There’s no doubt that some companies do really well with download apps for smartphones. The question every potential app publisher should ask is: will we?
This approach is to be applauded. It’s about customer choice: people will always use different handsets and will want to engage with companies in different ways – messaging, Web, apps etc. And the winners are covering all the mobile bases… as they are covering all bases in all media.
Our concern is for companies that have a limited mobile budget – possibly new to mobile – and are tempted to dedicate this budget entirely to mobile apps, perhaps just one app for one niche platform, which media hype (despite its relatively small market share) suggests should be the iPhone, delivered via the Apple App Store. If the gamble pays off – great. But if it doesn’t, will the CFO axe the mobile budget before mobile has had a chance to prove its worth?
App publishers work out the potential ROI first… right?
We assume that businesses apply the same due diligence to mobile apps as they do to any other project. You have to ask: will an iPhone app deliver return on investment (ROI)? Apps is mostly about numbers of downloads. If you are a fashion retailer, you want to know how successful other fashion retailer’s apps have been. Or if you are weighing up paid-for versus ad-funded app, you want to known how steeply downloads drop off the higher the price. That’s the basics, right?
So, how can you begin to work out ROI if the biggest app store, the Apple App Store, doesn’t give download figures for apps? You can’t. All you can do are some crude calculations based on the three numbers that Apple releases.
• Number of apps: 225,000.
• Number of downloads: 5 billion.
• Revenue shared between developers: US $1 billion.
If our mathematics serves us correctly, this gives us…
• Average downloads per app: 22,222.
• Average revenue per app: US $4,444.44.
Or taking into account that 29 percent of apps are free (according to 148Apps):
• Average revenue per paid-app: US $6,259.78.
We are told in this interview with GetJar (an independent app store) that it is normal for an app to cost US $50,000 to develop. mobiThinking understands from a different source that the extra cost of adding a second and third smartphone platform is 30-50 percent of the original investment.
Even if many apps are developed for less than this, you still have to take into account the cost of promoting the app.
Why do you need to promote the app?
In the App Store, your app is competing for visibility with nearly quarter of a million other apps. You can’t pay to promote it on the App Store, so if you don’t get picked by the Apple reviewers, you don’t get featured.
According to Nielsen, iPhone users have on average 37 apps on their phones (the average for smartphones is 22 and feature phones is 10). If that is a sufficient number of apps, then your app will have to displace one of their favorites.
Now if you’re Facebook, Google or TWC, promotion is easy – you have the biggest mobile Web audience and the hugest PC Web audience to which you can cross-promote your app for free; you probably also have huge SMS/email opt-in lists, plus the media love writing about anything you do; and on top of that you’ve got a huge marketing budget. Anyone who isn’t a media giant needs a plan.
By the way, mobiThinking is not alone in querying the economics of the App Store model: see Tomi Ahonen.
And this honest first-hand app experience from Tom Hume, a design director at a London agency called IDEO, is fascinating.
So how successful are the really successful apps?
TWC tells mobiThinking the iPhone app is approaching 12 million downloads and the Android app is over 6 million (TWC does paid-for and ad-funded apps for all smartphone platforms, by the way).
That’s excellent – it’s great that an app is doing so well that the publisher is proud to share the download figures. Most refuse to share download numbers.
But it begs the question: what do download figures actually tell us? If the app is pay-per-download then this means revenue. If the app is ad-funded or is intended to drive m-commerce revenue etc. then the important thing is how often the app is used once downloaded and for how long it is used.
The problem with native apps is you need to download them to try them. Usually paid-for apps will do a ‘lite’ version that you can try before you buy. All download figures really tell us is that the app was used at least once. What we don’t know is: was it was kept for a year, month, week or day, or did it go straight in the bin.
TWC proudly tells us that Weather.mobi gets 25 million unique users a month.
But the same visitor information for the app is confidential.
Now TWC’s app is actually one of the three most used apps in the US, according to Nielsen. So if top apps aren’t crowing about their monthly users, then what does that say about the performance of the other hundreds of thousands of apps?
mobiThinking recently asked CNN about its mobile site and its paid-for iPhone application.
CNN proudly tells us that CNNmobile.com is the top mobile news site in the US with 14.5 million unique visitors in May.
But CNN wouldn’t say how many times the CNN app has been downloaded.
Why the secret? The CNN App was the No 1 top paid-for app for six days straight, the No 1 top grossing app for seven days straight and has been the No 1 paid-for news app since its launch.
So if top paid-for apps aren’t crowing about their download, then what does that say about the performance of the other hundreds of thousands of paid-apps?
Apps as a marketing tool
Of late, there has been a surge in apps released by brands purely for marketing reasons – i.e. there’s no intention to make revenue through sales or advertising. This isn’t new. Companies have been giving away mobile content for 10 years – think ringtone, just a lot more expensive.
For over 18 months, mobiThinking has been querying the wisdom of doing an expensive freebie for such a small proportion of a brand’s customers, but we concede that on occasion it does deliver fantastic ROI. And downloads have nothing to do with it. It’s all about milking the media hype around apps… and it doesn’t even have to be an iPhone app.
The most amazing example of this was IBM’s Wimbledon Seer, which was an augmented reality guide for visitors to Wimbledon for Android phones. So how many tennis fans visiting Wimbledon over the two-week competition had Android phones in 2009 and downloaded the app? It’s irrelevant. Seer delivered UK £26 million (US $39.4 million) in new business for IBM, free PR equivalent to the value of £2 million ($3 million) in advertising and more positive brand awareness for IBM than the past 5 years put together; a total return on investment of 1:156. The app wasn’t done by IBM, it was the work of Ogilvy (which obviously has more than a little experience in the world of PR and marketing, besides mobile). See this profile of Ogilvy for the IBM video.
Great apps also have a habit of winning awards, see how many apps won awards at Cannes, Wimbledon SEER included. This generates even more publicity.
Please note: Wimbledon Seer is in a class of its own. We know of no other example of an app delivering anything like these results. Feel free to calculate the cost of the IBM app from the investment ratio. It also might have helped that IBM is a Wimbledon sponsor.
So, what are we saying?
Depending on the mobile service or campaign you are planning, a download app for one or more smartphone platforms may well be the right delivery mechanism, but we suggest you approach it with realistic expectations. Weigh up the cost and benefit of focusing on a handset that may only be used by very few of your customers (iPhones, for example, are only 2-3 percent of new phones).
• All smartphones can browse the mobile Web, as can many featurephones.
• All smartphones do email, as can many featurephones.
• All smartphones do SMS, as do all featurephones.
Consider the options. Consider what will deliver the best results over a prolonged period. Consider the costs. Mobile Web tools such as dotMobi’s goMobi make mobile Web pretty quick, easy and cheap.
We said it 18 months ago and we’ll say it again:
If you’re new to mobile… learn to walk, before you try to run.
Comment below or email editor (at) mobiThinking.com.
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