#MobileBeat/Mobile Ecosystem: All About Apps

17Jul09

VentureBeat outdid itself yesterday with a class affair at the Parc 55 in San Francisco. If you wanted a good look at the players of the mobile ecosystem this was the place to be, replete with pitch fest, cocktails, jazz and killer schwag to bring home to the kids, including SGN‘s plush pandas and Symbian‘s rubber duckies.  There were about 500 suits comfortably seated as carriers, handset manufacturers, and app developers took the stage to share their thoughts on the phone. Together they cheered: Bell dogma is dead, it’s all about apps! Stitcher got it on audio:  http://stitcher.com/listen.php?sid=588199 and Ooyala should be posting video soon.  Here’s what they had to say:

I.  Handsets:  

Tero Ojanpera, Nokia
3D Strategy: Development, Distribution, Discovery – make app development easier, work with carrier on unlimited data, push to home screen.  Goal is $100 unsubsidized smart phone, market is moving to smartphones with better browsers and unlimited data.  India, China no unlimited data plans, most are $30 feature phones. (Nokia’s profit’s down 66%, NYT:  http://www.nytimes.com/aponline/2009/07/16/business/AP-EU-Finland-Earns-Nokia.html?_r=2&hpw)

John Ellis, Motorola
Motorola in just 13 months went from 17 platforms to just 1 – Android. Developer community at developer.motorola.com. (see MOTODEV Studio-better tools for app creation, App Accelerator Program-bringing apps to market faster). Voice is primary.  The phone still needs to be able to make a call, most fail.  Bell Dogma was lift phone, get dialtone, comes down to delivering a kicka.. experience.  Asking are we moving fast enough, replied:  not sure I can go any faster, but need to recognize when perhaps certain innovation is not working and its time to move on, been in business 83y, aiming to get to 100y.

Marc Faucher, Blackberry Partners Fund
Everyone rushing into the app store business is net good for the industry, the app stores are a point of distribution, one piece of a bigger puzzle, still need to sift through it to unlock value, developers go in to make money.   Fund is under 1y, looking for breakthrough. RIM is different than Apple, legacy is enterprise, security DNA in SDK, core base 200,000 enterprise customers.  iPhone is a beachhead platform features innovation.

Chipsets: 

Nagraj Kashyap, Qualcomm Ventures
Barriers to entry are low right now.  80% of investing done outside the US, looking at China and Israel.  In 2-3y we’ll all be coexisting and markets will be open direct to consumers.  App model is never truly open, even Apple has cert process, they curate, there are apps out there that can brick the phone, must protect the user experience.  iPhone only has 5% penetration.  Then there are a whole other class of consumer devices like the Kindle.

II.  OS

Vic Ghundotra, Google
Even Google isn’t rich enough to develop native apps for all mobile, that’s why focusing on mobile web.  Unlimited data takes math out of the equation, makes web happen, tsunami of growth.  Not plotting how to cut people out of markets (Nokia elbowed with a wink – aw, cmon now, big laugh).  Web apps will overcome OS fragmentation.  India mobile search usage spikes 50x when AirTel offers unlimited data for 100 rupees.  The future is in building for the web, not Windows, etc.  Last 12 months huge innovations in the browser, iPhone 3.0 just added geolocation.  Apple brilliant in making bookmarks appear as native apps on the home screen.

Lee Williams, Symbian
5-7 points of presence where value sits for the consumer: email, SMS, MMS, image sharing, content discovery, listening, entertainment.

III.  Carriers

Russ McGuire, Sprint 
Carriers are not the most innovative companies, needs to enable others to innovate, get out of the way.  Sprint needs to be open, innovative and fast. Openness means not asking for permission.  Need to let go of control to not be an impediment.  You don’t want to move at carrier speed, you want to move a valley speed.  5 years from now the majority will still be on feature phones, need to make them more of a portal.  Sprint has been in the apps market longer than anyone, one of the oldest developer communities with the 9th Annual Developers Conference 9/09.  Need to protect network, consumer privacy and must be economically sustainable.  Sprint’s plans for Palm Pre are $1200 less over the life of the contract that ATT’s for iPhone.   Sprint wants to be the best backbone in the industry, other carriers have aspirations to be a media company.  Sprint control points in place so one customer can’t bring down the whole network.  It’s in everyone’s interest to keep the network up, don’t want the pipes to go out of business, all need to work together on the ecosystem.

Peter Barry, Vodafone
Permissionless, open ecosystem invites viruses, there is more personal info on phone than web, need carrier cert for trust.  We don’t want to control everything.  Vodafone distributes phones and apps (offers developers 70/30 split).  SMS still growing phenomenally, integrated with web experience, mix and match phone with web.

