The mobile moneymaker goes into price discrimination via in-app purchases and virtual goods. A more diverse portfolio will naturally increase overall profits, however, bundling multiple virtual goods will relatively be more profitable when goods are more alike.

1. the mobile moneymaker.

3. A long, long time ago
2003

4. 2 new stores launched
2004

5. Another Appstore launched
2005

6. Slowly growing
2006

7. Boring
2007

8. Apple launched Apple App Store
2008

9. All major players follow the lead
2009

10. Winners already appear
2010

11. Apps
Software designed
specifically for mobile
handsets, integrated with
the web to deliver real‐
time content aimed at
the user’s location.

12. What
configuration of
product characteristics
and pricing
will increase profitability
of mobile App developers?

13. The Mobile Moneymaker?
Free with advertisement
Paid
Subscription
Virtual goods

14. Need for Speed, Farmville, Mafia
Portfolio Battlefield, Fifa wars, Poker
Turnover 5Bn 250M
Profit 2Bn Undisclosed
Valuation 5Bn 5Bn
Why? Potential

15. Virtual goods example
Virtual good
Everything consumers can
purchase in the app that
change something within
the app.

16. Price discrimination
Sales of identical goods or services
are transacted at different prices.

17. Discrimination at three levels
1. Perfect price
discrimination Total welfare
Price
2. Quantity / Quality
discrimination
1
3. Multimarket 2 Demand
discrimination

18. Bundling
Student 70 20 10 100
eBuddy 25 50 25 100
Quant 40 0 60 100
Total 80 50 60 300
The price elasticity decreases

19. Versioning
Student 40 60 60 60
eBuddy 40 60 80 80
Quant 40 40 40 40
Total 120 120 80 180
Segmentation according to WTP

20. Versioning,
virtual goods
and bundling
are conceptually
the same
combining
or separating
multiple functionalities

21. One Good
100,000
p
v Black Box
y
Input Simulation Output

22. Multiple Goods
100,000
v1
p
vi Black Box
vk
y

23. Bundle Multiple Goods
100,000
v1
p
vi vb Black Box
vk
y
Bundling increases overall revenue

24. Bundle Multiple Correlated Goods
100,000
v1
p
vi vb Black Box
vk
y
11 ⋯ 1
⋮ ⋱ ⋮
1 ⋯
Correlation lowers overall revenue

25. More skewed valuation distribution
100,000
v1
p
vi vb Black Box
vk
y
11 ⋯ 1
⋮ ⋱ ⋮
1 ⋯
Skewness lowers overall revenue

26. Bundling
correlated goods is
always favorable
over a’‐la‐carte

27. The more goods are added to
the bundle the more favorable
bundling becomes

29. The more correlated goods are
the more favorable bundling
becomes

31. Measuring Correlation
Functional Hedonic Social
Positively influenced by
Performance Visual Cultural
Appearance references
Functionality Customizability Branding
Rarity

32. Conceptual validation
Pre‐/pilottest
PLS

33. Survey started by
1462 users resulting
in 119 participants
(very frequent users)

34. Significantly influenced by
Cultural Customiza Visual ap‐ Function‐ Perfor‐
Rarity Branding
references bility earance ality mance
0.14T 0.22* 0.39** 0.31** 0.28* 0.17T 0.50*** 0.32***
Social Hedonic Functional
T 0.1
* 0.05
** 0.01
*** 0.001

35. Implications
Adopt virtual goods
strategy
Search for uncorrelated
virtual goods
Bundle correlated
virtual goods

36. Contributions
Addition of correlation
to bundlings’ literature
Validation of attributes
of virtual good
Description of
mobile ecosystem

37. Limitations
Costs
Only one bundle
Piracy eBuddy
population
Unreliable

38. The Mobile Moneymaker!