Vision Mobile is simply the industry’s best research, analysis and strategy firm, and their landmark report (which comes out once a year) is “Developer Economics – The New Mobile App Economy”. It was issued last week, but it’s so jam-packed with info and insight that it took the AppCarousel team a week to digest it all and boil it down into “what it all means”.
There is simply so much to discuss that we decided to make it a 3-part series of blog articles.
- the report itself is freely available thanks in part to the lead sponsor of the report BlueVia by Telefonica. However in these blog articles all rights are acknowledged and credited to Vision Mobile
- get your own copy of the full monster-sized report by clicking the image on the left.
Anyway, here are our conclusions and opinions on this excellent insight into the world of developers and apps. Part 1 focuses on the platform wars.
Firstly let’s look at where developers are committing their resources (and are planning to over the next 12 months). It has clearly become a two-horse race, where the only platforms they care about are Apple’s iOS and Google’s Android. The report discusses in detail the reasons why, but in summary it’s all about reach. iOS and Android have the volume of handsets being shipped, the largest addressable market, the most visited app stores, and the most mature ecosystems. Developers want to spend their time developing on platforms that can reach the eyeballs of their users. Windows Phone can’t deliver that yet, and BlackBerry has a diminishing market share and a weaker ecosystem these days (even though the report states that BlackBerry is easy to develop for and quite lucrative to make money from).
If there is a third platform to watch, it’s mobile web AKA web apps AKA HTML5. The report nicely analyzes why this is lagging behind native app development, and will continue to lag behind for a long time (it’s because Apple and Google do a better job of supporting native apps than web apps, and because their app stores don’t feature web apps, and because native apps can be much richer thanks to better platform APIs). Here at AppCarousel we have showcase solutions to help developers of web apps to get noticed, and some big HTML5 app store plans for later in 2012. But right now we agree that the distribution and discovery options for native apps are superior to those for web-based apps.
The report highlights that revenue generation for developers is highest on Apple because Apple has a higher income demographic, the quality of content is higher (and can therefore attract a premium), and it’s easier to pay via the App Store / iTunes than it is on Google Play.
The report then crystallizes what could well be the next big trend; for developers to leverage Facebook. Yeah yeah yeah, I can hear you say, developers can easily add Like buttons into their apps, share capabilities, and they can promote their apps on Facebook. Well that’s not what the report focuses on. Vision Mobile believes that;
- Facebook is the next web
- Facebook is the “platform of platforms, atop iOS, Android and mobile web”
Until I read Developer Economics, it hadn’t really dawned on me how significant Facebook has become as an “alternative” to the giant Apple and Android app stores. Here’s why;
- The report argues (and we agree) that although the Apple App Store and Google Play have reach, they are very poor at addressing the next four challenges faced by developers; targeting, discovery, adoption, and engagement
- Facebook recently launched their App Center, we wrote about it here
- The report states that “Facebook is offering global discovery, distribution and targeting to 900 million active web users, along with direct billing [via Facebook Credits]“
- Facebook’s userbase is fast approaching 50% of the total internet users worldwide
- But more importantly, Facebook isn’t a standalone app store, it’s a fully integrated social experience (of which apps are just a part of it), so it’s a more natural way to discover relevant apps alongside the things you do on Facebook, and users discover apps that their friends use and that are recommended to them by their social circle
So from the perspective of developers, they should ignore Facebook at their peril. It’s no longer about developing an app and throwing it into an app store. The game has changed, and having a Facebook strategy is suddenly essential.
Today most developers use Facebook as another discovery and promotion point for their Apple and Google apps, but the big question is whether developers will migrate in large numbers to developing native Facebook apps and HTML5 web apps that singularly get promoted via Facebook, such that the existing app stores become redundant. Our view is that it’s horses for courses; native device apps have very different roles to play compared to Facebook apps, and they will all live happily alongside each other for a long time.
See you soon
The App Carousel team
For part two of “When is a TV not a TV”, we’ll be looking at what constitutes today nowadays. (Part one here!)
