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New Media Survey White Paper 2012

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A presentation I put together surveying the new media landscape, last updated 2012.

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New Media Survey White Paper 2012

  1. 1. NEwMedia8/22/2012Shay merritte
  2. 2. DirectoryExecutive summaryBusiness Industry and OutlookVC InvestmentROI on average app devleopmentmarket sizesbeyond appshow many downloads?Average app pricehow many appsmonetization schemesDevices Forecastareas for growthmajor playersexample investmentearning potentialwho has the moneyCritical Success NeedsGrowth through acquisitionLaunch strategies
  3. 3. Executive SummaryThe new media landscape is very competitive and highly fragmented.There are predicted to be a billion smartphones, and 400 milliontablets on the market in 2016 with 650,00 apps in the app store thatis growing at 15,000 apps a month. Consumers are hard to reach andfor the most part frugal, with only 30% regularly paying for apps, andthen the average price paid for an app has dropped from about $1.99to $1.50.But this isn’t all bad news, there are opportunities for growth,especially for American Greetings Properties. The tablet app marketis ripe for growth as the number of devices grows and consumersare willing to pay premium prices for premium content. Furthermorethere is a prediction that the app economy may subside in favor ofthe creation of cheaper and more universal web applications, as wellas the creation of content platforms that can provide an experience toconsumers across multiple platforms.
  4. 4. Business Industry and OutlookHigh Threat ofNew Competition•Low Barriers To EntryNo Switching or Sunk CostsLow Capital RequirementsNo Customer LoyaltyHigh CompetitiveRivalry withinthe industryHigh Threat ofSubstitutesLow Price DifferentialNo Buyer Switching CostsLimited Product DifferentiationHigh Number of SubstitutesHigh Power ofBuyersHigh Firm ConcentrationHigh Available InformationHigh Price SensitivityLow UniquenessHigh Power ofSuppliersHigh Supplier Switching CostsLow Differentiation of InputsLimited, Strong Distribution ChannelsLow Supplier Concentrationhttp://www.techjournal.org/tag/who-buys-mobile-apps/http://www.everythingicafe.com/distimo-app-store-revenue-and-sales-are-growing-thanks-to-in-app-purchases/2012/07/27/
  5. 5. VC investment in appsVC financing in 1st6 months of 2012 for mobile$3,900,000,000Different mobile start ups invested in479$3,500,000Average vc investment amount$960,000,000Investment in media & applicationshttp://techcrunch.com/2012/08/19/the-consumer-is-king-record-4b-raised-in-mobile-vc-in-the-first-half-of-2012-more-than-25-in-consumer-apps/
  6. 6. ROI for Average app developerhttp://www.bluecloudsolutions.com/blog/cost-develop-app/http://mashable.com/2011/02/24/mobile-app-dev-cost/cost to develop a very basic aPp ($5,000)Average app revenue + $8,700)Average return on investment ($3,700)asd40000$3,700
  7. 7. http://www.factbrowser.com/tags/tablets/?and=market_structure,forecasthttp://econsultancy.com/us/blog/9638-the-rise-of-the-billion-dollar-mobile-gaming-market-infographicHow big is the market$22,500,000,000mobile Apps$9,000,000,000Tablet Apps$15,000,000,000Games$5,420,000,000Kindle Sales$1,800,000,000Nook Sales
  8. 8. Beyond appsThe future of mobile and digital is an increase in 360oplatforms. Compa-nies that provide an experience, whether utilities, entertainment or gamesthat can provide value and engage anywhere digitally on web applications,In apps, on the tablet, in video games and on smart TVs are the companiesthat will win in the digital future. Furthermore in the future, new technolo-gies like HTML will render the app ecosystem superfluous as companiescan go directly to consumers.INDIVIDUAL APPS Platforms & Ecosystemshttp://www.theageoftheplatform.com/observations/what-comes-after-apps/
  9. 9. How Many Downloadshttp://techcrunch.com/2011/10/04/more-than-1-billion-ios-apps-are-downloaded-per-month/1,250,000,0001,000,000,000Monthly apple app downloadsMonthly android app downloads
  10. 10. Average Price For Appshttp://tech.fortune.cnn.com/2011/05/24/apples-itunes-store-500000-ios-apps-and-counting/http://www.tecca.com/news/2011/04/28/android-free-apps/Free$.99$1.99$2.99-$4.99$5.99+The average price of appshas dropped from $2 in2009 to $1.50 in 2011
