Building A Business With Social Apps

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In this talk we provide an overview of the market for social applications on social networks of both OpenSocial e.g. MySpace and Facebook, cover revenue and business models, and share some best practices. We provide examples of successful apps, how they effectively monetize, and show how much revenue can be generated for applications of various sizes.

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  • Can you provide powerpoint file link - would like to usea asa change leader tool in my organization that so far stubbornly is shying away from social network tools ? Thankls inn avance, Paul Lebo, RIM corp, Dallas TX, callcentertiger@gmail.com
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Building A Business With Social Apps

  1. 1. How are we doing? Share your thoughts on the content and speakers! Complete the session evaluation form on your computer or mobile device at: haveasec.com/io Next Session: Building a Business with Social Apps
  2. 2. Building a Business with Social Apps Chewy Trewhella, Google Gerardo Capiel, MySpace Shawn Shen, Google 5/27/2009 Post your questions for this talk on Google Moderator: code.google.com/events/io/questions http://bit.ly/mCqkQ
  3. 3. Who We Are Chewy Trewhella, Developer Advocate, Google Shawn Shen, Developer Advocate, Google Gerardo Capiel Vice President, Product Management, Open Platform, MySpace Founder of Gydget Co-founder of Digital Impact
  4. 4. How to Make a Million Bucks with Social Apps!!! Chewy Trewhella, Google Gerardo Capiel, MySpace Shawn Shen, Google 5/27/2009 Post your questions for this talk on Google Moderator: code.google.com/events/io/questions http://bit.ly/mCqkQ
  5. 5. A Developer's Profile Some 30+ years ago when most people thought freedom of sharing led to innovation in software, this fellow developer of ours demanded that people should pay, and in so doing he became...
  6. 6. A Billionaire's Profile
  7. 7. Agenda • Open for Social Business • Social Apps Landscape • Revenue Models for Social Apps • Costs and Operation • Best Practices • Stats ($$$) and Summary
  8. 8. Open for Business Revenue Cost __________ Profit But how to get customers?
  9. 9. Open for Social Business To get customers… Be Social!
  10. 10. Disadvantages of a Brick 'n Mortar Business • Lots of sales pitch • Build one stand at a time o Build one is fun, two is a bore, three or more a chore • Delivery of tangible goods A better mouse trap? Social Apps…
  11. 11. Advantages of a Business with Social Apps • Grow traffic on social network o Users and friends o Communication Channels • Build once and use it everywhere o Scale from 1 to 1000 servers o OpenSocial standard
  12. 12. Agenda • Open for Social Business • Social Apps Landscape • Revenues Models for Social Apps • Costs and Operation • Best Practices • Stats ($$$) and Summary
  13. 13. Social Networks and Application Platforms • Social Networks Facebook • Application Platforms o OpenSocial API o Facebook API Facebook Developer Platform
  14. 14. Social Apps Ecosystems • App Developers o Dozens of independent developers (>$1M dollars rev) • Advertising Networks and Offer Aggregators o Social Media, RockYou, OfferPal, SuperRewards • Payment Providers o PayPal, Playspan/Spare Change, Zong • Tool Providers o Sometrics, Kontagent
  15. 15. Social Apps by Category and $$$ (OfferPal) • $400 Card games • $200 MMORPG • $175 Racing • $150 Owning • $100 Pets • $75 Green • Others
  16. 16. Mouse Hunt App: A Better Mouse Trap • 470K MAUs • Courtesy of HitGrab, Inc. • Game Play: You are a hunter, hired by the king to trap the mice that infest his kingdom. For each mouse you catch, you'll receive a unique reward, with the aim of being the best in the land! • What can be bought? • Users pay real dollars? • How to implement?