By the time I get home late at night (from working those 20 hour days *cough*), any of the shows I would have wanted to watch are long past their regular broadcast times. That’s the problem the PVR/DVR/TiVo solves, right? Not always. I don’t have every channel, nor am I always near a TV set. What is more conveniently available is WiFi and a supple data plan for when a hotspot isn’t available. I can get a lot of the same content directly from the providers themselves, when and where I want it. Big Bang Theory is only ever a short URL away. What if I want to watch the a live hockey game? NHL Center Ice is available right on my iPad. The point I’m trying to make is that Video on Demand (VOD) is huge, and the universe of connected set box boxes, the rise of Netflix, smart TVs with more Over-The-Top (OTT) content, and again, content providers making their content available in this manner is the proof. Traditional channels will have their place for a long time, supplying timely, pushed content (it’s Cinco de mayo time, right?) and being a great leanback experience for when we don’t want to demand, but rather, unexpectedly delighted.
So when I’m watching the LA Kings wipe the floor with the St. Louis Blues on my tablet, am I watching TV? A whole lot of better knee-jerk descriptions seem to come to mind before “TV”. I’m watching the game, the feed, the show, the video…you get the idea. The same concept follows along if I’m streaming news from YouTube on my phone. Let’s not forget that all these internet “tubes” are in reference to the CRT tube TVs, but you’ll be hard-pressed to find many people who would describe watching mobile YouTube as “watching TV”. Take it from the other way around. Standing at Best Buy, no one has any problem navigating themselves to the TV department. There’s no issue with pointing at a television set and saying “Yeah, that thing there is a TV.” At least, this is at least what I’ve gathered from some informal polling. It’s a sign that there’s some sense of division between what is TV and what isn’t. There’s a growing divide between gathering around a communal television set and individual viewing, which translates into usage of all these similar-but-different screens and services.
This isn’t just in one direction either. TVs are continuously becoming more like tablets or smartphones, with Android and HTML5 playing an increasing role on what shows up on your big screen. Most reports put smart TV growth in the triple digits.
What about the TV Everywhere initiative, spearheaded by Comcast and Time Warner? The idea here, poorly paraphrased, was to give their customers a way to get their TV service that they subscribed to from whatever screen they wanted. Similarly, Sling Media’s SlingBox allows you to view your TV service from your myriad of different devices. The key words here are “TV Service”. This ideal that there’s a service provider for televisions, that has been around for generations and still exists today, helps to serve as a guideline for what is actually TV. If a device was meant to be primarily served by a television service provider, then the device is TV. If viewing the programming on a device that isn’t primarily served by a television service provider, then you’re viewing the TV service from a non-TV device. If you’re viewing videos from a content provider on any screen, it may simply be that: watching video.
Does this sound a little tedious and arbitrary to you? I don’t blame you. When the evolution of the connected TV and IPTV is at the pace it’s at, the lines blur. As long as the terms are agreed upon when you’re talking about them, you’re well on your way to clear linguistic bliss.
Let’s end off with this question: Is TV becoming (dare I say it) a legacy product?
With the TV industry generating at over $350 billion on revenues, this is a probably a stretch. There’s tremendous growth in new technologies, new monetization models, and new players mixing up the TV value chain, so there’s some arguments to be made on either side.
- Colin Chong
We track the search terms that people use to find our blog and the ones they use once they are at our blog. They give an interesting insight into what’s trending in our world (and your world, quite probably).
Here are March’s top words or phrases:
- Apps (yes, apps are still hot, and we are well indexed in Google because our business is showcasing apps)
- App carousel, or carousel apps, or carousel. The reason is that there is an app or two out there called “carousel”, Apple has a carousel interface, and carousels are quite a generic term for a way of showing content. While I don’t think people are necessarily looking for us, it’s great that when they do land on our site they like what we can do for them
- Apple. Now there’s a theme appearing – the first three all begin with “app”. When APple decided on their company name, little did they know that the App in Apple would be so important!
- Android. There’s another one ending in A! Seriously, what this does tell us is that when people think about app showcasing and app discovery, they think Apple and Android
- App economy. Sorry about this, but we are still stuck on the letter A and the word App. What’s interesting here is that a lot of people are typing the expression “app economy”. So I tried to find out why, and here’s the answer
As you can see above, on 19 March Forbes referred to the app economy in an article. Click the image above to go to that article (it’s a good read).
The next link that came up on Google in my “app economy” search was …
Click the image above to check it out.
Anyway, back to the list of the most common search terms this month;
6. tv and smart tv. 2012 is the year of apps in the TV environment, and we have received a lot of exposure thanks to our partner Myriad Group, and our own articles on the TV space. “Watch” this space, or so they say!
7. html5. Oh yes, everyone seems to want to understand this new buzzword they are hearing, and the implications for the app industry. More to the point, developers that are building HTML5 apps are looking for creative ways to showcase them. Welcome to our world.
