The mobile revolution has been dubbed by many as the trillion dollar revolution. While it is still hard for anyone to quantify the overall economic impact of the mobile revolution, it is clear that mobile devices and apps are changing every aspect of our lives. From news consumption, to photo sharing, to gaming, to hailing a cab to depositing a check, every moment has become a mobile moment. In fact, most consumers who have a smartphone or a tablet can’t imagine their lives without these devices and apps. We have become addicted to instant gratification and the back pocket proximity of powerful computing technology.
At Flurry, we have been at the epicenter of the mobile revolution for more than five years now and today we see activity from more than 300,000 apps and three billion app sessions every day, giving us a unique vantage point into the behavior of over a billion worldwide mobile consumers.
Today, SourceDigital13 we are sharing a peek into a day in the life of a U.S. adult mobile consumer. (We'll blog some other parts of my keynote in future posts.) For this depiction (see chart below), we have used a random sample of 15,271 U.S. iOS users and we measured their app usage throughout the month of May, 2013. We also cut the data based on a 24-hour cycle to help understand the usage throughout an entire day.
Daytime, Nighttime and Bedtime Are All Apptime
Many conclusions can be drawn from this chart. Here are a few key observations:
- App usage steadily increases over the course of the day and ultimately peaks in the evening (unlike TV which remains low then has a dramatic jump in the evening.) This is a big change of perspective for media planners who have been used to weighting their budgets toward evening TV. In an app-centric world, that spend could effectively be spread throughout the day given consumers are reaching for their devices consistently throughout their waking hours.
- Wearable computing already arrived with the smartphone. Our data confirms what many of us know from experience: smartphones, tablets and the apps installed on them appear to be glued to consumers 24/7, 365. They are with us when we wake, work, exercise, eat, play and yes, even when we sleep. We have entered the era of “wearable computing” without needing the wearable gear. Even ahead of the mainstream adoption of Google Glass or Apple’s rumored wrist device, consumers are already embracing the wearable lifestyle with smartphones and tablets.
- While gaming still consumes a large portion of the time spent on devices, other categories appear to be closing the gap when it comes to consumer attention. With the proliferation of social and photo sharing apps, consumers are switched on and sharing every aspect of their lives.
- Shopping and lifestyle apps are used around the clock. Breakfast time, lunch time, dinner time and bedtime have become shopping time.
Millennials Just Might Surprise You
We drilled further into the app usage of young adults age 25-34, a highly-desired segment for brands and advertisers. That segment of the population enjoys high disposable income and has traditionally been a prime target of CPGs, travel, entertainment and retailers.
In the next chart, we have analyzed how app usage by this group indexes against the overall population. (In this chart, 0% represents average usage across all age groups. Positive percentages reflect the degree to which app usage for the 25-34 year old age group exceeds that of iOS users in other age groups.) The results surprised us.
Given the popularity of game apps you might expect that Millennials drive that usage, but in fact they under-index for game app usage. It’s turns out that it’s the middle aged Gen X-ers who grew up with gaming consoles who are over indexing on games. Millennials also under-index on time in Utilities and News than the rest of the population. The categories in which Millennials over-index are Sports, Health and Fitness; Music, Media and Entertainment; Lifestyle and Shopping.
We then went one step further to break down gender usage within the 25-34 age group. The results are shown in the chart below.
Females age 25-34 dramatically over index in the Sports, Health and Fitness category. They spend over 200% more time in these apps then the rest of the population. Women gravitate toward self-improvement related apps while men gravitate toward entertainment. Males age 25-34 over index in Music, Media and Entertainment as well as Social and Photo-Sharing. They under-index in News & Magazines. Confirming some age-old stereotypes, women 25-34 also over-index in Lifestyle and Shopping in which they spend 75% more time than the rest of the population.
Even with more than a billion worldwide active devices, we are still in the very early days of the mobile consumer age. New apps and experiences are emerging daily. In the blink of an eye, experiences such as Ubering (the new verb for ordering a cab using the popular Uber app) and Snapchatting (in reference to using SnapChat to exchange ephemeral photos and videos) have arrived in the mainstream of society and soon, we predict, the English dictionary. Just three years ago these experiences, 100% powered by our mobile devices, didn’t even exist.
