Marketing an iPhone App - What a Difference a Year Makes in a Digital Media World

What a difference a year makes! I posted the blog entry below on May 27th, 2009. As I watch the iPad spiral to unforeseen levels of penetration in just a few weeks, as I ogle over the new HTC Droid, as the number of application stores reaches 5+, and as the number of Droid applications is expected to surpass those for iPhones this year, I thought it was worth pulling it up for old time's sake and to notice what a difference a year makes - and also what has stayed the same. So, in the interest of time - as I have important meetings at 2pm and 4:30pm, here are a few data points for thought:

• Mobile ad sales accounted for approximately $391 million in 2009 and are forecast to reach $561 million in 2010 (Zenith Optimedia). Of course, this doesn't begin to take into account content revenue: music, video, applications, etc. or usage charges: text messaging, data, voice (remember voice?)

• The global market for mobile applications reached $10 billion in 2009. (Didn't see that coming in 2006!) - Juniper Research

• Apple sold 1 million iPads in 28 days and more than 2 million in less than 60 days.

• It took 74 days to sell 1 million iPhones.

• As of May 3, 2010, 12 million iPad applications had been downloaded and 1.5 million eBooks (Steve Jobs)

• There are, I believe, 200,000 iPad applications available

• Android applications are expected to reach 150,000 by the end of 2010 - though I believe a Motorola executive speaking during Internet Week referenced 40,000 available apps - as she was making the case that WAP sites are even better than apps... Note that iPhone users are more likely to use apps than websites; that's flipped for other smart phone users.

• 65,000 Android phones ship daily (Eric Schmidt, May 17, 2010 via AndroPhones.com)

• Android phones were not around a year ago

• Unlike iPhones, Android phones have multiple manufacturers including Motorola, HTC, LG, Samsung and Sony Ericsson, and are available through multiple carriers

• The term is no longer "iPhone App" but rather "Mobile App."

• The term is no longer "iPhone" but rather "Smartphone."

• Smartphone penetration reached 21% of wireless subscribers at the end of 2010 and is expected to pass the 50% mark in 2011. (Nielsen)

• 14% of mobile customers have downloaded an app in the last 30 days. BlackBerry, Palm and Windows Mobile users have between 10 and 14 apps on their phones, with RIM on the low end of the scale. Android users average 22 apps, compared to iPhone owners who devour, as Steve Smith of Mediapost puts it, 37 apps.

• As of May 2010, Apple is larger than Microsoft.

And now to our formerly scheduled blog posting:


POSTED MAY 27TH, 2009

I recently attended one of Alan Brody's iBreakfasts - "iPhone Apps & Mobile Platforms." The panelists were Eric Litman from MediaLets, Ken Engels from Curious Brain and Alex Muller from Slifter. And it of course, got me thinking about iPhone apps. So here are some of my thoughts:

FUN iPHONE FACTS

How Many Phones?

There are currently 40MM iPhone and iTouch devices (15)

17MM iPhones had been sold as of March 2009. (1)

Nearly 4MM iPhones were sold in the 1st quarter of 2009 - representing growth of nearly 125% vs. 2008. (8)

During the first three months of iPhone 3G availability (3Q 2008), seven million phones were sold, exceeding the six million first-generation phones sold in 1 1/4 years. (8)

26% of U.S. smart phone users have iPhones (35% have Blackberries). (3)



Where Are They?

iPhone applications are available in 77 countries. (7)

There are 500MM people with mobile phones in India...(5)



How Many Apps?

As of April 24th, 2009, 1 billion iPhone applications had been downloaded - 9 months after the launch of the store. (4)

On June 8th, Apple announced that there were 50,000 applications in the iTunes Store - up from 35,000 in April (7). At the OMMA Video conference on June 17th, I heard estimates of 54,000 by Gordon Borrell and 57,500 by Marketspace Senior Advisor Andrew Heyward.

As of April 15, 2009, 25,000 different iPhone apps had been downloaded. (6)

As of June 12th, 2009, 15 of the top 20 free and paid apps (top 10 free; top 10 paid) were games

The iPhone Applications Store model of centralized distribution is unprecedented.

It takes one to two weeks for a new application to be listed by Apple (if approved).(9)



What's Up with UrbanSpoon?

UrbanSpoon was one of the top applications downloaded in 2008.

Following favorable reviews from Macworld, TechCrunch, and even the New York Times, the free app racked up 300,000 downloads and over 6,000,000 shakes within the first 10 days.

In October 2008, UrbanSpoon began selling advertising on the application through a platform/ad network called AdMob that specializes in mobile advertising.

UrbanSpoon had already achieved 1MM downloads when it was approached by Apple to be featured in the Apple iPhone commercial. One month after the November commercial hit the airwaves, UrbanSpoon's downloads had jumped to 2.2MM. (10)

The UrbanSpoon iPhone application was originally introduced to drive traffic to its website. Its founders estimate that if they had charged for the application, e.g., $1.00, downloads would have been reduced by 90%. (11)

UrbanSpoon was recently purchased by IAC.



How Much Are They?

Most iPhone applications are paid apps. (12)

However, the top 10 free applications made up 7% of downloads as of December 2008. (13)

iPhone paid apps range from $.99 to at least $6.99 (e.g., BeamMe Pro). (14) The average price is $1.00 - $1.50. (12)

Apple takes 30% commission for paid applications. Apple's estimated revenue from app sales is undisclosed, but estimates range from $70 million to $160 million. (14)



What's Next?

