Adding more Freemium to the Fire (1)

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Over the past 12 months, reports have consistently indicated a shift towards Freemium as the business model of choice for Mobile App monetization.  Flurry and Distimo published data last year citing that 50% of apps are now Freemium. And then this week, while this carefully crafted blog post was sitting in draft format, GigaOm came out with a long article explaining how to make Freemium work for you and eMarketer declared that 64% of app revenues now come from in-app purchase.

Is it time for paid apps to go home?!

Certainly not.

In this blog post & the next I’m going to develop an alternative framework for making this decision and look at how some of the trade offs play out

Let’s start with a simple formula

Gross Profit for a Mobile App = (ARPU * Volume) – (Dev + Marketing Costs)

And each of the levers identified above, is influenced by several other factors.

  • ARPU – App mechanics (e.g. how much free content?), quality of content or experience, user demographic
  • Volume – Organic Volume (Rank, SEO, cross promotion efforts, brand, universality of appeal) and Paid Volume (spend on advertising)
  • Development Costs – Quality of development team, framework for development
  • Marketing & User Acquisition Costs – Cost effectiveness of spend, breadth of traffic sources, quality of optimization and spend management

So just by thinking logically about the problem, it’s clear that the Freemium decision becomes a trade off between lower ARPU and higher costs on the one hand, and higher volume on the other.

Sounds simple right? But how do you know how those factors will play out….

Definitions
Freemium is the term applied to online and mobile business models that offer a skeleton of content or services for free, but incur additional charges for further content or services. In the mobile app world a Freemium app can be downloaded for free and includes some basic content to entice the user. Revenue is earned through a number of other means including: advertising; upgrade or purchase of additional content; referral fees. By contrast in a classic pricing model, the user pays the full amount upfront.

An emerging market for app acquisition

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A couple of weeks ago there was an article on TechCrunch about a guy who had listed his mobile app for sale on EBay. The story goes that the scavenger hunt game Buckshot, was listed with a starting price of $1. According to the article, the game generates $300/month in revenue (from sales and iAds) and costs little more than $2/day to maintain (Amazon cloud server costs). Eventually the app sold for $16,600, no doubt aided by the buzz and publicity created by TechCrunch.

And at that moment, many thousand entrepreneurs thought “Ah ha – Why didn’t I think of that business idea 6 months ago?”

Well, obviously a few people had thought of that idea before, including the likes of Apptopia, SellMyApplication and SwAppz. I was at a Boston Mobile App Developers meetup group earlier this week and Jonathan Kay CEO of Apptopia was presenting. He was very modest about the business idea (a marketplace to help broker the sale of mobile apps), but I wish him good luck and speedy execution.

In 6 months time I think we’ll be seeing a lot of competition in this space, and hopefully it’ll turn out to be a very positive thing for the app ecosystem. Maybe it’ll change the culture of disposable apps with a short shelf life and improve the incentive to develop high quality apps with longevity.

In order to evolve a well functioning marketplace, the following 5 challenges will need to be addressed:

1. Valuation
How much is an app worth? How good is the code? How much lasting appeal does it have? To an extent, this probably won’t matter to early buyers with a speculative perspective. However, as the marketplace matures and attracts a wider range of buyers, reliable valuations will be key.

2. Paradox of Expertise
Currently you need a certain amount of expertise in order to be able to understand the quality of a code base or to be able to make subsequent use of it. However, if you have the capability to do this, then why not just build something from scratch that exactly meets your needs? The lack of time, or the desire to get hold of something proprietary maybe? Marketplaces can help overcome this paradox by providing code evaluations, specifying standard code components and providers technical support services post-sale.

3. Revenue Opportunities
In a classic business acquisition, buyers look for revenue opportunities and cost synergies. In mobile, revenue opportunities could be generated through: better marketing & user acquisition strategies, cross promotion, new product or service features. This is probably the key reason to purchase an app. In simple terms, you see something and think you could make it better! However, app marketplaces may need to facilitate this by developing business partnerships with solution providers like MoPub (for ad revenue), Fiksu (for marketing & user acquisition) & Airpush (for mobile notifications).

4. Cost Synergies
These could come about as a result of scale or geography. For example, if an app development shop bought an app from another developer, they might be able to maintain and support it more cost effectively than an individual. Or perhaps, the new owner would outsource development to a lower cost country and that way save money. However, the opportunity to generate cost synergies seems small overall.

5. Mobile IP Protection
How many indie app developers have actually taken the precaution to register their app with the US Copyright Office? Or to register their app name with the USPTO? Not many I suspect. Until that becomes common practice, developers may find it easier to clone and copy than to purchase assets.

10 Tips for Rookie Mobile App Developers!

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Over the last couple of blog posts I described my experiences building a mobile app through different platforms and channels (PhoneGap & Elance). This was a winter hobby project, motivated by the desire to see what it takes to get something into the App Store. However, I’ll summarize these posts with 10 tips for mobile app development, from a rookie developer. Good luck!