8. developer and develop. Following on from the one above, there is more developer activity than ever, and we are seeing inquiries from developers who want to get above the noise. This recent article dives deep into the minds and trends affecting developers.
9. app billing. I am not sure why this is trending, perhaps because the number of billing options for apps has increased exponentially (carrier billing, PayPal, Zong, Boku, Billtomobile, PayOne, Apple, Google Wallet, and on and on). Are people looking for solutions, particularly for HTML5 web app billing which is a bit more complex than for native apps?
10. Terry Hughes. Yep, our Managing Director gets his name around the industry a fair bit, and was recently listed on Vision Mobile’s 2012 Atlas as an advisor, so it’s no surprise people searching for that name land on our site. However there’s a much more famous Terry Hughes, a baseball player, and the one who directed shows like The Golden Girls, and there’s even a park called Terry Hughes Park in Canada (where our very own Terry Hughes can often be found asleep on a park bench with a bottle in his hand) … did I really say that? Pink slip on the way.
We will do another one of these at the end of April!
Last week my 9 year old son Tom told me he wanted a tablet computer for Christmas.
“I am not sure Santa and his elves make tablets in the North Pole”, I stated.
“I am sure they do” replied Tom, “because they are so popular, so Santa wouldn’t miss a trick like that”. Wow, kids are so commercially minded these days.
We then got into a debate about which tablets Santa makes. I explained the operating systems, and how Android is open source, and he replied that he felt Santa would choose an open source platform because he had been operating in an “open sleigh” mode for years. Good point.
As much as we think kids’ minds are weird, here’s an example of how the adult mind can be just as wacky… I then said to Tom “No, I disagree, I think Santa will focus on iPads this year because Steve Jobs is now up there with him and I am sure they are colluding.”
“What are you talking about?” said Tom. “Why would Steve Jobs be in the North Pole? He is dead.”
For some bizarre reason I had got heaven confused with the North Pole, and I looked like a bit of an ass when my son called me on it.
I sincerely hope Santa isn’t in heaven because that could cause a few problems on Dec 24th. But if he was in heaven Steve would be all over him, because Steve never missed an opportunity to lock down a distribution ecosystem and Santa does have the mother of all value chains.
Merry Christmas, Season’s Greetings, and Happy Holidays to everyone.
Big news for us here at App Carousel … Myriad Group today announced the launch of Alien Vue, the Android environment for TV service providers, set-top boxes and the home entertainment market, and AppCarousel is the app store provider! The complete solution will be demonstrated at CES in early January. We are delighted to be working with our friends at Myriad to make this a reality.
The official Myriad release is here http://www.prnewswire.com/news-releases/myriad-brings-android-to-your-tv-135927918.html
A great explanation of AppCarousel’s involvement is at http://www.cedmagazine.com/news/2011/12/myriad-develops-an-app-store-for-msos
What’s cool for us is that the article on TechCrunch at http://techcrunch.com/2011/12/20/myriad-alien-vue-brings-android-apps-to-your-tv-without-the-extra-hardware/ has an embedded YouTube video demo of the solution, and the frame being shown on the TechCrunch page is the part of the video with AppCarousel in it!
There’s also a really good analysis of the opportunity ahead for Myriad on Rethink Wireless at http://www.rethink-wireless.com/2011/12/20/myriad-brings-android-tv.htm
A further article discussing GoogleTV and how Myriad fits in is at http://www.theverge.com/2011/12/22/2652032/myriad-alien-vue-google-tv-apps-cable-boxes. In that one they say “Myriad’s also giving service providers the option to run their own, fully skinned app store experience by means of AppCarousel”
Personally we think that the JVM (Java Virtual Machine) market, coupled with Android app players, targeted at the growing number of consumer electronics devices that aren’t Android but want to run Android, and Google’s appetite for home entertainment, is a huge opportunity. And Myriad are front and center with Alien Dalvik.
Chief Spinning Officer
I saw this article in the New York Times earlier in the week. The article – ‘One Million Mobile Apps, and Counting at a Fast Pace‘ provides an excellent case for why brands, device manufacturers, carriers, software companies, developers and publishers – basically everyone in the app economy needs an App Carousel!
Enough from me, read the article below. I’ll let you make you own deductions, just remember our tag line while you read: The content you care about showcased to your audience.