Web 3.0 is here. The iPhone 3.0 enables in-application purchases (7)



RECOMMENDATIONS FOR MARKETING AN iPHONE APPLICATION

ASO and ASM:

I have coined two new phrases: Application Store Optimization (ASO) and Application Store Marketing (ASM). These are core elements of iPhone application marketing.

Where do people go when they are looking for information and answers? Google - the "Q-Tip" of Search. Where do people go when looking for an iPhone application? The App Store - the centralized, exclusive source for iPhone Applications.

There are two goals: (1) turn up high on the results page of an app store keyword search (e.g., subway map, weather) and (2) be part of a "Top 10" list (e.g., games). 80% of downloads come from the top 100 applications. (16)

If you can't accomplish this organically, then go for Application Search Marketing (ASM) by paying to be a "Featured" application. As with SEM, ASM can be used to jump start organic search.

The key concept to remember is that popularity breeds popularity. Once you achieve a high ranking, take advantage of it. The one time you are guaranteed inclusion in a Top 25 list is when you are introduced, so support your application when you launch it, and focus your efforts.

If you are going to spend money advertising your application, then you are better off with one heavy push, i.e., buy your advertising all in one day rather than by sprinkling it around.

The "What's New" and "Top" lists are said to have rolling 24 hour windows. However, Apple has been continuously changing its algorithms.


Other Applications

A good strategy is to get included in other applications. This can be done by purchasing ad inventory through a third party or through partnerships. Creators of gaming applications often maintain a portfolio of games, using each one as a platform to promote the others. Whatever your application, it's important to target people who like a similar or complementary application.


Website Promotion

If you have an online presence, you can promote your mobile application on your own website. This can include deep links that can be emailed or texted to a mobile device or that links to the iTunes Store.


Social Media and Editorial Reviews

Develop a strategy for getting positive coverage: editorial and user reviews, blogs, Twitter, etc.


Consider Giving It Away

As with other content providers, the developer of an iPhone application is faced with a tradeoff: (a) give it away to get broader adoption (b) sell it to get revenue and recoup costs. Consider giving away your initial version; it will get downloaded by early adopters who are sure to give you feedback in the form of reviews within the Application Store. Once you've refined the application and gotten some word of mouth, transition to a paid model (grandfathering the early adopters). Additionally, you can give your first release away for free and then charge for the 2nd generation premium or "pro' version. BeamMe went from free to $6.99.


OBSERVATIONS

iPhone applications are characterized by the early fervor of a new space, and there are low barriers to entry for a new iPhone application

More than one in four smart phone users have iPhones; Verizon needs to take this situation seriously as it evaluates whether to reach an arrangement with iPhone once AT&T's exclusive contract expires. A Blackberry representative recently told me that because only 7.4% of computers are Apple computers, there is limited incentive to create software for Mac users, e.g., a working program for synchronizing a Blackberry with a MacBook. However, if Blackberry can't offer a viable solution, Verizon will lose customers to AT&T and iPhone, despite the fact that Verizon offers dramatically better phone courage. If Verizon continues to let this happen, they are missing a big opportunity.


HOW'D THEY DO?

In early 2006, I wrote a presentation about the mobile space for a multi-platform publisher that included forecasts of mobile advertising and marketing revenue by a range of media pundits. This is what they forecast for 2009:
- Visiongain: $602MM (55% compound annual growth rate)
- RBC Capital: $1.5 Bn (101% CAGR)
- McKinsey: $250-$750MM
- eMarketer: $434MM (20% CAGR)

(As it turns out, mobile advertising revenue for 2009 was $391 million - Source: ZenithOptimedia, "Advertising Expenditure Forecasts," provided to eMarketer, December 8, 2009 - it seems that eMarketer wins the forecasting contest.)

The wide-ranging projections could not have foreseen the iPhone application revolution, that provides increased opportunity for paid listings, sponsorships, cross-promotion, affiliate marketing and display advertising. That said, the majority of mobile revenue comes from text messaging. (12)




Sources: Eric Litman, Alex Muller, Ken Engels and Alan Brody, Network World, Zueo, Christian Science Monitor, Articles Base, eMarketer, Tata, Steve Wax of Campfire Media, Stuart Farr of Not for Tourists

(1) March 24th, 2009
(2) January 28th, 2009 - while some of the difference between the 15MM and the 17MM numbers may be due to purchases made between January and March, some is likely attributable to iPhone owners who have purchased more than one iPhone - likely trading up from version 1 to version 2
(3) March 2009 - eMarketer, Skype survey
(4) 1 billion as of April 24th, 2009 - Apple.com - remember that iTouch users also download applications --> approximately 22 per device
(5) Tata - 92nd Street Y panel, June 2009
(6) Are there 10,000 iPhone applications that have never been downloaded?
(7) 35,000 as of April 24th, 2009 - Apple.com
(8) Apple financial report
(9) June 8, 2009. Recent applicant
(10) Ethan Lowry, founding member of UrbanSpoon, one of the most downloaded iPhone applications of 2008. Mobile Crunch, December 5th, 2008.
(11) October 30, 2008 - Seattle 2.0, Kevin Leneway
(12) iBreakfast panel
(13) Mobile Crunch, December 5th, 2008 - estimate by Greg Kuparak
(14) ClickZ, May 22, 2009
(15) Apple, June 8, 2009
(16) Gordon Borrell, CEO, Borrell Associates, Inc. - OMMA Video Conference, June 17, 2009