The app market 2012


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Normally a three hour seminar which seeks to illustrate the main elements in the burgeoining app market - in Plain English - with a view to explaining how someone might begin to plan an app either as a business or a marketing tool

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  • Yes Its worth billions already and its growing No But it can transform your industry Maybe It depends on what you want to achieve… A better questions is who pays!
  • The app market 2012

    1. 1. Could you market a globally successful app? Kieran Hanrahan October 2012
    2. 2. Part 1: Introduction• Welcome• What is an App?• Why build an App?• What are the most popular Types of App?• How does this affect me?• Ideation• Handsets and Operating Systems• Q&A
    3. 3. What is an App?• App is short for application• It’s a clever piece of software that does something useful or valuable• You download it onto your smart phone – Or potentially onto your computer, tablet, laptop...
    4. 4. Why?• Apps have a global market – Potential for massive growth• Low entry level barriers to this market – Cheap to prototype – Cheap to develop – Cheap to deliver – Cheap to promote… well sometimes!
    5. 5. Different Types• Calculation• Entertainment• Games• News• Productivity• Search• Social Networking• Sports• Travel• Weather• Education
    6. 6. Who do Apps do?• They solve a problem…• Games• Search• Productivity• Sports• Entertainment
    7. 7. Do Apps Make Money?• Most don’t…• Some do… a bit• Every so often, one goes viral andthe developer becomes a millionaire
    8. 8. Yes, it IS worth billions already and its growing…Yes, it will transform most industries, especially if yousell consumer goods or services to the publicDo you need an app? Perhaps. It depends on what you want to achieve… A better question for some people might be… whose app should I be using?
    9. 9. Where do I find an idea for an App?• Existing Business• New Business• Innovation emerges in – Product or service – Process – Business model• Apps can instantly change EVERYTHING! EVERYTHING
    10. 10. The Market• Global market – Segmented by • Language • Culture • Marketing Opportunities• Smart phones : key factors – Operating systems – Market penetration – Third party control of market places
    11. 11. Operating Systems
    12. 12. Why are OS so important• In order to access the whole market, you need to build apps which work under each of the operating systems – although it is enough to build just one and see how it goes before building it in the others…• Android, IOS and Microsoft dominate.• RIM is in trouble, Symbian is now defunct.
    13. 13. Part 2: The Market• Handset Sales Statistics – Smart phone market penetration – An introduction to Virality • Virality Coefficient • Metcalfe’s Law – Download statistics and analysis• The Impact of Language & Culture
    14. 14. Mobile Phones Q4 2011
    15. 15. Broadband Q4 2011
    16. 16. Broadband Access• In 2012, smart phones are FIVE TIMES more popular as a means for accessing the internet than typical broadband i.e. fixed connections.
    17. 17. • > 70% of all phones sold in 2012 will be smart phones• 100% of all phones sold in 2013 will be smart phones• People change phones in less than two years which means smart phones will be the only platform by 2014.
    18. 18. App Downloads 2011 Downloads (Millions) Android iPhone iPad WP7 TOTAL EnglishUSA 673.99 378.09 79.46 12.07 1143.61Great Britain 161.05 70.74 16.5 3.21 251.50Australia 31.72 32.69 6.94 0.72 72.07Canada 16.48 883.24 39.99 7.78 0.75 65.00 KoreanKorea 204.03 53.08 4.69 0.15 JapaneseJapan 100.97 107.25 7.86 0.19
    19. 19. App Downloads 2011 Downloads (millions) Android iPhone iPad WP7Germany German 98.70 46.15 11.33 2.43Russia Russian 90.92 29.11 13.83 3.21Spain Spanish 67.29 25.28 6.25 1.65Taiwan 64.43France French 56.85 43.79 9.67 1.55Brazil Portuguese 50.88 19.88 3.98 0.89Portugal 4.86 55.74 3.63 1.17 0.23Italy Italian 53.42 39.73 8.39 2.31China Chinese 25.28 246.37 74.63 3.93Poland Polish 20.96 4.02 1.34 0.81
    20. 20. App Downloads 20121 billion per month 1 billion per month 53 per user 83 per user
    21. 21. Channels to Market• Direct• Marketplaces – Apple – Android – Microsoft – Other• Embedded on handsets (pre-sold)
    22. 22. An Introduction to Virality• Metcalfe’s Law• Virality – different types – Collaboration – Utility – Signature – Social Network – Other
    23. 23. The Importance of Virality• Virality reduces your marketing costs.• Virality encourages users to use your app and encourage others to use your app…• Virality is fundamental to the design of the app and the business model. You can not have enough Virality in any business!
