April 20, 2011

App Monetisation Secrets (Part IV)

By Romulo “Je” Alipio, Executive Producer, Games

Try & Buy, Virtual Goods, Mobile Ads, Mobile Rewards, Service Subscriptions, Upgrades & Updates, Cross-selling, Mix & Match . . . the number of revenue strategies has blossomed along with the market for mobile apps.

Which strategy works best? Which is the most lucrative?

I can't answer that . . . because there is no single monetisation strategy that will work across markets. You really have to do your research. And it's extremely important to have a business model in mind from Day 1. Waiting until a new app is finished before sorting this out is a sure way to lose money.

Don't despair, though. While it's particularly difficult to build a game that will be successful in both developing and developed markets, I think there are three inter-related key variables for developers to keep in mind as they create games and take them to market.

1. Time
2. Mode of Consumer Payments
3. Connectivity, Handsets and Platforms

How do consumers in your target market value their time?

Well, in high-income markets like the US and UK , where consumers have more disposable income, gamers are impatient. They will not support a game that requires them to watch an ad first. Nor are they likely to take a survey in exchange for free game time. So scratch Mobile Ads and Mobile Rewards off your list for these markets.

Upgrades & Updates, on the other hand, are a successful strategy because American and British consumers are willing to pay a fee to extend the lifespan of a game they've already downloaded, assuming they like the game. Upgrade fees provide these consumers with an additional return on the time already invested in a current version of the game.

In emerging markets like Indonesia and Vietnam, on the other hand, gamers are happy to trade time for free downloads, additional playing time or virtual goods.

The challenge with Mobile Ads and Mobile Rewards is that many consumers simply do not know that they exist. Developers need to educate the market and build an audience. Consumers often fear that money will be deducted from their SIM card if they download a popular branded game. If they knew they could get EA games like “Need for Speed”, “Sims” and “Worms” for free (via any freemium model), content consumption would jump.

Time Too
When it comes to time, though, the split is not simply along economic lines. There are cultural differences as well. In Thailand, Japan, Korea and Taiwan, gamers are hooked on Role Playing Games (RPGS) – like MOBile Wars by Cellufun, Warspear Online by Aigrind and With by GameMaker – and are happy to spend money on virtual goods like clothes and swords for their characters.

In India and The Philippines, on the other hand, consumers are into games that are easy to pick up and can be played for about five minutes. With short action and racing games, virtual currencies do not take off.

Mode of Consumer Payments
 The key question here is whether consumers in your target market buy pre-paid SIM cards or subscribe to a monthly service. If they have prepaid accounts, you can scratch any approach that requires a credit card from your list. So basically forget about Try & Buy, Subscriptions, Upgrades and Virtual Items. Technically, it's possible to subtract fees from a prepaid account. But users generally keep less than US$5 on their cards and they use these funds for what they deem to be essential – SMSes and calls – not entertainment.

Fortunately, the pre- versus post- paid split falls largely on emerging market lines. So once again, in places like The Philippines and India, think ad-supported and mobile rewards.

Connectivity, Handsets and Platforms
Are you building a game for a target market where consumers have the latest phones? And do they have good internet connections?

If so, you can consider showing video ads and building games in HD.

But at least ten percent of the global handset market now is held by generic devices like those made by chip-manufacturer MTK (MediaTek) and Chinese factories installing the MAUI browser. These generic phones have touch screens and can connect to the internet and run apps, but the platforms are extremely limited compared with Android, Nokia or the iPhone. Ten percent is a significant share of the market – three times that of iPhones, in fact -- so if you want to target these devices, you need to program your game around them. Make the games simple and be sure they do not use too much memory.

Good connections to payment servers meanwhile are essential for virtual transactions, which need to be as seamless and secure as possible in order to maintain consumer confidence and support. So, Virtual Items and Updates/Upgrades are good bets in countries like Germany, Japan, Korea and the US, where virtual transactions have been proven secure and users are adept in virtual worlds.

In slow markets, avoid monetisation methods that are data heavy. Creating branded apps – like Yahoo!'s and Adidas' cricket schedulers and Reebok's action, racing and sports games – can be more effective, because you only need to count the number of downloads to measure the marketing impact and there is no need to connect to an external server.

Future Monetisation Strategies
Here at the beginning of a new decade and some fourteen years after the introduction of the first mobile game, the market for mobile apps is fragmented, providing developers with a variety of options.

Going forward, expect to see some consolidation as a handful of trusted partners emerge, providing the best possible experience for developers and users alike.

Expect to see more hybrid freemium models – combining Virtual Goods with Try & Buy by selling additional virtual items at higher levels, Mobile Ads + Try & Buy, etc – as well as social networking approaches, like that taken by Germany's Gofresh, which encourages app sharing and offers free downloads on itsmy.com to members who recommend a game to their online friends or contact lists.

Think back for a moment to 2000. If you wanted to launch an international SMS campaign, you had to go direct to each market. But today, there are companies that specialise in providing global SMS services. At the moment, there are companies that can assist developers with monetisation strategies and implementation. But so far, there's no expertise in providing seamless global services. This will change.

Related Stories

Part I - Early Business Models
Part II - Revenue Issues
Part III - Freemium Models