Many things will change over the next few years but we predict that mobile devices will become even more a part of the fabric of society than they are today. That means marketers and advertisers need to learn how to make mobile a central part of their marketing and media plans, not just an afterthought.
Flurry now measures apps used on more than 1 billion smartphones and tablets each month. As connected devices reach critical mass, marketers are more seriously incorporating mobile into the marketing mix. But there are pros and cons. While the collective size of the mobile audience is rivaling that of TV and other media, it still requires aggregating the audiences of many apps to reach what can be reached through a few TV programs. That said, the numbers are likely closer than you think. Additionally, mobile offers unique ways to engage consumers given its “always on, always present” characteristics.
In this report, we look into what it takes to reach comparably sized audiences across different media like television, print, online and mobile apps. We also drill down into how the size and engagement of the mobile app audience varies across days of the week and hours of the day, and how it presents unique opportunities.
Let’s start by considering when people use apps.
The chart above shows how app usage varies over the course of a day, cut by weekend versus weekday. Data used for this chart comes from the top 250 iOS and top 250 Android apps measured by Flurry Analytics during February 2013. Through the top apps Flurry sees, app usage spikes during primetime to a peak of 52 million consumers. Make a mental note of that number, because we’ll revisit it a little later.
Comparing weekday to weekend curves, the general shape is similar. App usage ebbs overnight and then grows throughout the day, peaking in the early evening. While weekends also have a distinct primetime window, they see higher daytime usage across the day between 9:00 AM – 5:00 PM, ostensibly when someone would normally be working. However, the overall difference in audience size during the day between weekdays and weekends is not substantially different. Let’s look at 11:00 AM, for example, when the number of people using apps varies the most between weekdays and weekends. The size of the audience during this time is only 25% greater on weekends. Looking at it another way, this means that during the normal workday, people use apps at least 75% as much as they do on weekends. This creates a unique opportunity for advertisers to reach desired audiences over the course of the day via mobile.
The App Audience: Big But Fragmented
Now, let’s return to that 52 million primetime app user number. To get to an audience of that size, you’d need to combine the circulation of the largest 200 weekend newspapers in the U.S. or combine the audiences for the 3 most highly rated primetime TV shows during a good TV week (e.g., The Big Bang Theory).
We believe this comparison says a couple of important things about the app audience: first that it has reached critical mass, and second that it is still highly fragmented relative to more traditional forms of media. Additionally, while we don’t compare costs in this study, it is far more affordable to reach an audience on mobile versus Print or TV.
Now let’s consider how the app audience compares to the audience that is reachable through larger digital devices like laptops and computers. Flurry measured 224 million monthly active users of mobile apps in the United States in February of this year. During the same month, comScore counted 221 million desktop and laptop users of the top 50 digital properties in the United States. From this, we conclude that the U.S. audience that is reachable through apps, albeit more fragmented, is now roughly equal to that which can be reached on laptops and desktops.
There’s An Audience for That, on Mobile.
Earlier this year, Morgan Stanley analyst Benjamin Swinburne showed that “There has been a 50 percent collapse in broadcast TV audience ratings since 2002.” As the prized 18 – 49 year old demo is further lured to digital media, marketers need to adjust. But the mobile industry also needs to do more to make media planning and buying more efficient for advertisers and agencies.
The more mobile ad networks increase their ability to deliver the right combination of reach and targeting, the easier it will be for advertisers to invest in mobile and leverage the unique value it offers. Mobile, in particular, can deliver different ads to different users within the same app or the same ad to similar types of people across different apps, based on the varying interests of those individuals. Dynamic segmentation is much more possible on mobile compared to earlier forms of broadcast media. Now, fast forward one year from now, by which time Flurry estimates the installed base of smartphones and tablets will have doubled to 2 billion active devices per month. That should leave marketers of nearly every product thinking: on mobile, there’s an audience for that.