Aditya Khurjekar, Verizon
Dynamic and exciting phase.  1st developers conference next week.  FiOS apps market developing too.  Ultimately will merge mobile and living room for full three screen experience.  Openness vs. choice, consume on device or network.  Developer time from concept to launch is very short now.  So much can be done with the new consumer-centric devices.   There is room for innovation in pricing plans.  Increasing commonality and consistency across three screens.

Venetia Espinoza, T-Mobile
T-Mobile has a Partner Network Program, like a developers program: http://developer.t-mobile.com/site/global/home/p_program_faq.jsp
Embraced Android.  MyTouch phone.  Accessory pack to MyTouch as a way to make money.  Bundle of accessories and apps like music pack incl headphones, music apps.  Data plans competitive.  Success lies in partnering.  22 partnerships to date … Virgin, Sony Ericsson.  All will thrive with cooperation in ecosystem.  T-Mobile embraces open platform but have to preserve business margins to stay in business and protect customers. which is why Skype and VoIP was removed.  Need to create a win-win for carrier, device manufacturers, developers and consumers.

Luke Bao, China Mobile
Developing Android-based OS called OMS Open Mobile System.  Don’t use credit card, bank cahrges 2-3% fee.  China Mobile does micropayment billing.

IV.  Markets

Ilja Laurs & Patrick Mork, GetJar
GetJar is the premier market for free java apps, has more BB apps than BB Apps World, connects mobile app developer with the consumer.  .5B downloads globally on 1500 devices, largest percent from emerging markets.  Expect 1mm apps by 2011.  1.2mm downloads/day, majority under 25y.  50,000 apps in store.  12mm consumers/month.  iPhone and BB less quantity, high repeat usage.  From India to Indonesia, most are feature phones with java apps.  Market is larger than that for smartphones, intensity of usage makes ad driven models viable, need to take speed bumps out of purchasing, make it as simple as buying a song off of iTunes.   At one point Verizon was charging $8 game, the days of selling a $5 game are over.  Monetize with in-app advertising.  Market creates a new middle class.  7%-30%-40% developers earning $7000+/month, making a living wage, few like EA, top 1%.  Discoverabilty is major issue.

Eric Chu, Google
Google to enable the long tail.  4-6000 Android apps in 20 countries to date, with over 200 apps adding weekly.  Total # of apps not the right number.  Look at relevant apps in each category and paid v free.  iPhone has first mover advantage.  iPhone is good for all platforms.  Need to work on making porting easier.  What is the addressable market.   How are users downloading, single # not enough.  The app stores are a nascent market now.  Direct to consumer business.  Need to land a sustainable business model.  Goal is to get as many handsets out as possible.  18-20 handsets to ship this year.  To add social features to app store including friends and family recommnendations.  Cater to casual browsing and hunters.  Let new apps see the light of day.  Android keeps an infinite list not just hte top 50, keep scrolling down, working hard on UI for discoverability.  Removed Skype and VoIP because it put users in violation of TOS with carrier.  Commenting on www.inmobile.org report on 2011 OS that shows Android dominating over iPhone, Symbian (Nokia), Web OS (Palm Pre), BB, Windows Mobile – MS is royalty bearing, not consortium free.  Also Symbian (Nokia) is 3x the size of iPhone (others remarking MS is not going to sit back and be relegated to nothing in the marketplace).  Android has already had 3 iterations, one more before end of year.  Working with developers to make apps exceptional.  UI can’t be too varied or too schlocky, or it won’t compare.  Working on billing integration with T-Mobile.  Direct carrier billing.  There is room for all to prosper.
Android SDK:   http://developer.android.com/index.html

http://www.stumbleupon.com/s/#1TsBV6/www.telecomcircle.com/2009/05/the-economics-of-mobile-application-stores//

V.  Apps

Tom Conrad, Pandora
Question is whether carriers will be content to be pipes, or try to be a media company and control user experience.  3 years ago was ondeck with Sprint in the pre-iphone days.  Sprint told Pandora that 1 hour of Pandora costs $.40 for the network (proration of Sprint’s $6B investment in spectrum).  If there was ever an issue of bandwidth consumption being excessive could just bury app in deck.  Control point is our own bad, developers still work with Apple despite the gatekeeping because the audience and monetization is there.  25% of audience from mobile, now moving to STB, TV, stereo, even kitchen devices just like Netflix, CinemaNOW, its getting very complex.  We’re a small company and need to prioritize our resources right, small company can’t do it all, need to move fast on the right priorities.

