartphones come down in price to have a mass market appeal and these users will be more reluctant to pay for applications. Growth in smartphone sales will not necessarily mean that consumers will spend more money, but it will widen the addressable market for an offering that will be advertising-funded.
An application can be free because the developer is offering it at no cost to the consumer while charging for other things within the application. There are also applications that are free to use but that charge for physical goods that you can have delivered through the application. There are many applications that are free to users and derive their revenue from advertising. This can be done with banners as well as full page advertising between game levels for instance. Thus it is critical for the applications to be “sticky” enough to engage the user for more ad opportunities and be addictive enough that users want to keep coming back which will thus give a repeat value to eye-balls acquired.
Native Apps Stores versus Third party Apps stores
The easiest way to download apps would be the native apps store. So we have the Apps Store from Apple, Android Marketplace for Android phones, Ovi Store for Nokia Phones, Blackberry App World for RIM devices, App Marketplace for Windows Mobile smartphones and more (Samsung, LG, HTC are all building their native Apps stores).But a whole other universe of third-party, independent mobile app stores are out there, which sell apps across platforms and offer some unique features that are not found in the native app stores. Apple and Windows have locked their apps stores unless one goes for jail-breaking their devices.
There are about 37 third party apps stores and the ones of note and scale are as follows:
GetJar: Has over 1 billion downloads till date with over 70K applications which supports Android, Blackberry, Symbian, WinMo 6.5, Java. The Android version of the beloved game Angry Birds (which held the number one spot in the iTunes App Store for many weeks) debuted on GetJar rather than on the Android Market
Handango: The largest cross platform 3rd party mobile app store which is a result of the merger of Handango and Pocketgear.
A few others of note are MobiHand, andspot and SlideMe.
Apple Apps store and the Google Marketplace are expanding both in terms of number of apps featured, apps downloads and user numbers. The increasingly popularity of apps store is perhaps reflected by the growing numbers of device makers and carriers who are riding the Apps store to deliver customized services or products to the consumers.
Estimating the size of the Mobile Apps opportunity
Consumers will spend $6.2 billion in 2010 in mobile application stores while advertising revenue is expected to generate $0.6 billion worldwide, according to Gartner, Inc. Analysts said mobile application stores will exceed 4.5 billion downloads in 2010, eight out of ten of which will be free to end users. Furthermore, Gartner forecasts worldwide downloads in mobile application stores to surpass 21.6 billion by 2013.Free downloads will account for 82 per cent of all downloads in 2010, and will account for 87 per cent of downloads in 2013. Worldwide mobile application stores’ download revenue exceeded $4.2 billion in 2009 and will grow to $29.5 billion by the end of 2013. This revenue forecast includes end-user spending on paid-for applications and advertising-sponsored free applications. Advertising-sponsored mobile applications will generate almost 25 per cent of mobile application stores revenue by 2013.
Apps: A sure-fire way to reach the consumer provided content is sticky enough
As Apple loves to remind people, there’s an app for just about everything. However, discovering apps that work–and that the user would actually use–can be a daunting task. According to another poll by Harris Interactive Mobile users download apps based on recommendations from other users, not basis brand recognition. Twenty-nine percent of the apps users downloaded were based on recommendations from other users, it said, and 66 percent said they purchased an app because of a review. The results of our survey are quite telling, and further proof that organizations must invest more in the user experience of their mobile apps, rather than rely solely on the brand. Users download mobile apps by their own volition. The Apps content needs to be compelling enough to create stickiness around the app such that users spend time on the app. That way, the application will be able to deliver what it is meant to deliver to the user and have mobile ads piggy-backing them to the user and thus make more money for the store, developer and the carrier. That way, mobile applications are the surefire way to extend a brand. It’s time for organizations to understand how to fully leverage the mobile channel and optimize a user-centered approach to drive adoption, as well as reinforce and drive brand loyalty. According to the study, 73 percent thought that a company’s app should be more user-friendly than its Web site. It found that users take the following criteria into consideration when downloading an app: 74 percent think an app should be to be easy to use, 75 percent think it should do exactly what they want or need it to do, and 57 percent think it should be well designed.
Continued from an earlier post, which tries to explain why Apple is Apple, a cult brand, a maverick, one of the highest market cap compnaies in the world and a huge money minting machine. It may have detractors against its “closed”/”walled garden approach” but the bottomline is that with 3% of market share by volume, Apple contributes 48% of the smartphone profits.
3.Economies of Scale
The lean portfolio with only a handful of products, each selling in great quantity allows Apple to buy components in massive quantities.Except for iPhone 4, all iPhones and iPod touch use the same display for 3 years now. They have 5 notebooks and 3 of them all use the same 13-inch display. Something like 75% of the CPU’s they have used in the past 5 years are Intel Core 2 Duo, and the rest were Xeon, with the exception of the recently added i series. Similarly, they use the same OS X core operating system on all of their devices. The kernel in iPhone 4 on an A4 chip is the same kernel as Mac Pro on 12 core Xeon. When they added Exchange to iOS, it showed up in Mac OS in the next release because they had actually added it to OS X, which is under both iOS and Mac OS. That builds huge economies of scale for Apple reducing the cost overheads of spares and components.
Apple had only used one iPhone display for 3 release of its iPhones, and they used it again in iPod touch. They probably bought 100 million of that exact same display, and they are still buying and using them right now in the low-end iPhone and the iPod touch. They paid much less per phone for the display than what the display cost on any other phone, which typically sell less than a million devices each. The 90 Android phones are each a custom job, much more expensive, much less profitable.
Henry Ford was once quoted that if he had heard his consumers, he would possibly never have made a car. He would have built faster horses instead.
Apple doesnot possibly look at the MBA-style consumer approach methodologies in terms of determining its products. Apple’s understanding of the “need” bolstered with great judgement of world class design, starts with no consumer particularly.Add to that,state of the art software, OS and iTunes make it an undefeatable combination when it comes to PROFITS.It moves through the cycle of enthusiast, tech geek, prosumer, maven route before massifying itself into mass consumer usage.
5.Absorbing Profits from multi consumer segments
Apple has two other iOS devices, the iPod Touch (due for a refresh this September) and the iPad, that are absorbing profits from other segments of consumer electronics; music, casual gaming, and soon, photography, video, and in the not too distant future, near field wireless. all making platforms for advertisers or hardware makers or wireless carriers instead of making the best consumer product. Apple thus is leveraging the same platforms for accessing different consumer segments and usages. What makes this special is the Apple “way and design” which helps redefine the markets, consumers and product segments.