Posted by Peter Farago on Wed, Jul 01, 2009
The data in this report is computed from a sample size of 200 applications, 25 million consumers and four platforms: Apple (iPhone and iPod Touch), Blackberry, JavaME and Google Android.
Google Android: Maintaining Market Share
When Flurry released its March 2009 Pulse, we declared iPhone the undisputed winner, leading by a wide margin over Google Android in all key categories: number of developers, applications and consumers. Since then, the number of developers, applications and consumers in Flurry's network has grown by more than three times. Revisiting market share, we find that Android has maintained its percentage share over this rapid period of growth. While the iPhone still dominates the application market, Google Android has managed to prevent Apple from widening the gap. With 1) reports that roughly 20 more Android handsets will ship during 2009, 2) continued application saturation in the App Store making it harder for developers to compete for consumer downloads and 3) the relative ease required to develop for Android versus iPhone, Google appears well positioned to chip away at iPhone's dominant position.
For Blackberry and JavaME, however, our sample shows that Apple continues to cannibalize those platforms.
App User Retention: Android Users More Loyal than iPhone Users
Comparing a group of applications available on both iPhone and Android, we found that Android consumers use their applications longer. To measure this, we tracked the percent of users who still use an application after downloading it over different periods of time.
Across all time periods, Android users continue to use their applications longer. For the longest period of time measured, 90 days, the proportion of Android to iPhone usage was approximately 50% greater. Please see the specific figures in the graph below.
One reason we believe retention rates vary is that Android offers far fewer applications compared to iPhone. With applications coming out on iPhone at a faster rate, iPhone users move onto other apps more quickly. For Android users, they make more use of what's available, with less temptation to move to the next application. Other factors that could also play a role:
- The Android base tends to be "older," have less time and interest to try new applications. Once they find an application they like, they stick with it.
- The Android base is more tolerant, tend to be more tech savvy and find ways to appreciate what they have, even if their applications aren't perfect.
Regardless of the underlying drivers it's clear that at the current volume of available Android apps, usage is stickier.
App Usage Frequency: Android Usage Heavier than iPhone Usage
Further studying our set of applications with both iPhone and Android versions, Android consumers used their applications significantly more frequently than their iPhone counterparts. 37% of iPhone consumers who downloaded applications used those applications fewer than 5 times per month ("superlight users") with Android having only 11% in the superlight usage category. Toward the other end of the spectrum, 35% percent of Android users can be defined as "heavy users," using applications more than 50 times per month, compared to only 15% on the iPhone.
We believe differences in frequency of use are driven by the same underlying factors affecting length of use; namely, fewer available applications for Android and different behaviors exhibited by an older, more tech savvy user base. Overall this creates opportunities for Android application developers who are seeing saturation in the iPhone App store. Finally, a lot will hinge on the Android Market becoming a better shopping experience as well as the need for better design of upcoming Android OEM handsets than the existing HTC G1.
Posted by Peter Farago on Fri, Jun 12, 2009
The ability for developers to offer in-app-purchases within paid iPhone apps, as part of iPhone OS 3.0, creates exciting new revenue opportunities. At the same time, the option to sell virtual goods, additional game levels, subscriptions and other forms of micro-transactions, creates more complexity around how to best monetize a given application. Developers who can quickly and effectively measure and optimize the impact of these new pricing options will emerge as winners in the next phase of the iPhone economy.
To date, selling an iPhone application required a few simple decisions: developers could either give an app away for free or charge for it. The two most common business models to emerge were free-to-paid and ad-supported, with some companies opting to ship only paid version of their applications. The decision to offer a free version seems correlated to whether a developer has recognizable brands. For example, EA Mobile, which boasts The Sims 3, Tetris and Scrabble tends to release more paid-only versions. By contrast, companies with more original, less-recognizable titles like Digital Chocolate, which makes Crazy Penguin Catapult, Brick Breaker Revolution and Tower Bloxx frequently go to market with free trials of their games to entice consumers to try-and-buy. Overall, much of the learning in the market has centered on what price to charge, when to drop price and whether ad-supported apps earn more revenue than paid apps.
