Show me the money in mobile apps

As the owner of an eight year old, self-funded mobile erotic business I have intently followed industry news and developments on apps, app platforms, app stores and app monetization. I have been waiting for the tipping point where sustainable ROI becomes standard before investing in it for either Cherry or its partners.

 

And I’m still waiting…

 

I hear the magical stories about Rovio and download figures from the Apple App Store indicating I am missing the boat, but when I dig below the surface of the media hype I tend to find, in terms of making ‘real’ money, it’s only the developers who are getting paid high development fees from companies who work on the ‘We must have an app’ strategy (ignoring a viable reason to have one, realistic customer demand – they just have to have one!)

 

I’ve spoken to dozens of mobile companies, from different continents, with different business models and budgets and have yet to find one that tells me that they are making reasonable revenues from apps.

 

The global stampede to be a part of the ‘app phenomenon’ is creating a fiercely competitive and over-populated market place. Don’t get me wrong, I can clearly see the contribution that apps are making to mobile entertainment uptake, handset sales and the migration to a direct-to-consumer marketplace, but from a commercial point of view, we are seeing an ever decreasing price average and worse, the gradual elimination of consumer’s expectation to actually pay for apps. A report released in January 2011 by Distimo found that the average cost of downloading an app in December 2010 was considerably cheaper compared to January 2010. 

 

I notice all the time that the industry media and press only really detail downloads, very rarely revenues. Some app stores keep download stats for individual apps a secret. This obviously saves the lower performing publishers from any embarrassment. Thus you only hear download figures for the more successful apps, but whilst these sound impressive, they don’t mean much without the retention rate. How many people are still using the app a week, a month, or a year later? How many are upgrading to a paid premium service - or paying at all?

 

Another point worth noting is that ‘download figures’ can sometimes be a bit slanted. The Facebook app has been downloaded 100 million times from GetJar’s app store (December 2010), making this the most downloaded app from any store. Mobithinking rightly comment that this is not really a download app, it’s a short cut to the Facebook mobile site – Facebook is a web app, available for anyone with any Web-enabled handset.

 

If it was tough a year ago for average companies to achieve sustainable income from apps, it’s only getting worse. One opportunity you could shout at me for overlooking here would be the possible consolidation of the app market as smaller developers and d2c mobile companies finally close their purses for the on-going challenge of enticing paying app customers.

 

Consolidation would obviously expand the share of voice for those who were left, but apart from marketing opportunities, I’m really struggling to hear about viable commercial models, both in erotica and mainstream that answers our clients’ requirement for making money from apps.

 

 

All these issues might be irrelevant in a few years given some rumblings in the industry that app stores may potentially have a short shelf-life. ABI Research last year predicted that app stores will slowly decline as subscribers migrate from download apps to the Mobile Web, and more popular apps including social networking will just be preloaded onto the handsets. And then you have HTML 5, which will change the landscape completely.

 

Now the reason I am having a whinge about this is that one of the few areas where adult entertainment has always gained respect from mainstream industries is in the way it has defined many ‘new media’ channels, not only for usage , but also particularly for its innovation in monetizing that demand.

 

Adult was a forerunner in monetizing the purchase of content via the internet. Circa 1996, the issue was - “adult users won’t pay for internet porn using their credit cards, it’s too insecure and they don’t want it showing up on their credit card bill”. “No problem” said the adult industry, “we’ll just create a payment solution that allows you to be billed anonymously per minute via your dial up connection” and BOOM, users started happily paying between $1 (€0.69) and $3 dollars a minute when they could be subscribing to unlimited access for a mere $20 bucks per month.

 

It seems that in the world of mobile applications, this is not the case for the first time in digital history! When I see the complexity and amazing immersive environments for mainstream hobbies, services and games, I can’t believe that adult entertainment is so far behind, given its track record. We are either looking at a magazine style application or a simple gallery of videos and/or images. Hardly thinking outside the box, is it?

 

I firmly believe there is a huge commercial opportunity to be had here. Cherry Media is currently working with various adult brands, app stores and producers to design a new breed of erotic applications. Apps that effectively merge with their customer’s natural behavior patterns, take advantage of the immersive opportunities that app environments bring, but most importantly, thinking beyond the simple ‘ad-funded’ or ‘freemium’ commercial models.