Andrew Lacy, Tapulous
15mm uniques, 500,000 games played, the Guitar Hero of iPhone is on 1/3 of all iPhones. Tapulous has 10mm free users, had they charged it would have only had .5MM. Market leader in a space that reinvents itself every three months.  On freemium, users upselling to $.99 game where can buy extra songs, in app commerce only allowed on paid apps not free apps.  (With Apple, free means always free, paid means ok to pay more) Coldplay, 9 Inch Nails, Lady Gaga, Dave Matthews $4.99 in app store, play along to the music, can invite friends to play along.  Much easier to sell inside app than a new app.  So there is FREE, $.99 lowest price point for microtransactions, and upsell, navigate the right price point.  Lose 95% of audience going from free to paid, but no drop off between $.99-$4.99.  Only on one platform, iPhone, doesn’t have the virality of FB where you can easily invite friends and acquire customers for nothing, aggresively cross promote free to paid.  On launch day, the entire company is in on a Google doc  with 100 things to do to get the title in the Top 20 for that upboost to make it self-sustaining.  Work with PR.  Second tier involves hundreds of blogs who collectively have a very loud voice.  Like a movie launch.  Twitter RT when launch a new app is major, Lady Gaga was twending at 1mm RT in a 2 hr window, Twitter works very fast, very effective.  Not currently encouraging existing user base to post positive reviews but are sensitive to hate mail.  Bigger audience on iPod Touch than iPhone.  iPhone and iPod Touch markets are different.  iPod Touch don’t buy anything so extract ad value from free.  Publishers are dead, what do you need them for when you can go direct to difficult markets like Iran, Cuba, now the app store is the intermediary.  iPhone velocity is due to desktop app + billing relationship.

Nikao Yang, Jirbo/EpicTilt
50 apps, 55mm impressions/month, Just came out with clone of Tapulous’ Tap Tap called Tap Star.  Doing very well.  Jirbo is the family friendly division, Epic Tilt is more pop culture/mature.  LA based.  15apps, 6mm downloads.  Free grabs mindshare, goal is to go forward with as many free apps, freemiums to microtransactions.  Tap Star integrates microtransactions where you can download 23 tracks for $4.99.  The three Cs and four Ps of marketing still apply.  Work with ad mob to promote new apps and sell space in-app to sell to others, cross-promotion strategy, acquisition + retention = success, need a strong relationship with Apple to get featured, use global leader board where users upload scores and have UGC galleries for the social viral effect. Jirbo does do blog outreach.  When www.boygeniusreport.com tweeted he loved Tap Star, downloads spiked.  Recent WSJ article:  best practices not engaging in iTunes SEO, that said SEO is critical on iTunes landing page.  Comb through comments for constructive feedback, make changes when there is substantial chatter for added functionality.  On pricing dynamics:  believe price points will all go to zero – FREE with monetization via advertising.  iTunes gives a # of promo codes to give to seed prelaunch, give to reviewers.  But nothing gets posted before it goes live, at Apple live is live.

Anil Dharni, Storm8
Company has 10 employees, 4 from FB, he’s from hi5.  SF based.  In 4 months released 7 RPG titles on iPhone, 10mm downloads.  Zombies. Rockstars. World War.  Every title has hit the top ten on free, 30% of users have downloaded all 7 games, RPG games by nature are social, need a mob or clan to level up, users go to forums to recruit clan members, the social elements are fundamental to game mechanics, keeps in good ranking in app store.  Shelf space theory, where you are in the ranking begets more downloads – organic effect of staying in the top 25.  On freemium, let users get immersed use microtransactions to level up, use time or energy constraints, they did 1mm downloads in 10 days, some breeze through the free 85-90 levels in 2-3 days, power levelers will pay to upgrade, points give power in game.  Storm8 is profitable, haven’t had the need to raise capital yet.  Building virtual currency, microtransactions like hi5 coins.  Unfortunately iTunes isn’t a wallet system and asks users everytime “are you sure you want to buy this”, better to sell packages of $5, $10 and let them spend freely.  Launched 4 months ago with no press outreach.  Clone iMobsters reached Top 10.  No press, no PR, no marketing, barely AdMob, content can make it happen organically.  Only featured apps are allowed to skin landing page.  Look at reviews seriously but they don’t play into rankings.  Look at MoronTest, the #1 free app with 2* ratings.  Reviews are great to allow community to band together.  Racing Live, a text-based RPG get really good/bad reviews.  Bad reviews were from those that thought it was going to be a fast racing app.  Value of umbrella brand, fan sites being built.  RPG players tend to stick with umbrella brand be it Storm8, Zynga, PlayMesh or SGN.