Already, there are several iPhone apps well suited to micro-transactions. To stay relevant, well ranked, and retain consumers, developers have been adding extra content and features via updates. Pocket God by Bolt Creative* is an example of an app that has strong micro-transaction potential. They have already successfully trained users to expect regularly released content updates that keep the gaming experience fresh (personally, I like the spear used to fight off the Tyrannosaurus Rex). As a result, Pocket God has been ranked among the top paid apps for several weeks. However, they have been collecting a mere $0.99 for the initial download of the app and then giving away a steady stream of additional content after the sale. While their current strategy has earned them users, they should weigh this approach against maximizing revenue through micro-transactions. A risk to keep in mind is that users who have been receiving content updates for free may resent paying for updates going forward. This could be mitigated with a combination of free updates and optional in-app purchases.
To further this example, listed below are some ways Bolt Creative could consider applying micro-transactions:
- Content Packs: Charge $0.49 (UPDATE: $0.99 is currently the lowest price that Apple will allow for any transaction in the App Store) for each content update going forward. Over time, measuring the micro-transaction conversion will allow Bolt to tune the amount of content, how often they offer new content and types of content. These could be new maps complete with common-themed sets of items. Imagine a moon map with all sci-fi items, for example.
- Individual Items: Bolt could test whether selling individual items for $0.25 (UPDATE: $0.99 until Apple allows lower price points) such as ant spray, shark repellent, blueprints to build a shelter, etc. yields higher total revenue per user.
- New features: Offer new features like sending a post card to a friend and challenging them to play a turn-based version of the game, charging $0.99 for these as in-app purchases.
- Subscription: Convert to a subscription billing model, charging $0.99 per month going forward. It goes without saying that the amount of regularly offered content needs to satisfy subscribers to keep them engaged and paying.
Of course with each of these pricing changes, Bolt could lose users. However, if they can find the right model and sweet spot of monetizing the new content they are currently giving away, they could stand to increase revenue significantly. It's really about finding that balance to increase revenues, even if it's with a smaller user base. Either way, it will be key to measure how changing their pricing model affects new user adoption, retention and monetization. All of this can be measured with a robust analytics package like Flurry.
Experienced publishers and developers will tell you that testing and measuring is the best way to focus on the right parts of your business, especially when it comes to your product and how you price it. As it relates to micro-transactions in the App Store, think about the content you are offering and whether it's well suited to micro-transactions. Then test launch different kinds and amounts of content, at different price points, from within different points of your app and at different intervals. Compare how these perform using your analytics service of choice and tweak your approach. With this kind of testing, learning and tuning, you'll be reaping the rewards in the next era of the impressive iPhone economy.
* Bolt Creative is not a Flurry customer and the business model options explored in this blog post are for illustrative purposes only.
Posted by Peter Farago on Thu, Apr 30, 2009
An age-old question in any demo or trial program is how much of the product to give away in order to maximize sales. With Free and Paid sections, Apple has designed the iPhone App Store to easily facilitate this classic go-to-market strategy, and we've found that iPhone App free trial strategies are effective.
In the world of mobile applications, the question of how much to give away is actually a relatively new challenge since carriers, for the most part, did not support free trials on their decks. Previously, mobile developers dealt with the occasional issue of defining trial length only when they won a coveted embed (aka pre-load) deal on an OEM's handset. With so many new developers throwing their hat into the iPhone App Store ring, there is little collective experience around this topic. Additionally, mobile application analytics solutions, like Flurry Analytics, did not exist. With Flurry Analytics, the guess work can be completely removed and developers can measure with precision the optimal up-sell point in their trial application.
Before we review mobile developers' choices around "free" iPhone App store offerings, we want to point out that Apple requires the amount of a free game or app to be a full, stand-alone experience. For example, developers cannot "gray out" menu items that would appear in the paid application if the consumer were to purchase it. Additionally, since it's well documented that few ad supported applications generate meaningful revenue, exceptions notwithstanding, we'll suspend this topic for this blog post.