  11. 11. How many apps are there?http://www.engadget.com/2012/06/27/google-play-hits-600000-apps/?icid=eng_latest_arthttp://www.mobilestatistics.com/mobile-statistics/650,000600,000In App StoreIN Android Store
  12. 12. Best way to monetizeFREEFree apps are popular because they provide the consumer with a low barrier of entry and can bemonetized via ads, although the revenue per ad has been dropping over time.PREMIUMSimply an app that one has to pay to download, can also contain in-app purchases.FREEMIUMFreemium apps are free apps with some functionality with additional features or a premium experienceunlocked through in-app purchases.SUBSCRIPTIONSubscription apps are free or low cost apps that derive a lot of their revenue through recurring monthlypayments that unlock content, generally used by companies that create and distribute media.http://techcrunch.com/2012/05/07/google-play-about-to-pass-15-billion-downloads-pssht-it-did-that-weeks-ago/http://www.readwriteweb.com/mobile/2012/04/mobile-game-devolpers-reconcil.phpFreemium titles areresponsible for68% of revenue
  13. 13. Devices Forecast2012 2016SmartPhoneTablet400M52% Android48% Apple1B70% Android30% Apple491M70% Android30% Apple106M43% Android57% Applehttp://www.businessinsider.com/bii-report-how-annual-tablet-sales-will-explode-to-400-million-by-2016-2012-8http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a#subscribers
  14. 14. Areas for growthE-BooksE-Books, especially for the tablet are predicted to be a growing business, especially those that includeinnovative interactivity, have strong brands, and have marketing to spend. Consumers are willing to pay$9.99 to $15.99 for a quality interactive e-book and there is still room for players to establish brands. Andbecome best-sellers with less work.TabletsSimilar to e-books, tablets are growing product area that is predicted to grow by 400% in the next fouryears. Currently the tablet market is underserved by quality apps that are made just for the tablet andnot just smartphone imports. Furthermore, tablets are seen as a premium platform, where consumers arewilling to spend more on tablet specific apps.Web Apps/PlatformsA near future case is developing products that live on the web. These are cheaper to produce since theyare device agnostic and don’t need to live within one of the 2 major app ecosystems, few develop for thismarket as the HTML5 protocol hasn’t been 100% adopted by all major browsers, but this should changewithin the next 2 years. Related to this is that the brands that will succeed in next few years will be thosethat have developed platforms that deliver experiences to consumers across diverse devices, includingtablets, smartphones, smart televisions, in location based services, etc, and could involve physical objectslike gaming pieces.http://www.theageoftheplatform.com/observations/what-comes-after-apps/http://www.businessinsider.com/bii-report-how-annual-tablet-sales-will-explode-to-400-million-by-2016-2012-8
  15. 15. who are the major players?ZYNGA: $1.16BZynga generated $1.16 billion in 2011 from the more than 30 games it has made or acquired. It has 306million monthly active users and 72 million daily active users. It was founded in 2007 and currently has3000 employeesRovio: $100MRovio generated $100 million in 2011 from a handful of apps. It’s flagship Angry Birds app has beendownloaded over a billion times. It was founded in 2003 and currently has 100 employeesCapcom: $79.2MCapcom Mobile generated $79.2 million in 2011 from several dozen apps, and was one of the firstcompanies to sell in game premiums. It currently has more than a thousand employees.http://investor.zynga.com/releasedetail.cfm?ReleaseID=648577http://www.incomediary.com/20-top-app-developers-of-2011
  16. 16. Investment example$50,000Design$60,000Coding$15,000Testing$7,000Infrastructure$30,000Marketinghttp://www.bluecloudsolutions.com/blog/cost-develop-app/#devcostshttp://www.padgadget.com/2010/10/17/the-cost-of-building-an-ipad-app/An anonymous app developer gave the followingbreakdown of what they spent to build a game that wasable to make it to the top 20 paid app downloads.