1. Use free online wire framing tools
I experimented with LucidChart but ended up using Balsamiq – a free tool web demo tool. Export html and pdf designs for iPhone & iPad.

2. Design a 3 click user interface
Not only will this make your life as a developer easier, it will improve the user experience. 3 clicks means that this is all it takes to reach the deepest buried context in your app, or complete an action.

3. Use online design crowd sourcing sites for icons & images
Actually I mainly just googled for images and edited them using free Gimp software. However I have also used 99Designs and Crowdspring which are both excellent crowd sourcing platforms for logos, icons and general design work.

4. Consider cross platform tools for developing HTML5 apps
Options include PhoneGap (free & open source) and Titanium Mobile with JQuery Mobile and Sencha Touch. The advantage of doing this is that you’ll quickly be able to develop for iOS, Android, Blackberry & Windows Phone 7. If you have a niche application focused on content, then going broad with a simple app across platforms could make sense. These frameworks are also a great way to make a quick and dirty version of an app, before committing to Xcode or Java.

5. Outsource with ELance or oDesk
Both Elance and oDesk offer access to a vast global pool of developers. Submit a project description and receive 5 – 10 bids. If nothing else, you’ll learn a lot from the process of discussing requirements with potential contractors!

6. Draw up very detailed project plans
Include weekly milestones, contingent payments and file references. Go over the description again and again (perhaps with a friend who doesn’t know the project). Is it 100% clear what you want and are all the materials needed readily available? Expect that producing a project plan so detailed will take quite some time.

7. Learn the basics of Xcode so that you can tweak and adjust
e.g. What is a plist, asset file, target build, code signing certificate and archive manager? How does a .m file differ from a .h file? Here is a basic Xcode intro video on YouTube.

8. Write content in html files
This can save time & cost for the project. It also means that you will easily be able to edit content in the html asset file in future.

9. Test regularly
No explanation needed. This helps identify bugs and required changes early.

10. Keep notes on what steps it takes to submit app to store
For some reason, every time it came to the point of submitting the binary to Apple, even though I’d done it before… I ended up fumbling around for 90 minutes or more. Whether it was getting the Code Signing correct or finding the Archive Manager, something always seemed to go wrong and I couldn’t remember how I did it last time. Be methodical and document your steps!

My mum and her iPad

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I wasn’t planning on writing a blog post on this topic. However, I’m home in Stratford-upon-Avon for Christmas and spending some time with my family. Mum has a new iPad 2 and it’s pretty fascinating to see this technology that I’m so familiar with, through her untrained eyes! And don’t get me wrong here, I totally respect her for making the conscious effort to engage with all this stuff at age 64 (she already has a Kindle & uses a computer totally proficiently). Stratford isn’t a buzzing tech hub, but even here it’s possible to get left behind.

Where’s the instruction manual?
The iPad is supposed to be an intuitive device. Is that really true? Well, the on/off button on an iPad doesn’t exactly scream out at you, and the swipe motion takes a bit of getting used to. Is it really intuitive to tap the screen? No, that’s a learned behaviour.

What is the iCloud?
I’m not sure why this was a recurring question for my Mum. But she was very concerned about syncing email and realized that the iCloud had something to do with that, just not sure what! I think the point is that you don’t need to do anything to enjoy the benefits of iCloud – it will simply sync content between all your devices automatically. Glad we got that one sorted.

What apps should I use?
Answering that question makes me realize, again, how awful app discovery still is. Where is the list of Top 10 Apps to Get Started? Where are the recommended lists depending on interests and experience? Mum’s attitude to the iPad is very functional. What offline things can I translate to the iPad world? (See below for the list of 10 apps I ended up recommending her).

Where can get sheet music for church choral songs?
This wasn’t exactly her quesion ;-) but it highlighted to me that as more people (especially older folks) start using tablet devices, it’ll open up a new swathe of topics to offer content and services around. And since most mobile app entrepreneurs don’t typically address this demographic, there’s an opportunity here.

But overall, the iPad is going to be a really useful device for someone who doesn’t spend all her time at a computer. Good luck Mum!

Recommended Apps
1. Facetime
2. iPad Tips n Tricks
3. Angry Birds
4. BBC Weather
5. The Telegraph
6. Facebook
7. Kindle E-Reader
8. forScore (sheet music for iPad)
9. BBC iPlayer
10. Flipboard

Using Elance to Develop v2.0 of KillerCases iPhone app

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Version 1.0 of my iPhone app (KillerCases) was out in the App Store, built using PhoneGap & JQuery mobile. Initial sales were going moderately well, but I was keen to switch to a freemium pricing model to drive a higher volume of downloads. The upgrade would involve building new features to support in app purchase and I realized it would take months to figure out by myself. So I decided it was time to get some cash out of my wallet, and venture into the world of online outsourcing.

First step was choosing an outsourcing website. Amongst the options were Elance, oDesk, Guru.com and PeoplePerHour. All seemed to offer pretty similar services, with the opportunity to get a range of quotes, manage projects in an anonymous work room, and make payments through the online platform. This is a good description of the differences between Elance & oDesk (from a contractor’s perspective). Ultimately I decided to go with ELance because of a personal recommendation from a friend.