The decision of how much of a free game or application experience to give away begins with understanding the mechanics of the basic equation: Revenue = (Number of Free Players) x (Free to Paid Conversion %) x (Price per Unit). If a developer gives away too much of an experience, it inadvertently satisfies the consumer so that upgrading to the paid version does not seem necessary. However, by giving away a lot of value, the application may become more popular as a result, garnering strong community review scores and increasing the free version installed base. Having a large installed base means that a smaller percentage conversion is needed to make good money. Generally, we recommend a balance with a focus on optimizing conversion.
In other words, we recommend giving enough of the game or application away so the consumer understands the value, but still understands that if they buy the full version, there is a lot more value to be had. Overall, don't be afraid to cut off a consumer if he isn't willing to pay. We subscribe to the philosophy that developers should be focused on finding consumers who are willing to pay, not trying to completely satisfy free-rider consumers.
Below is an example of how one game developer tracked user progression in its free trial game. While this free version shipped with ten levels, analytics showed that most users failed to progress beyond level five of the free game. With the up-sell message shown at the end of the demo, describing additional features the consumer would get when purchasing the full version, many consumers did not see this. By cutting the free version in half, holding the same conversion rate, we estimate this developer could increase its sales by approximately 40%.
Traditionally, the process of deciding how much of a game or application to give away has been more art than science. While the length of a demo experience should vary from app to app, leveraging analytics data allows developers to test, track and tune their free trial strategy to drive maximum conversion rates and revenue.
Posted by Peter Farago on Fri, Apr 10, 2009
Among your strongest marketing plays in the App Store is to offer a free trial of your game or application. Not only is the App Store designed for this, but also it's the best way to reduce consumer risk in trying your application, with the goal of eventually getting that user to purchase the full version. Think: money. And from our data, it's among the most effective moves you can make. Here's a motivational example using customer data collected using Flurry's mobile app analytics service in their iPhone apps.
In particular this strategy can favor non-branded applications. For example, instead of simply purchasing a familiar and "safe" game like Tetris, Bejeweled or Pac-Man, a consumer can explore and try your innovative, unknown game for free to decide whether or not to purchase. Simply put, free trial has leveled the playing field for independent developers who previously struggled to get consumers to even give them a try. Additionally, it rewards more established companies who innovate and leverage capabilities of the iPhone hardware to wow consumers - things like touch, the accelerometer, contact list integration for invites, and more.
To further motivate you to seriously consider a comprehensive free trial strategy, we took a look beyond the very hot and sexy iPhone App Store, observing that all major new mobile store entrants will also offer a Free Apps section. Check out a very good side-by-side app store comparison courtesy of Gizmodo that compares the iPhone App Store, Android Market, BlackBerry App World, Windows Mobile Marketplace, Palm App Catalog and Nokia Ovi Store. What this tells us is that a free trial strategy is a must-have going forward in all viable launch strategies. One could argue that uber-brands are an exception to this rule since their consumers are probably willing to buy an application or game without first trying it. However, even if you're the proud steward of such an uber-brand, remember that free trials drive discovery your title, helping increase the adoption of your paid version and ranking in the Paid App category. And don't forget that all the previously disadvantaged Indies now have a shot to take away you consumer with their free trial.
In an upcoming blog entry, I'll touch on how to track and tune your free-to-paid program from a product experience standpoint to maximize your conversion, and therefore revenue generated. Also, there are some Apple policy issues you need to be aware of when designing your free experience - nothing too crazy, but that can result in failing the Apple approval process. Stay tuned.
Posted by Peter Farago on Mon, Mar 30, 2009
The glut of applications in the App Store has made application discovery a top concern among companies releasing iPhone games and apps. Last week, 148 Apps reported that more 30,000 games and applications are available in the store, already 5,000 more than the 25,000 announced by Apple when it previewed its iPhone OS 3.0 software on March 17.
