Stop counting Downloads / Measure Engagement
Don’t charge up-front / Go for In-App Payments
The biz is on iPhone / But Droid’s on the work-plan
You need Analytics / Cause numbers’ the game, man!
I ain’t generally a lyrical guy, but they were running a poetry contest, so I took a crack (darn if I understand how I didn’t win that iPad!)
So in a nutshell – these are the main points, really:
Platforms: iPhone and Android are all that’s interesting to this crowd – and iPhone seems to be monetizing ten times better. Even though the trend for Android as a platform is great, it is not monetizing well through paid apps (and there’s no in-app payments). With this type of revenue driving most of what’s happening on the iPhone – Android developers have slim pickin’s… BlackBerry and others were all but ignored by most everyone, except for Flurry CEO Simon Khalaf who says for the last three months he’s been seeing significant developer investment in Windows Phone 7 – driven by Microsoft’s basically committing to minimum revenue numbers (i.e. directly paying them to take the risk).
Business Models and User Behavior: Most revenue still comes directly from the users, but lately more through in-app payments than pay-per-download. Advertising dollars are growing, according to Google’s AdMob, but are still secondary, especially on iPhone. Now whether it’s ads or in-app payments, to get this revenues flowing, you need engaged users, who will use (and pay) over time. People will download everything, but also discard it immediately – apps typically churn overnight… if you can’t keep your users for weeks and months, you have very little, whether it’s by way of payments or advertising. This makes analytics critical if you want to know what works and what doesn’t.
What works for promotion? A huge percentage of downloads on iPhone result from being on the “Top X” charts – these drive 80% of downloads according to TapJoy co-founder Lee Linden (!). This means that to effectively promote, you need a concerted effort that drives your app to the chart – which then gets you a virtuous cycle of user exposure -> download -> you remain in the chart. Developers with multiple apps can then cross-sell their new apps to their existing user base via in-app ads, email etc. In fact – having multiple apps is a key driver of revenue, as when you “spike” with one you can successfully spillover to the others if you cross-market well.
Virality is great if you can get it, but getting it is far from simple. Advertising works but is costly, so it only makes sense if you can spend enough to get your app into the charts – and then have it remain there on the virtue of its quality. So you need to “buy many thousands of users” at a high CPA so that you will get into the charts – and then get many more organically. If you can’t spend enough to reach the chart, or if you immediately drop out of it due to your app not being good enough / priced low enough / presented well enough – it was all wasted money.
Flurry, who seems to be doing very well by the way, presented their AppCircle product as an alternative – lower CPA due to better targeting, which can then be economical even at a small scale. Some other points made by panelists focused on the limited merchandising possible in the App Store – sometimes even changing the app icon can bring a huge boost in downloads… Appolicious too pitched themselves as a distribution platform for developers, albeit with much less of a structured methodology around it to my mind. If you’re interested in that model, also check our AppsFire. Tapjoy (formerly OfferPal), claimed a great ability to help iPhone developers get traction, with “up to 200,000 downloads per day for the top spot” – and then to monetize via virtual goods. Some other interesting comments from their co-founder include that the app icon has a significant effect on people – sometimes by improving it you can get a 10x increase in downloads!
Android is a little different. First, the Android Market is not as driven by the “Top 25” listings as iTunes. It is also a multi-channel market with many competing App Stores (Android Market vs. Carrier app-stores vs. direct downloads / GetJar etc.) Angry Birds launch, which was done exclusively at GetJar for the first 24 hrs was of course a topic for discussion – further highlighting the issues the audience and panelists raised regarding the Android Market. When asked “which platform you’re focused on”, less than 10% of the audience responded “Android”. Most importantly – it is much harder to monetize on Android. Between the different user demographics, the missing credit card info, and the ability to “return” an app and get a refund – users are so much less likely to pay for the download. Add to that the missing in-app payments, and your market is reduced by an order of magnitude. The general consensus was that on Android it is easier to monetize via ads than via payments.
In retrospect – I have to say that this reminds me a lot of the PDA applications market circa 2001 – after the first wave, come the big aggregators (mainly Handango at the time) whose charts dictate the market . Concerted marketing efforts are focused on getting into the charts (hard) and then remaining there (not so hard if your product is both relevant and good), which you often do by engaging with your existing audience and get them to download something new on the same product SKU… Many other points of similarity too. All-in-all a very valuable conference – Kudos to the VentureBeat people for pulling this off.