Smartphones and tablets continue to break new consumer technology adoption records. From earlier research, Flurry found that iOS and Android smart devices have experienced twice the uptake rate compared to that of Internet adoption, and four times the rate compared to that of PC adoption. Following this unprecedented adoption, advertising dollars are beginning to flow into mobile. A recent IAB study reported that 63% of top brand marketers have increased their mobile advertising spending over the last two years, and that 72% plan to increase advertising spending over the next two years.
Focused on mobile advertising, this report has two parts. First, Flurry compares the allocation of advertising spending across various media versus the actual time consumers spend across those same media. Next, through detailed demographic breakdowns, we share which audience segments are best responding to mobile advertising. Let’s start by understanding trends in media usage versus ad budget allocation.
The Great Mobile Ad Spending Gap
In the above chart, Flurry aggregated publicly available data from VSS and Mary Meeker (KPCB), then layered in its own analysis to reflect the growth in app usage we observe. With our adjustment, we resized the totals for U.S. advertising spending by media and consumer time spent using each media. From left to right, represented by the green columns, is the proportion of advertising spending across each major media. TV and Print command the greatest advertising spends in the U.S. with 43% and 29% of the total, respectively. Web, Radio and Mobile channels round out the balance of media spending with 16%, 11% and 1%, respectively. Adjacent to the ad spending columns is the amount of time consumers spend by media type, represented by blue columns. TV leads consumption with 40%, followed by Mobile and the Web with 23% and 22%, respectively. Radio and Print complete the picture with 9% and 6% of usage, respectively.
Comparing where usage and spending vary most, one notes severe over-spending in print advertising and even more severe under-spending in mobile. Web usage also shows sizable under-investment, relative to platform usage, though not as dramatically as seen on mobile. In short, despite the fact that mobile advertising is growing, the platform is far from getting rational levels of spending compared to other media.
We believe the main reason for this disparity is that the mobile app platform has emerged so rapidly over such a short period of time. With the iOS and Android app economy only three-and-half years old, Madison Avenue and brands have yet to adjust to an unprecedented adoption of apps by consumers. Further, the mobile advertising ecosystem remains nascent, without sophisticated platform tools. Concepts of audience measurement and segmentation on mobile are still forming, and mobile lacks the kinds of systems that agencies take for granted on the web. For instance, mobile inventory is difficult to buy in volume, ad networks have yet to be integrated into Demand-Side Platforms (DSPs) and common standards for ad serving, tracking and settlement are yet to be defined. Just consider that large publisher properties like Facebook have yet to monetize their mobile properties, with many still needing to hire media sales organizations to position themselves to do so. As the mobile platform matures, and these problems are addressed, mobile advertising is poised to take off in earnest.
Mobile Advertising Audience Sweet Spot
For the second part of our analysis, we measure which audience segments respond best to mobile advertising, leveraging data from our own ad network, AppCircle, as well as publicly available data. Taking a sample of 60,000 daily active users on iOS, from among a total group of 6 million for whom we have demographic data, we calculated the effective cost per mille (“thousand” in Latin), or eCPM, earned by publishers. Using eCPM allows us to consider both branding (e.g., CPM) and performance (e.g., CPC and CPA) advertising campaigns in our calculations to get an accurate read on which mobile audiences monetize best. In the following charts, we display eCPMs by age and gender, household income and educational level attained. The higher the eCPM earned by audience attribute, the more valuable the audience is to both advertisers, who pay top dollar to reach this audience, and publishers, who earn the most revenue for selling access to this audience. Let’s start with audience breakdown by age and gender.
The chart above shows the value of mobile application segments by age and gender. Males are shown in green and females are shown in blue. The value above each respective column is the eCPM earned by that segment. For example, 25 – 34 year old females fetch the highest eCPMs at around $13, driven by underlying high click-through and conversions rates. In fact, females are the more desirable target audience across most age breaks, tied with men in the 18 – 24 year old age range, and exceeding them at 25 and older.
