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.