It’s well known that, with the exception of a few apps, paid and in-app purchase funded apps tend not to be financially sustainable. The exception is games. However, a new article on Polygon suggests that even games developers are having a tough time.
The article explains how Battlestation: Harbinger, featured by both Apple and Google as one of the best new games in their respective marketplaces, hasn’t been viable. It explains how the majority of people have been conditioned not to want to pay while the remaining few who do pay (actually pay a lot) barely ‘prop up the fun’ for everyone else. Competition between developers has lowered the price to a few dollars a game. The article suggests that consumers and developers must work together to change the industry.
However, I am sceptical that the industry can be changed now. Game developers will probably have to look to other ways to make money, in the same way as non-games developers, via B2B and indirectly selling or promoting other things. One interesting prospect for game developers might be gamification of brands, services and other activities.
IDC and App Annie have a new free report on app advertising and monetization trends
. Freemium continues to see the greatest growth with paid apps declining. However, your chosen method of monetisation should depend on both where you are and where your expected customers are located.
In my opinion, too much emphasis is put on free vs paid and monetisation strategies. Very few people make money directly from apps and the ones that do are probably games.
The people making the real money are those that are supplying apps for free and instead selling or promoting something else. Almost every industry has opportunities to use apps as enablers of core business. For example, in my case, in the last year I have worked with companies using apps in healthcare, insurance, retail and hospitality. The retail solution was created so that it was white label to allow use by my client’s many clients. None of the apps I created over the last year for clients was sold, ad-funded or freemium funded. Instead, the apps support existing businesses to sell more of their core product or service.
I believe there are many opportunities such as these that go beyond the free vs paid mentality. Furthermore, if they are implemented in such a way as to be re-brandable via white labelling then this leverages the opportunity to make it even larger.
Vision Mobile has a new Developer Economics Q1 2014 report based on a survey of 7,000 app developers in 127 countries. As might be expected, iOS and Android are very dominant and iOS remains as top revenue earner. However, if you want apps to provide revenue, read on.
The ecosystem was worth $68 billion in 2013 and is projected to grow to $143 billion in 2016. This seems like a huge incentive for companies to take up mobile if they haven’t done so already. However, where’s the money? We are told…
"60% of developers are below the “app poverty line”, i.e. earn less than $500 per app per month"
How can this be? How can such a large, tens of billions, market result in such a low income per app? The report provides some extra insights on the revenue distribution across and within platforms…
Even on iOS, a few apps (mainly games I guess) represent the majority of the income. So why do developers continue to develop apps when they aren’t likely to make any money? The report provides some insights on developer motivations…
It can be seen that Hobbyists, Explorers, Product Extenders, Enterprise and, to some extent, Guns for Hire and Digital Media Publishers don’t really care about the ability to generate revenue.
What does this mean for entrepreneurs in the mobile space? Well, if you are thinking of making money from apps (‘Hunters’ as Vision mobile calls them) then you are probably wasting your time unless you think you can be part of the small slice of the market (games?) that makes the majority of the money. Instead you probably need to change your business model to become one of the other categories of developer.
Last night I was at the inaugural Mobile Monday Shoreditch in London. The theme was the A to Z of Mobile Games although a quick poll of the attendees showed most worked in areas other than pure gaming. It was mainly a panel event consisting of Sami Mahmood (ngmoco), Roberta Lucca (Bossa Studios), Alex Caccia (Marmalade), Maxwell Scott-Slade (JohnnyTwoShoes), James Faure (Autotrader) and chaired by Oscar Clark (Papaya).
Not being a games developer, I was particularly looking for insights that might be applied to non-games. Here are some things that were mentioned…
- Most games are now freemium and many are becoming social freemium.
- A few games are using pseudo gambling models such as Gatcha style models where people buy something where it’s a surprise what’s ‘inside’. Care needs to be taken with using these models.
- Casual games are the most successful.
- The more successful companies are building a brand alongside products.
- Niche, premium (paid) games might not need everyone to like/download.
- Many games use Facebook as the social network (see my OverTheAir post on Facebook’s Open Graph API for the latest mechanism). However, you might not want all your friends to know all your gaming activities or even the fact you are gaming.
- There are two types of mobile social gaming: real time and asynchronous. Asynchronous involves messsages about the game after the fact and reinforces gaming relationships rather than competition between players.
- A high proportion of all downloads are games. Hence, app quality in general is set by games (really?).
- As the majority of games are free you can’t succeed with an average quality game.
- Brands sometimes get in the way and ruin the game experience. There needs to be continuity between the brand and the experience.
- Adverts get in the way and distract from the experience.
- There needs to be innovation in advertising from everyone in ecosystem.
- There’s a need to know more about demographics to attract advertisers.
- It can cost high six figures for a well produced custom branded app/game.
- The landing pages for ads need to be just as good as the games.
- There’s an ongoing balance between cost of acquisition (5 cents to 2 dollars) vs monetisation.
- Freemium games need to give enough away initially to attract players.
- Ways of paying and price points depend on geographic location.
- It’s not always correct to assume iOS represents people who can and do pay – other users can share the device, eg children.
- With kids, pricing, adverts, micro transactions and moderation are all extra issues.
- There’s a problem of device fragmentation and getting the best performance possible on a particular device.
- At some stage you have to cut off the cross platform effort.
- There’s the issue of whether the game should look and feel like the native platform.
- Some iOS developers are scared to go to Android due to the perceived fragmentation.
- In the future (18 months) there will be more powerful devices with better graphics processors. Still need to concentrate on game play. Top performance is only important for the smaller number of hardcore gamers.
In summary, games apps are no different to non-games. Many of the issues are the same. I think Roberta Lucca gave the most insightful comment when she repeatedly said that it’s necessary to look at demographics to resolve many of the problems. It’s the same advice I often give to clients. The better you know your potential end user, the better you can tailor your apps/platforms and the more sucessful your app will be. Also, I’d say user demographics are rarely fully known upfront in which case you need to analyse early users and modify your strategy accordingly.