Breaking out eCPMs by household income shows that income ranges from $60,000 to $100,000 are the most valuable, with $100,000 to $150,000 also performing very well. For mobile advertising, there appears a strong correlation between affluence and eCPMs. This squares with earlier analysis from Flurry that found households with iOS and Android smartphones are, on average, 50% more affluent ($44,000 average U.S. household income vs. $66,000 average U.S. smartphone household income). Smart device owners are, on average, more affluent and more educated.
Similar to household income, we find that those who attained higher levels of education are more valuable segments in terms of eCPM generation. Those with a bachelor degree fetch the highest eCPMs, close to $8.00. The second most valuable segment are those even more educated, having earned a master degree or higher.
The Cream-Skimmed Smartphone Upper Middle Class
As a total snapshot, our analysis shows that females and males, between the ages of 25 and 34 years old, who have higher levels of disposable income and a bachelors degree or higher, more strongly interact with mobile ads. Leading sociologists William Thompson and Joseph Hickey define this class as “the rich” or “upper middle class,” comprised of highly educated salaried professionals whose work is largely self-directed. Typical professions for this class include lawyers, physicians, dentists, engineers, accountants, professors, architects, economists and political scientists.
What bodes best for the outlook of mobile advertising is the quality and quantity of the audience that not only uses smartphones and tablets, but also interacts with ads on these devices. Based on our analysis, revealing that the most sought after segments already interact most with mobile ads, a key ingredient required to realize the promise of mobile advertising is the introduction of mobile ad platforms that can segment publisher audiences and enable targeting by advertisers to reach segments of their choice. Like online, which is infinitely more measurable than Print, Radio and TV, mobile advertising is poised to grow radically with the introduction of scalable, data-driven solutions that put advertisers and publishers in control of their own destiny. Actionable data and well-built platforms are the keys to unlocking Madison Avenue spending.
Smartphones app usage, facilitated by explosive iOS and Android device adoption, has created among the fastest-growing media channels in the history of consumer technology. Flurry estimates that, worldwide, over 600 thousand apps are available for over 350 million iOS and Android devices. On average, consumers have downloaded over 65 apps per device.
While micro-transaction models, largely associated with free-to-play games, have proven the most lucrative business model for iOS and Android apps, there have been big bets placed on advertising. In addition to its own iAd initiative, Apple acquired Quattro, a mobile ad network, for $275 million in January 2010. This was shortly after Google announced its intention to acquire Admob, a rival ad network, for $750 million in November 2009.
In June 2011, Gartner projected that mobile advertising revenue would double to $3.3 billion worldwide in 2011, and grow from around $300 million to over $700 million in 2010 in North America. eMarketer, a research firm, predicts that U.S. mobile ad spending will top $1.1 billion this year.
In this report, Flurry focuses on the size and growth of available advertising inventory within iOS and Android applications. We used data from over 100,000 applications tracked by Flurry to estimate the size of this media channel. The chart below shows that U.S. app inventory is not only growing at a staggering rate, but also poised to absorb the equivalent of the entire U.S. Internet display advertising spend by the end of this year.
Reviewing the chart, we see that U.S. mobile app inventory has grown aggressively over the last year. With its growth trajectory, it will be able to absorb the entire U.S. online display ad spend by the end of the year. Another way to look at this is that, in approximately two years, mobile app inventory is growing so aggressively that it could easily meet the demand of a mature, 15-year-old form of online advertising.
To arrive at these figures, we first tracked the average number of ads shown per application session, which we found to be 4.3. The average application session is 4.2 minutes. For reference, the average session length of a website is just under 1 minute. We then looked at the number of sessions. Flurry tracks about 20% of all sessions in the market, and so we grew our numbers accordingly to come up with a market size.
We compared this inventory with the net spend on display advertising in the US. The US market currently spends a little over $12bn per annum on online display advertising. We assumed a conservative CPM (cost per 1000 impressions) of $2.50 for mobile application inventory. As a point of reference, a typical 30 second video on a large video streaming website such as Hulu has a CPM of $10-$15.
We at Flurry see four reasons why the market is growing at such a fast rate:
1) Smartphone growth – over a million smartphone devices are currently being activated on a daily basis
2) Publisher growth – The App store now has over 400,000 apps in the market and Android, with over 200,000, is catching up quickly
3) Session use growth - Flurry has previously found that smartphone users now spend more time in mobile apps per day than the average Internet users spends online.