Shervin Pishevar, SGN
#1 spot on iTunes store is 30,000-40,000 downloads a day.  Frictionless payments are key for social gaming.

Steve Boom, MIGG33
Venture backed by Accel.  Offer fremium with premium element, monetizing exclusively with virtual goods economy.  Free to paid is 30-40:1.  Some will pay to control color of text.  There is money to be had in social expression, status.  VG RPUs (revenue per user) is very attractive.  Nokia commands 70% of market abraod, particularly in SE Asia, world’s largest mobile first community.  Low RPUs get neglected.  India has 10mm subscribers/month, not a big mobile ad market, eventhough it is 1/6 that of the UK’s entire population of 60mm.

Steve Polsky, Flixster
On iPhone, Palm, Android, of course FB and web.  Customers go to website for entertainment, to mobile app for utility, to decide what movie to see (ad driven media property).  40% iphone uses also use Flixster.com or FB, try to leverage installed base to iphone with social features to recommend to or invite friends, bring the legacy community to mobile.  Haven’t quantified press impact but do spike marketing in big short bursts, more self-reinforcing than ongoing marketing.  Use FB Connect to invite friends.

Scott Jampol, OpenTable
Sat 500,000 through iPhone app since October, only 33% web users know about app.  Goal is to put butts in seats, get paid for each.  Use app as a transaction engine, extension of web buisness. It’s incremental business, will use mobile closer to the time of reservation, phone (voice) is biggest competitor, iphone is bigger than WAP audience.  We are in a bubble, many users still don’t know what an app is but most have iTunes on their PC, promote app on confirmation page.  Rankings and download #s are meaningless, usage in very important, its transactional so its about LTV lifetime value.  Want users to be aware of products when they need to use it.  Use comments as market research, aggregate results, respond with changes, audience wanted to be able to search by name, added in that feature as a response.    Strive to be platform agnostic.  Loyalty program helps.

AJ Rhodes, Disney
Disney mobile is not repurposed content, it is mobile-specific content, and is seen as a revenue opportunity.  Mobile is becoming an entertainment device.  There is a rebranding of the phone as a media device, watch video, play games, mom to play games with kids, iPhone overindexes on consumption, more kids have iPod Touch.  There has been a 30% increase month over month of video viewing at Disney mobile.  There is an audience that wants text alerts.  Pushing Radio Disney Live event tour location info to phones.  Disney’s philosophy is to be in the forefront of technology from Iger down.  Creative integrated technology, king of synergy, first place to hear Hannah Montana music is on mobile.  For Disney , traffic is built off deck with major media integration, going right to the consumer, mom wants more utility on the site, rich media experience is driving traffic, video is huge for mobile.  Attach sweepstakes to mobile alerts 1-2x week, video and games drives traffic and engagement, flipping the switch on entertainment content.  Create awareness that Disney is available on handset, invite in and always cognizant of children, provide a safe entertaining experience with high level verifiable consent, tremendous level of customer care as with all of the Disney properties.  Screen size is not an issue for branding campaigns on mobile, especially when targeting those who grew up playing Pokemon on a tiny screen.  People don’t want to read text, want visuals, the simpler the better, 1-2 easy fresh call to actions, repetitively works.  Brands tend to want it more complex.  

Sam Altman, Loopt
Some carriers free, some pay.  Brands don’t buy ads on feature phones, data bundling, one time license paid on feature phones.  Advertisers will pay much morefor iPhone vs. noniPhone.  Apple can drive huge traffic to featured apps.  In app payment for virtual goods will be huge.   
 SMS is $100B+ market bigger than search, don’t need to charge a lot to make $ with recurring business and now you can do subscription as an in-app charge, monthly recurring fee.  Apps now trending to $.99 the lowest Apple allows you to charge to have in-app transactions.

*Digital Chocolate, 9 games have charted in Top 10 for unit volume on paid games:  http://www.pocketgamer.co.uk/frontend/r/iMobile/Digital+Chocolate+news/m_news.asp?c=13959 

VI.  Advertising

Jason Spero, AdMob
Acquire users by charging a license fee, advertising, freemium, driving off mobile result like lead gen, pay for service, access point – different places to engage the user.  Check out iPhone app review sites: www.148apps.com, www.appcraver.com, a good review here goes along way.  Ad Mob has detect and sniff capiabilities meaning the ad network can see if a user already has an app, and if so serve up an ad for a different app.  Google AdWords too expensive at $.80 per click, expensive to acquire via mobile search, AdMob is more reasonable and more qualified a click.  On pricing dynamics:  install rate doesn’t change much from $.99-$4.99, but there is only a 10% retention from free to paid.