With rampant competition, companies must leverage every customer contact point to increase sales. This is where cross-selling can help. Cross-selling targets a company's existing consumers to sell them additional products. On the iPhone, the best opportunity is from within a downloaded application, usually with a link to other games or applications included on the menu screen.
While cross-selling theoretically has been around since the beginning of business, it has become far more effective since the advent of e-commerce on the Internet. In addition to allowing a consumer to quickly and easily complete a follow-on purchase, it can be tracked, measured and tuned for maximum impact.
Since cross-selling is such a classic marketing tool, not to mention easy to execute on the iPhone, we were surprised to observe several developers either not doing so, or treating it as a rushed after thought. So we took a look into our data set to ask: how well does cross-selling work on the iPhone?
The short answer is that it can be highly effective, and the following example demonstrates just how effective. After three weeks of strong sales in the App Store, sales began to decline for Company X's first application. When the second application was released, it included a strong call-to-action to purchase the first application. As the graph below shows, strong sales of the second application, along with solid cross-sell conversion, reversed declining sales of the first application.
It is worth noting that these two applications benefitted from sharing a similar target audience to which both products appealed, and that the efficacy of cross-selling efforts can vary. However, whether your application can achieve a similar lift from cross-selling is something you won't know until you test and measure it for yourself. As all markets mature - and the iPhone App Store has matured in record time - it is important to think strategically about growing your business by maximizing every precious consumer point of contact. Cross-selling remains among the most effective marketing tools.
Posted by Simon Khalaf on Fri, Mar 20, 2009
The App Store's unprecedented success has certainly created "poster-child" success stories like iShoot and Trism (for the record, we love and play the both of those games!). At the same time, Apple recently announced that over 25,000 applications are available in the iPhone App Store and that over 50,000 paid developers are in their SDK program. Given these figures, many wonder if increased competition has created an insurmountable barrier-to-entry for additional success stories.
First, let's get the definition of "success" out of the way. For some - fame, recognition, or capturing lots of users is success enough. But let's focus on money. We asked: Are most apps we see in the App Store little more than fun distractions during a consumer's busy day, or is there a solid business behind them? Inquiring minds would like to know and we have an answer.
Based on our data, there still remains a significant opportunity to make solid money with iPhone applications, especially for games. However, like traditional video game, movie and music industries, the iPhone App market is a "hit-driven industry" meaning that total market revenue is concentrated among a few big winners.
That said, there appears to be more of a middle class in the App Store; that is, more companies bringing in respectable revenues. This is particularly true when comparing revenue distribution across iPhone Apps versus what games and apps earned on traditional carriers like Verizon and Sprint. This is due in large part to the free trial, better navigation, community ratings and superior discovery solved by Apple in their store. What this means for developers is that if they release a title with a strong concept and solid production values - even if it doesn't have a known brand associated with it -- and they market it well, they can have a hit and make money.
But how much money? What is a hit worth? Well, how does $750,000 in three weeks sound?
It doesn't yet beat U2's expected revenues from their new album, No Line on the Horizon, but it's getting close.
To demonstrate this, we studied a puzzle game that was released with both free and paid versions. In this case, both versions made the Top 25, in their respective categories.
Within three weeks, the game had over two million installs and generated an estimated $750,000 USD in revenue. Not bad for a puzzle game. However, the bigger puzzle remains, how did that application make that much money while 25,000 others didn't?
Studying the questions, the answer came down to a matter of basic execution: a great concept, a good user experience, tight marketing and a smart distribution plan. Those factors helped "thrust" the title into the "orbit" of the Top Sellers category. Then the real "booster" of superior merchandising placement kicked in.
While we know that hits will continue to emerge in the App Store, the space is maturing quickly. To succeed, developers need to think about their total offering and how to market it effectively.
The good news is that there is money to be made, but it's time to bring your A game. Stay tuned as we share more on this topic, including best practices and tips to succeed.