4) Publisher integration of ads – with larger screens, targeting, and increased adoption of mobile applications, more publishers are integrating ads into their apps
Not only is inventory growing, but Flurry has also found that the average user of a smartphone is a very attractive target for advertisers. With a sample of more than 60,000 app users, we used location data and zip code statistics available from the U.S. Census Bureau to understand their demographics. On average, smartphone users are better educated and earn higher household incomes than the average of the U.S. population.
Additionally, looking at age and gender, we find that U.S. smartphone app users cluster into younger age groups and trend slightly more female.
In 1994, Hotwired.com was the first company to start selling display advertising in large quantities on the Internet. Back then, it took over six years for advertisers to embrace this model. For mobile apps, less than four years into their growth cycle, a critical mass of highly attractive consumers has been achieved. With growing awareness by brands and advertising agencies, we now expect digital advertising on mobile to take off in earnest.
Hardcore Gamers are so 2007
As the growth of iOS and Android mobile devices continues to explode, there is a tectonic shift in the landscape of video gaming, a medium that continues to reach the most powerful spenders in the economy. Not only are these emerging platforms attracting droves of existing gamers, but also spawning a new and highly engaged audience: the mass-market mobile casual gamer. The era of marketing singularly to the 18 – 34 hardcore male gamer is officially over.
Given the sheer size of the video game industry, this is a watershed moment. In January 2011, according to the NPD Group, 2010 worldwide video game revenue, excluding hardware, exceeded $15 billion. Strikingly, console game sales were down by 5% in 2010 over 2009. PC sales were up slightly by 3%, primarily due the release of the latest StarCraft installment by studio veteran Blizzard Entertainment. As Flurry described in its analysis last year, hardcore gaming is facing competition from more mass-market-friendly gaming apps on mobile devices. In particular, iOS is taking a bite out of portable platforms.
Below are two charts that demonstrate how age and gender demographics vary between the traditional gaming audience and mobile social gamers.
Reviewing the charts, it’s clear that mobile social gaming is attracting a much stronger female base, as well as a younger average user. Among mobile social gaming, there is also greater density in the 18 – 49 year old bracket, which indicates that iOS and Android devices are attracting users during their earning years versus, in particular, their teenage years, where they likely cannot afford more expensive mobile devices.
Mobile Bigger than Console, Portable… and TV
Just how big is the audience in this new era of smartphone mobile gaming? Consider that Flurry has detected over 250 million unique iOS and Android devices in the market, and is detecting more than 750,000 new devices daily. According to recent reports, this installed base is larger than the combined worldwide installed base of console industry leaders Nintendo Wii, Microsoft Xbox 360 and Sony PlayStation 3, estimated at approximately 180 million units. Likewise, iOS and Android devices command a larger installed base than the combination of portable game platforms Nintendo DS and Sony PSP, which recent estimates peg around 200 million devices worldwide.
Further sizing the segment of users that plays mobile social games, the audience exceeds that of any U.S. primetime television show, the best of which can top 20 million viewers on days airing new episodes. Contrast this to the 26 million unique users Flurry already detects 365 days of the year, and who spend more than 25 minutes per day in social games. On a broader scale, Flurry monitors more than 300 million user sessions across all games and apps. A whopping 37% of these are from games.
The Consumer behind Social Games: a Marketer’s Dream Target Audience
The audience playing mobile social games is beginning to attract the attention of major advertisers. For this study, Flurry used a sample of over 60,000 social gamers on iOS and Android who self-reported age, gender and location. For parts of this report, where we focus on the U.S. segment of the audience, we further crossed location information with United States zip codes to leverage U.S. Census Bureau data for deeper segmentation.
Let’s start by looking at the concentration of mobile social gamers by international region.
The chart above shows that mobile social gamers live in more developed economies, with the highest concentration in North America, followed by Europe. This hints strongly at a similar geographic footprint to iOS and Android penetration to date, with Asia beginning to grow more quickly as Android, in particular, finds increased distribution in this part of the world.