  17. 17. What is our earning potential(P*N*.7)- (1.3*N)+ (N*.25*5)-(P*.25*N)P= App PriceN= Number oF Apps Sold$.99$1.99$3.99$1.99100,00050,00050,000100,000$39,550$42,275$52,365$84,550P N EarningsSALES DevelopmentCostMARKETINGCOSTPremiumsI put together this back of the napkin equation to give a quickconservative calculation of what a freemium app’s earns could betaking into the average number of users who buy premiums, thedevelopment costs, the percent the app stores take out and theaverage amount it takes to purchasehttp://techcrunch.com/2011/09/16/who-spends-more-in-freemium-games-battle-of-the-sexes-edition/http://www.bluecloudsolutions.com/blog/cost-develop-app/#devcosts
  18. 18. where is the most Money?http://techcrunch.com/2011/09/16/who-spends-more-in-freemium-games-battle-of-the-sexes-edition/http://blog.flurry.com/bid/72755/Mobile-Freemium-Games-Women-Thrifty-Men-Binge25-34 year olds spend more time in freemium apps and spend the most money on in-apppremiums. With men spending the Most time and more money. Among app downloaders, thegroups most likely to pay for apps are men, adults age 30 and older, college graduates, adults withhousehold incomes of $50,000 or more, and those living in urban communitiesMen & women25-34Money Spent playingfreemium gamesTime Spent PlayingFreemium Games Out OfEntire PopulationAverage spendingon in-apppremiums28%49%$16/MO
  19. 19. What are the critical needsto be successful?MarketingHaving a great product that people talk about, is only half the battle, in orderto really make an app successful, it needs to be marketed, especially early onin the release to achieve a high download ranking in the app store which helpsperpetuate downloads. The top revenue earners, who earned at least $50,000with their most successful app, spent the most effort on marketing. On average,14 percent of their time was dedicated to promoting their app, backed by amarketing budget of nearly $30,000 on average.Great productThe first half of a successful app is that the app has to be great. Whether itis a beautiful design or innovative elements, the app needs to have somethinggreat about it. This is because a large driver of downloads are family and friendsword of mouth, about 50% of mobile gamers said they learn about new gamesfrom acquaintances and 25% learn about apps from social media.http://uxdesign.smashingmagazine.com/2012/04/05/art-of-launching-app-case-study/http://econsultancy.com/us/blog/9638-the-rise-of-the-billion-dollar-mobile-gaming-market-infographic
  20. 20. Growth through acquisition?Acquisition as an avenue for growth has seen mixedresults. One story to watch is Disney’s acquisi-tion of app developer Tapulous (for an undisclosedamount after a 33 Million round of funding) andsocial game developer Playdom (for $563 Million) in2010. These acquisitions have led Disney to developseveral long running #1 apps that have had severalmillion downloads and spun off other merchandise.http://www.businessweek.com/magazine/content/10_32/b4190035402934.htmThe theorized amount of Disney’s spending on digital acquisitions in 2010$800,000,000The theorized amount of apps that have been downloaded4,000,000
  21. 21. What are the bestlaunch strategiesChoose the right app categorySome of the most popular paid categories are Games, Entertainment and Books.Marketing and PRThis is probably the 2nd most important part of developing an app, after actually designing the app.Marketing can include advertising, social media campaigns, reviews in app blogs and review sites, and othergeneral public relations tactics of press kits to media outlets. Marketing and PR gets people’s attention andcreates awareness, which is often all you need for a consumer to consider a downloading an app, And willquickly cause people to download when app is released, driving up it’s placement to the top 25.Ask for ratingsApp Store Ratings are an important driver for app downloads, since a lot of people base their downloaddecisions on word of mouth, and ratings act as a kind of anonymous word of mouth and peer promotionwhen consumers decide about downloading an app, especially for new apps.http://uxdesign.smashingmagazine.com/2012/04/05/art-of-launching-app-case-study/http://www.quicksprout.com/2012/05/10/the-beginners-guide-to-mobile-app-marketing/Most developers agree that best launch strategy to create a successful, highly downloaded app, is to get featuredin the top 25 of downloads. Most consumers find most of the apps that they download by looking at the top 25 inthe app stores and take it of a sign of quality and worthiness that others have downloaded the app. Although, this iskind of a Catch-22, people download the apps in the top 22, but how do you get people to download enough to getit into the top 22?Get into the top 25

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