Round 1 – A local developer in Boston
Next step was the project description, then hey presto, within 12 hours I had 5 quotes for an average of $1.3k (range $700 – $2k, project details below). After several days of courting, I chose a developer based in Boston USA, with some work history & good reviews on Elance. Above all, it was the quality of communication and response to my questions which was the deciding factor. I was excited to get started!!

And so the project begun. Indeed the communication was good…but deadlines went past and code trickled down the funnel… very slowly. The relationship ended amicably 6 weeks later with this:  “Sorry for the string of emails. Just thinking through long and hard about this app project, I have to admit that I’m continuing to have a bit of a hard time visualizing some of the requirements. While I am certainly willing to work with you to see this through its completion, I do want to give you the option of canceling the project with no strings attached. I can provide you the full source code so far at no charge, so you would be able to definitely have a head-start. The reason I bring this up is that I see us completing this project by the end of August if we are lucky, and it could be quicker and cheaper for you to hire an offshore programmer to do the remaining work. “

Round 2 – Outsourcing to Pakistan
So it was back to the drawing board. I’m not sure what happened on ELance in the intervening 6 weeks, but the second time around I got 13 quotes for an average of $4.3k (range $1.9 – 5.9k) for exactly the same work!! Except this time I was very specific about what I wanted and wrote out an extremely detailed step by step work plan. So perhaps that tells you something about the problem the first time around! Anyway, this time I selected a team from Pakistan who took the extra step of producing some mockups during the proposal period. They seemed like a young team, eager to build up a reputation. Swenggco-Software.

And this time around, I’m glad to say that it was a very positive experience. Swenggco completed the work accurately and on time! I communicated regularly with a product manager who spoke perfect English, responded quickly and had a good level of technical knowledge. Swenggco have even provided post project tweaks/updates pro-gratis. Thank you!

Check out v2.0 KillerCases Lite here.

Technical Details
For those who are interested, here were the requirements that translated into a project cost of $2-6k on Elance.

Provided:
HTML Text files with case study & concept content
Design format & layout
Detailed project plan with 4 milestones & contingent payment

Wanted:
In-App purchase per case study
AdWhirl ad integration for 5 ad networks
Math Quiz – multiple choice questions & answers
Form to request interview coach support (by launching email)
Pop up notification after 3 opens
Display video files
Integration of Fiksu & Flurry tracking code
Xcode re-write

Not Included:
Remote content management

Building a really simple iPhone App (1) – Phonegap & JQuery Mobile

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It gets cold in Boston over the winter. And last year I decided that a good way to use my weekend time during these dark months would be to attempt to build an iPhone app using my bare hands.  I did engineering at university and that involved a few lab sessions doing C++ and Matlab, but other than that I have no background in computer programming. But I often like to joke, what do you get when you put an ex-management consultant into a mobile app marketing business?  A mobile app about management consulting!!

So the content for the app was easy to figure out. 10 business case studies covering a range of topics & industries.  Designed to help a prospective candidate prepare for an interview with a management consulting company. Management Consulting interviews are notoriously rigorous and usually involve talking through 3-4 different case studies during several rounds of interviews.  Interviewers are looking for people who can structure their answers, do math quickly and diagnose the key issues at stake.

From a technical stand point, I had no idea how I would approach writing an app, until I attended the Boston Mobile Camp Unconference in February 2011, organized by Mobile Monday folks. And that was where I learned about the wonderful world of HTML 5 tools which are making it way easier to develop mobile apps across platforms.

There are quite a few different tools out there, like PhoneGap and Titanium Mobile (from Appcelerator) which allow developers to embed a web app in a native shell and still access native device APIs like Camera and Contacts.  So basically, you write in HTML and/or Javascript and PhoneGap does the rest. PhoneGap is totally open source and free, so that was the deciding factor for me.  Titanium Mobile offers a free starter package, but you can also upgrade to get support and training materials.  No doubt these would have been useful for me, but I managed!

These tools can be paired with HTML 5 frameworks, like Sencha Touch and JQuery Mobile which allow you to access code libraries to quickly build mobile optimized sites.  My impression is that Sencha Touch is a little more sophisticated than JQuery Mobile and calls more heavily on Javascript skills.  I’ve heard it said that it’s better to use Sencha Touch for building a mobile app and JQuery Mobile for a website.  This is a nice discussion of the differences. JQuery Mobile sounded like the easiest option to me, so I picked this. I also liked the idea of getting familiar with a tool as it was being developed (Version 1.0 only got released in November 2011).

So first step was to download XCode/Eclipse and get a developer license. Then I simply followed instructions on the PhoneGap site to complete a Hello World application.  And after that it was a case of googling tutorials about JQuery Mobile and compiling a thousand times until I got what I wanted.

The result was an app called “KillerCases”. The early version that I built using PhoneGap/JQuery Mobile can be viewed on Android. The iOS version has now been updated in XCode (the topic of a future blog post), but can be viewed here.