    24. 24. Virality – The Hockey Stick Cumulative users over time 18,000,000 16,000,000 14,000,000 12,000,000Total users 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Time period
    25. 25. Virality – The Hockey Stick• Regardless of the number of initial users, regardless of the time it takes for them to “infect” others, the path your user uptake or app download will take will always be in the shape of a hockey stick.• Complex maths formulae can now predict this and are crucial to any business plan.
    26. 26. Virality - Case Study• Mathematical formula• Key factors – Cycle time – Invitations – Conversion Rate – Retention
    27. 27. Virality Factors• Cycle Time • How long it take for someone to download, use, like and start to recommend the app to others• Invitations • How many invitations they deliver to friends and members of their network (address book)• Conversion Rate • How many of the invitations lead to downloads• Retention • How many of the people keep and use the app.
    28. 28. Viral Co-efficient• This mathematical formula gives you a viral co-efficient. A simple number.• If the number is > 1 you’re in business!• If the number is < 1, you will go bust.• It really is that simple…
    29. 29. Demand is Infinite?• As you become more successful, demand is not infinite and the number of people who can be invited and converted to users diminishes, but in the more accurate models this is accounted for using a term called saturation. This problem is one of the underlying reasons why Facebook’s share price was under pressure after its launch.• If you start running out of potential customers – consider that a definite sign of success!
    30. 30. Language & Culture• The boundary on the app market is linguistic.• Not just in the build, but also in the promotional and marketing effort and after sales support. English 500 million Mandarin 1,100 million Spanish 400 million Hindi-Urdu 490 million Russian 277 million Bengali 215 million Portuguese 193 million Punjabi 109 million Japanese 123 million Turkish 50 million French 120 million German 90 million Korean 70 million
    31. 31. Part 3: Marketing1. Review of the Four Factors 1. Cycle Time 2. Invitations 3. Conversion Rates 4. Retention2. Customer Relationship Marketing
    32. 32. Cycle Time• We can describe cycle time as how long it take for someone to download, use, like and start to recommend the app to others• Make this as SHORT as possible.• How?• Look at the Freemium business model
    33. 33. The Freemium Model• Pro • Con• Shortens cycle time • Slow income growth• Encourages users to • Too tightly restricted trial and use the app service requires users• Builds customer base to cross the “paywall”• Optimises potential • Cost of free services for “premium” sales exceeds premiums
    34. 34. Variations on Freemium• Free during beta i.e. initial test period – Encourages faster cycle time and more invitations – Offer credits afterwards and/or via successful invitations• Free trial period, before/after payment – The more valuable the app becomes to the user over time, the longer the trial should be, which may mean reducing the trial period based on Metcalfe’s Law or even removing it altogether.• If it’s a free service, the users are the product – How do you monetize them? That’s a whole other seminar!• Some or all of the above, on a phased basis…
    35. 35. Service Restrictions• Feature – a lighter or free version of software, such as Skype• Time limited – only usable free for thirty days, such as MS Office trial version• Capacity limited – can only be used to read one article, e.g. Harvard Business Review• Seat or licence limited – only usable on one computer, not across a network – Only usable free by individuals, not by companies or organisations• Customer class limited – only usable by educational users• Effort Limited – all or most features are available for free, but require extended unlocking which can be shortcut for a fee, via software or “key”.
    36. 36. Trust“So you’ve built an app.. And you want me to download it to my expensive smart phone…hmm… ok… now just who the hell are you?”
    37. 37. Ways to Create Trust 11. Trust Signals 1. Certification, Testimonials, Verifications, etc.2. Transactional Assurances 1. Forms of payment and delivery 2. Data security and privacy 3. Policies and guarantees 4. Secure payment portals /markets3. Appearance 1. Professional design 2. Sparseness and neatness 3. Organisation, clarity, intuitive user interface
    38. 38. Ways to Create Trust 24. Illustrate your Authority 1. Reviews and awards 2. Marquee clients 3. Media mentions 4. Trade associations & memberships4. Illustrate who you are… 1. About Us 2. Blog 3. Social media links4. Forego third party advertising revenue
    39. 39. Ways to Create Trust 37. Content & Product information 1. Give them as much as you can… 2. Avoid superlatives and spin, be HONEST! 3. Speak to the individual, don’t broadcast 4. Track users and roll out language versions7. Engage and Support the Audience 1. Offer every form of support possible 2. Maintain contact with your customer base 3. Go the extra mile or kilometre to solve problems
    40. 40. Reducing Cycle Time• We can describe cycle time as how long it take for someone to download, use, like and start to recommend the app to others• Download speed• Intuitive user focused design• No bugs!