  17. 17. Agenda • Open for Social Business • Social Apps Landscape • Revenues Models for Social Apps • Costs and Operation • Best Practices • Stats ($$$) and Summary
  18. 18. Social App Business: Revenue Streams • Advertising • Virtual economy (Direct Pay & Offers) • Branding • Others
  19. 19. Revenue Streams: Advertising • Display and text link ads o CPM: Cost Per Mille (thousand) o CPC: Cost Per Click o CPA: Cost per Action (email/referral/affiliate purchase) o CPI: Cost per Install (specific to installing social apps) Banner & Skyscraper
  20. 20. Advertising: Code/Tag samples AdSense <script type="text/javascript"><!-- google_ad_client = "[publisher_id]"; google_ad_width = 468; google_ad_height = 60; google_ad_format = "468x60"; //--> </script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> Right Media Exchange <!-- BEGIN TAG - 728x90 - [publisher_id] - DO NOT MODIFY --> <script type="text/javascript" src="http://optimizedby.rmxads.com/st? ad_type=ad&ad_size=728x90&section=[publisher_id]"></script> <!-- END TAG -->
  21. 21. Advertising: Challenges / Opportunities • Challenge: Declining eCPMs ($0.10 - $2.00) o Demand / Supply o ROI for advertisers o Canvas view ads ONLY for most networks • Opportunity: Provide contextually relevant ads o Music app => downloads, ringtones and concert tickets
  22. 22. Revenue Streams: Virtual Economy - Direct Pay Mouse Hunt App • Goal: Catch mice • Virtual currency: Gold • Virtual goods to buy o Cheese o Trap • How to get Gold o Catch mice o From King o Loot and trade o Or buy gold via…
  23. 23. Revenue Streams: Virtual Economy (Buy Gold) Mouse Hunt App Industry wide • Buy Gold via CC/PayPal $1-10 per 100 DAUs • Or Earn Gold via… Daily Active Users PayPal Gold! Instant Payment Notification
  24. 24. Revenue Streams: Virtual Economy - Offers/Surveys Mouse Hunt App • Earn gold by filling out o Offers o Surveys
  25. 25. Revenue Streams: Virtual Economy (Earn Gold) Mouse Hunt App Source: OfferPal • Earn Gold via offers Avg. $7.5 per 100 DAUs Daily Active Users OfferPal Gold! Callback within seconds to hours
  26. 26. Revenue Streams: Offers/Surveys (Code) • Offer iframe <iframe src=“http://pub.myofferpal.com/[publisher id hash]/ showoffers.action?snuid=[user_id]” frameborder="0"> </iframe> • Callback URL o http://www.myserver.com/offerpal_callback.php if( isset($_GET['snuid']) && isset($_GET['currency']) ) { $u = $_GET['snuid']; $q = $_GET['currency']; $q = "update USER set gold = gold + $q WHERE u = $u"; }
  27. 27. Revenue Streams: Branding • Branding apps o Coca Cola on Xiaonei o Sony/Ericsson/MTV on orkut o Heineken on Netlog source: Interbrand • Branding elements/campaigns o Purina Dog Foods in FooPets o National Geographics in Where I’ve been o iCue by NBC/Appssavvy for Lexus on Facebook
  28. 28. Branding App: New Year's Coca Cola
  29. 29. Branding App: FooPets & Purina Appssavvy: "connects many of the most popular social media applications found on Facebook, MySpace, the iPhone...with leading brands and agencies"
  30. 30. Revenue Streams: Others • Free/Freemium apps o Box.net Files (LinkedIn) o Huddle Workspace (LinkedIn) • Premium apps for fee o Fanbox • Donation o Causes • Custom development o Contracting and consulting • 3rd Party versus 2nd Party Apps o Develop container apps
  31. 31. Agenda • Open for Social Business • Social Apps Landscape • Revenues Models for Social Apps • Costs and Operation • Best Practices • Stats ($$$) and Summary
  32. 32. Social App Business: Cost • Development o Engineering, graphics, product/project management • Hosting and Operations o Servers, bandwidth, storage, tuning and scaling • Marketing/Advertising o Ad spend to grow traffic, campaign tuning and monitoring • Community Management o Users support and management, feature request feedback • Others o Sales (better ads/offers and direct) o BizDev (e.g. rev share) o Legal, Office, etc.
  33. 33. Cost: Development • Development o 1-5 developers o 1 Product manager o 0-1 Graphics designer  contractor or FT  project based  creative commons can help • Tips o Keep feature sets small o But a strong theme o Iterate more often o 1-3 months dev. cycle
  34. 34. Cost: Hosting and Operations • Manage your own LAMP stack o Lease your own servers  ~$100/month per server (Web and DB) o Joyent/Sun  From free to paid (on-demand servers) • Cloud Solutions o Amazon EC2  FamilyLink (~36M users on Facebook) o Google App Engine  BuddyPoke app: (~40M users on dozens of networks)
  35. 35. Cost: Hosting and Operations Qualitative estimated costs • LAMP: DIY everything • EC2: Procure/configure servers on demand • Google App Engine: Focus on app and we do the rest! o Python and Java (beta)
  36. 36. code.google.com/appengine
  37. 37. Cost: Marketing/Advertising • Advertising o Gallery Sponsorship (CPM, CPI, Rev Share) o App Ad Networks (e.g. Rock You, OfferPal, Social Media) • Organic Growth o Activity Streams o Profiles o Invites o Notifications
  38. 38. Cost: Community Management • Community Management o Support user forums within applications o Network itself will likely have discussion areas o User requests to product roadmap o Security issues o App/game play loopholes o Confused, malicious, novice users • Tips: Scale by leveraging your users o Invite power users to co-manage forums o User Generated Content e.g. graphics, polls, quizzes