Next, we display a cross-tabulation of age and gender in a bar chart format for our worldwide sample. This provides the opportunity to study how male and female usage varies across age ranges.
From the chart above, it’s clear that female mobile social gamers are older than their male counterparts. While males have a slight lead in usage in the 13 – 25 year old range, more women play between 26 – 44 years of age. Additionally, referencing the earlier age comparison between traditional and mobile social gamers, the latter are younger, with an average age 28.2 vs. the traditional, more hardcore gamer, who is more often male with an average age of 34. Just below, we display separate charts for age and for gender.
The U.S. Mobile Social Gamer: Affluent and Educated
Studying the U.S. mobile social gamer, we note that she earns over 50% more than the average American, is more than twice as likely to have earned a college bachelor’s degree, and is more likely to be white or Asian.
The video game industry is transitioning from an era of hardcore male gamers who have dominated the landscape, to more mass-market usage across mobile social games. 18 – 34 year old males are being supplanted as the most attractive segment to target by big brands and agencies. The Mobile Social Gamer segment is highly engaged, younger, made up of more females, more educated and more affluent. In terms of usage behavior, they use social games far more often than they watch prime-time television shows, and using for 25 minutes per day, are heavy users of this interactive content. Mobile social gamers are the new mass-market powerhouse.
This article comes from the Flurry Smartphone Industry Pulse, August 2009.
The data in this report is computed from a sample size of over 2,000 live applications and over 200 million user sessions tracked each month across Apple (iPhone and iPod Touch), Google Android, Blackberry, JavaME platforms.
Understanding Mobile App Retention: They Use or You Lose
With more than 75,000 applications in the App Store, consumers have a vast choice of alternatives to the applications they have already downloaded. And while discovery of new applications is a challenge for consumers, retaining users can be equally difficult for developers. To shed light on the kinds of applications that tend to be used over a longer period of time, Flurry studied user retention across 19 categories over a 90-day period. We monitored if consumers returned to use a downloaded application within 30, 60 and 90-day periods, as well as how frequently consumers used applications over those time periods. Flurry measures user retention by the number of users who downloaded an application, at any time in the past, and used that app within the last seven days.
Reviewing the chart on the previous page, Quadrant I is comprised of the most frequently used apps over the longest period of time; categories like News and Reference (e.g., Dictionaries, Thesauruses, Recipes, etc.). Thinking about News apps, this makes sense given that news content is constantly being refreshed, providing consumers nearly infinite value over time. This logic continues to hold up when we consider that news apps get re-used more than once per day, at a rate of 11 times per week.
On the other end of the spectrum, in Quadrant III, we find the Entertainment category, which could better be described as a collection of "gimmick" apps (think Lighter, Fart, IQ Test and Ringtone apps). Once downloaded, these apps are typically used only a few times and then abandoned.
In Quadrant II, we find categories like Books and Games, among the two largest app categories in both the App Store and Android Market. These application categories are characterized, on average, by intense usage over a finite period of time. Because games and books offer content that typically is consumed only once, the user usually moves on after reading a book or finishing a game.
Finally, Quadrant IV contains Productivity (e.g., List, Drawing, Wi-Fi Finder apps), Navigation and Medical apps. These kinds of apps remain on a consumer's handset for a long period of time, but get used only occasionally. Unlike "gimmick" apps, they are perceived as having sustainable value and therefore consistently revisited over time.
Mapping categories by usage frequency and retention also provides insights into pricing models. Quadrants I and IV (the right-hand side) are better suited, on average, to subscription (if supported by the respective app storefront) and advertising-supported models. The main reason is that these apps have perceived enduring value by consumers over a long period of time, and therefore more successfully retain their user bases. For ad-supported apps, this high repeat usage translates into more ad impressions served. Categories on the left-hand side, Quadrants II and III, are better suited for one-time download fees. Those apps may provide higher immediate satisfaction to users but their content, once consumed, rapidly loses their value.
For more data on retention by category, as well as frequency of use, we provide the chart below:
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.
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.
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.
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.