    41. 41. Invitations• Invitation is many invitations users deliver to friends and people in their network(s)• What role does reciprocity play?• Do you use incentives? What type?• Do you restrict them to create scarcity?• How valuable is your app?• Do you offer one-to-one or one-to-many?
    42. 42. Roger’s Bell Curve
    43. 43. Invitations• Link your invitation strategy to promotion and marketing, including all possible PR and similar opportunities, on and off-line.• Who is your target audience?• How can you communicate with them?• Will peer-to-peer invitations work?• How do you avoid spam-like issues?
    44. 44. Conversion Rate• What do the new users think and feel? • Consider using split tests for different offers • Does this data change your business strategy? • Would variations on freemium be a better option?• Use third party paying customer reviews • What feedback are you getting on your app?• Compare converted versus non-users • Can you track them across your website? • How does their behaviour differ and what does this tell you?
    45. 45. Retention• Does the app serve a useful long term purpose or will it be just a fad?• Currently it is estimated that 26% of all downloaded apps are discarded. Yes, the background image is of a net!
    46. 46. Retention• Situational Intelligence • • basic version is free• Utility• Upgrades• Additional Functionality• Customer Relationship Marketing
    47. 47. CRM• Customer Relationship Marketing• Online – Email – SMS – VMS – IM• Multiple Languages• Multiple Time Zones
    48. 48. Part 4: Funding Your App• Why A Funding Plan & Stream is Key – Proof of Concept – Proof of Model – Growth: Cost v Revenue – Source of Funds / Standard “Plays”• Cost Structures• Revenue Streams & Monetization
    49. 49. Market Entry• Whilst building an app is relatively cheap and getting up on the main markets is a relatively simple process, you will then be competing for attention with one gazillion other apps. More than 90% of your funds will inevitably be spent on promotion, in all its many forms, both online and traditional. Getting in is easy. Getting noticed isn’t.
    50. 50. Proof of Concept• We all start with an idea.• The first task is to prove it can be done but its not a case of “build it and they will come”.• What is needed next is a proof of concept relating NOT to the app but to the business model.
    51. 51. Proof of Model• Aside from the mechanics of just how viral your app is and how rapidly you can grow the user base, the key is revenue streams.• How many streams have you got?• How much will they deliver?• How has performance mapped against your initial targets and assumptions?
    52. 52. Proof of Model• How are you projecting growth?• When do you reach breakeven? • Bear in mind that these can be displayed in terms of user numbers rather than a specific timeline.• When do you start to make a profit?• What is the cost of acquisition per user?• What is the revenue per user?
    53. 53. Avoiding Bootstrapping• Bootstrapping: “a self-sustaining process that proceeds without external help.”• App developers often fall into the trap of seeking to bootstrap.• It fails because you can not grow fast enough…
    54. 54. Avoid Bootstrapping• Lack of sufficient funds is the most critical problem faced by early stage businesses…• Have a clear strategy for the app’s release and promotion• Anticipate third party funding – start on the business plan now.
    55. 55. Revenue Streams• Purchase • Higher risk of piracy and copying of your app • Lower user growth rate• Donation: • It builds the love but… love don’t buy you money!• Freemium • The basic Apps is free but people pay for the extras.• Advertising Supported • Dominated by gaming / entertainment apps • eCPM, CTR and Global Fill Rate (GFR) • Generalised or Specialist Niche promotion
    56. 56. Funding Pathways• 1st round – Personal & Sweat Equity – Family / Friends / Co-Developers• 2nd round – Business Angel – R&TD or similar Grant Aid• 3rd round – Venture Capital / Acquisition
    57. 57. And finally…180 million reasons why you might look at developing just one little app…
    58. 58. • OMGPOP built an App called Draw Something.• It’s adoption was simply spectacular with 1 million downloads in the first 9 days from launch. This peaked at 35 million within a matter of months and prompted Zynga to pay USD 180 million for the company, not much more than two years after a few guys thought of the idea…
    59. 59. The End• Solve a problem and you have a business.• Solve a common problem and you have a potentially far bigger business.• Only five billion phones out there…• Imagine if everyone wanted your app!
    60. 60. • Kieran Hanrahan•• @TKNLGY• + 353 (0)87 2212 369 GMT