  39. 39. Other Costs: Sales and BizDev • Ad Sales o Best ad networks/offers o Direct sales force • Partnerships e.g. rev sharing • Fixed cost e.g. office, legal • Track and optimize e.g. tools
  40. 40. Agenda • Open for Social Business • Social Apps Landscape • Revenues Models for Social Apps • Costs and Operation • Best Practices • Stats, $$$, and Summary
  41. 41. Iterative Process: Monitor 3R's • Reach App • Retention App Version • Revenue Version 1.0 2.0 • Reach: conversion to installs (e.g. 1-10% invites) o Time of install • Retention: conversion to active users (1%-40%) o Last login tracks repeat users; Google Analytics • Revenue: conversion to paid users (0.2-5%) o Average Revenue Per User ($10-150/day per 1000 DAU )
  42. 42. Tuning Communication Channels App Communication Channels App V1.0 V2.0 • Communication Channels o DO NOT spam users o A/B testing for invites, notifications and activity stream/feed  Use dynamic text  Keep curiosity factor in mind  Make them timely and relevant e.g. birthday calendar
  43. 43. Tuning: A/B Testing Example 22% Conversion: "I just sent you a secret gift! I know you will love it. I will give you a hint, it is {food.hint_description}" 8% Conversion: "John is hungry. Are you hungry?" Source: Kontagent
  44. 44. Tuning: A/B Testing with Ads/Offers Source: Sometrics Virtual Currency Manager
  45. 45. Provide Social Context for Engagement App Social Context App Version Version 1.0 2.0 • Use game design pattern to provide context o Leaderboard, leveling up, points system o Locked items, daily unlocking code
  46. 46. Users/Friends for Product Roadmap App App Version User & Friends Version 1.0 2.0 "At Playdom,...we don’t assume what they will or won’t like; instead we look to them to actively enhance our games...we listen, really listen, to them. If our players don’t like something, we phase it out. And we give them more of what they want. It’s that simple." Courtesy of Playdom
  47. 47. Agenda • Open for Social Business • Social Apps Landscape • Revenues Models for Social Apps • Costs and Operation • Best Practices • Stats, $$$, and Summary
  48. 48. Market Size in $$$ o Annual revenue $500-700M (estimated) o Top 10 app developers ~65% (estimated) o Revenue split (estimated)  Ads 20%  Virtual Economy 70%  Direct Pay 40%  Offers 30%  Others 10% What’s new in OpenSocial about virtual economy model?
  49. 49. OpenSocial Virtual Currency API (5/15) http://code.google.com/p/opensocial-virtual-currency/
  50. 50. CyWorld Supports OpenSocial (5/14) - #Users: 27M (59% of South Korean) - Community Revenue (virtual items): $16M for Q1, ’09 - Virtual goods: - Minihompy (mini home page) - Gift shops - Miniroom - Story room
  51. 51. CyWorld: One of the Seven Virtual Wonders?!
  52. 52. Sample App #1: 10K Daily Active Users Avg Publisher Payout: $75/day per 1,000 DAU (Source: Offerpal) • Revenue o Daily ($25/1000 DAU) x 10K = $250 o Annual: $91.2K • Cost o Hosting: server@$200/month o Annual: $2.4K • Gross Profit o Annual: $88.8K Good for 1-person team?!
  53. 53. Sample App #2: 100K DAUs • Revenue o Daily ($25/1000 DAU) x 100K = $2.5K oAnnual: $912K • Cost o Hosting: servers@$5000/month oAnnual: $60K • Gross Profit o Annual: $852K • Expense o Annual: $202K • Operating Profit $650K Good enough to staff a team of 5+ developers
  54. 54. Sample App #3: 1M DAUs • Revenue o Daily ($25/1000 DAU) x 1000K = $25K o Annual: $9.13M • Cost o Hosting: servers@$20K/month o Annual: $0.23M • Gross Profit o Annual: $8.9M • Expense o Annual: $1.9M • Operating Profit $7M Good enough to staff a team of 20-40 developers
  55. 55. Social Apps Market in Perspectives Annual Daily Annual Revenue Revenue Active per DAU Users Social Apps $500-700M 50-70M (estimated) $5-12 Huge growth last 2 years Yahoo $7,200M 130-160M Public data: $45-55 Google Finance Alexa Google $21,800M 160-200M Public data: $100-135 Google Finance Alexa
  56. 56. One More Example App: Mobsters
  57. 57. Summary • Business Opportunity with Social Apps • Landscape, Revenues, Costs, Best Practices • Dollars and Sense + =$
  58. 58. Attributions Images from Flickr under Creative Commons http://www.flickr.com/photos/niallkennedy/78844524/ http://www.flickr.com/photos/maubrowncow/2508026764/ http://www.flickr.com/photos/tsevis/2279253649/ http://www.flickr.com/photos/gettheshot/1047513424/ Mouse Hunt, courtesy of HitGrab Inc. RockYou SuperPets, courtesy of RockYou Quote from Playdom, courtesy of Playdom
  59. 59. Q&A Resources and links Google Code http://code.google.com OpenSocial APIs http://code.google.com/apis/opensocial/ OpenSocial.org http://www.opensocial.org/ Google App Engine http://code.google.com/appengine/ Post your questions for this talk on Google Moderator: code.google.com/events/io/questions or http://bit.ly/mCqkQ
  60. 60. How are we doing? Share your thoughts on the content and speakers! Complete the session evaluation form on your computer or mobile device at: haveasec.com/io Next Session: Developing on O3D: A View From the Trenches

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