Alex Moukas, Velti
Mobile marketing is what happens after the click, couponing can drive instore traffic.  Til recently, mobile phone thought of utility.  Velti is 50% Europe, 30% Asia (CPA-don’t make $ til clients do), 20% US.  Brands run campaigns in US because its sexy, but also moving toward performance based campaigns.  USSR targeting postpaid data subscriptions, promotional giveaways targeted at 16-24y free 100min prepaid cards in exchange for participating in mobile marketing campaigns.  J&J spends billions on marketing, moms can text in due date and receive coupons from birth.  Brand spends for engagement on mobile piggybacks traditional media.  Twitter mobile marketing powerful search can target certain conversations.

David Smith, Mediasmith
Privacy laws coming to the web in the next 90 days regarding targeting, should have had an opt-in to allow serving 3rd party cookies.  Hopefully mobile can avoid privacy penalties but being more upfront with opt ins to monetize consumer base.  Cars and Coke have spent all they could on tv have money for online buys.  People who do billboard advertising have $ for online.  Great integrated campaign is NetApp, demandgen, web search, print, mobile mix.  iPhone is only 5% of market  (but 37% of data traffic).  Innovators looking to do the next big thing should focus on turnkey solutions for agencies to port creatives across platforms.  Need better tools to support fragmented infrastructure.  Clients are experimenting.  (Until consolidation) it will be hard to amass a significant audience, critical mass.  Mobile is small in the mix, not going to get much brand love eventhough phone is a trackabke medium, a metrics device.  70% of google search is navigation.  Twitter is more interactive than banners.  Dell uses Twitter instead of eBay to blowout inventory, see Twitter ultimately taking a commission.

VII.  Analytics/Research

Mark Donovan, comScore
Apple ecosystem humming along but not easy to get a break out hit, its a hit driven business.  Verizon appstore – thought that’s what brew was.  Larger audience web browsing over apps (mobile shortcuts).  40mm web users brwosing for news, 12mm using apps.  Outside of US, Symbian most prevalent OS.  Largest category of mobile growth are users that spend $100+/month.  In-app advertising works.  Tiny head for long tail, what apps most downloaded, Tapulous, Pandora, Facebook.  Greystripe in-app advertising drives $ for free apps.  Per mobclicks the vast number of apps are under $2.99.  Slash price get volume.  Not going to get a big fat check from ad networks, CPMs are way down.  Top newspaper gets 27mm, less than the eyeballs on mobile.  Ovi solves carrier billing issue.

VIII.  VC$

Matt Murphy, KPCB iFund
Platform fragmentation keeps me up at night.  1.5B downloads, apps are still snackable, not immersive yet.  Used to be people might buy 1-2 over the lifetime, now 40 per iPhone with a 30% retention rate, apps with high personal utility like Mint.com, UrbanSpoon, and Shazam seems to last the longest.  Apps that retain users are most appealing to VCs.  App store 70,000 apps deployed.  Ad ecosystem is interesting, acclerating due to iPhone 3.0.  Future of mobile apps is browser-based not device-based.  Subscriber acquisition – infection point, monetization next biggest catalyst.  90% of apps are lifestyle or extension of existing companies.  VCs are looking for the next Amazon of mobile.  FB mobile drives 50% more page views than web users.  Media companies need to be on 3 screens.   

Rich Wong, Accel Partners
Monetization models:  ad supported, paid subscription or one-time payments for premium services, traffic sharing/bundling, traffic generation, virtual goods.   You can still sell navigation apps for $4.99, e.g. networks in motion.  J2.com efax charges $6/month.  $1.2B market.  There is money in subscription, it adds up.  Anything with 100-200,000 users, recurring model.

PitchFest
Many interesting companies pitching including Touchnote, a printed postcard application, BustedLoop, free iPhone app store data, Boku servicing the $8B virtual goods market with mobile payments, and Zos, a geolocator solution.  SMS voting was provided by Mozes.  The popular vote went to Touchnote.  The VC pick was AppStoreHQ, Amazon-like discovery tool to sift through the volume and velocity of app stores.  But the best opening line went to Zos with “9 people are born every second, 6 die every second, 40 cell phones are sold every second, 17 are Nokia.”  Had lunch with the Z guys and they were equally enjoyable offstage.   They have many exciting enterprise accounts but I was most interested in hearing about their apps that enable parents to know the precise location of their child wherever s/he is with the phone.

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