Somewhere at a computer last Wednesday, a developer pushed a button and the one millionth mobile app went to market.
Apps shrink the programs that were once available only on a desktop computer to make them usable on smartphones and mobile devices — stock trades, restaurant reviews, Facebook, streaming radio, photographs, news articles, videos and, of course, Angry Birds.
The pace of new app development dwarfs the release of other kinds of media. “Every week about 100 movies get released worldwide, along with about 250 books,” said Anindya Datta, the founder and chairman of Mobilewalla, which helps users navigate the mobile app market. “That compares to the release of around 15,000 apps per week.”
According to Mobilewalla, in a fairly quiet 14 days before the release of app No. 1,000,000, an average of 543 apps were released each day for Android-based devices, and an average of 745 apps hit the market daily for the iPhone, iPad and iTouch. The total for the two weeks across the Apple, Android, BlackBerry and Windows platforms was 20,738.
A product was counted each time it was designed for a different device in the climb to a million apps. So when Urbanspoon was released for iPhone, BlackBerry, iPad and Android, it was counted four times because each platform demands different code from the developers.
By any measure, the rise in apps is striking. In October 2008 the known app universe was 8,000 Apple titles. Mobilewalla was formed that year to provide a Web site for users to search for mobile apps, and to categorize and rank them.
Mobilewalla began analyzing Android and Windows apps in 2009, and added BlackBerry a year later. The 100,000-app milestone was passed in December 2009. In little more than a year, the total passed 500,000 and exceeded 750,000 six months after that. Five months later: one million.
For Dr. Datta, the surge in apps and the ability of almost anyone to bring an app to market is a chicken-and-egg story. Developers who have created fewer than 10 apps make up 80 percent of the producers, he said. “Anyone with a good idea can outsource the code, and they own a new app.” In January, Mobilewalla will begin tracking ranking, downloads and revenue for individual apps
Brad Hunstable, a co-founder and the chief executive of Ustream, an app that allows users to broadcast live video to the Internet using a smartphone, or watch video anywhere, explained how the world has changed. Building an app for a phone five years ago meant going through the carrier, and contending with hardware and quality assurance issues, he said. “Now anyone can build for a platform,” he said.
Adding to prime conditions for app development is what Mr. Hunstable called the “convergence of the app ecosystem,” a world with more powerful devices, higher quality networks and high-resolution cameras.
“It’s an exciting time to be a developer for mobile,” said Thomas Chung, a vice president and general manager of the Playforge, a developer based in San Mateo, Calif. The Playforge released Zombie Farm, a role-playing game, in February 2010 for Apple, and an Android version in October 2011. On Friday, it was the top game in its category on Mobilewalla.com. Lower barriers to entry have prompted an explosion of content in the last few years, he said.
“The market has become more consumer-facing, too,” he said. “A lot of people can download applications now, and it’s just a big win all around.”
A version of this article appeared in print on December 12, 2011, on page B3 of the New York edition with the headline: One Million Mobile Apps, And Counting at a Fast Pace.
Today’s post on our blog is a shameless reprint of Vision Mobile’s blog article on Google’s strategy. We are friends of Vision Mobile, and we have great respect for what they produce, so we know they won’t have a problem with us spreading the word to our audience. Check out their analysis and strategy services, and their other great reports, at www.visionmobile.com
Anyway, here goes with a reprint of their article, which you can read in full on their blog at http://www.visionmobile.com/blog/2011/11/flatten-expand-mine-the-three-pillars-of-googles-strategy/
This article is Copyright Vision Mobile 2011, all rights acknowledged.
Flatten, Expand, Mine: The three pillars of Google’s strategy
[Google’s strategy is all about ads, not selling services. Business Analyst Stijn Schuermans examines how Google’s three-pronged strategy for making money and the key drivers of the company’s success]
Is Google a technology company? Well, sort of. Despite its geeky, engineering-driven reputation, Google is in the first place an advertisement business, as an overwhelming 96% of its revenues come from digital ads. Sure, Google produces some amazing high-tech stuff, spending $3.7 billion in R&D in 2010, but it’s all in the name of crude commerce; of connecting eyeballs to ads.
Let’s explore the three pillars of Google’s strategy that enable the company to sell more ads for more money. Google increases its reach by flattening any obstacle that stands between its ads and eyeballs. Then, Google expands its visibility to the user by providing services, creating more opportunities to show ads. Finally, the company squeezes the maximum out of those opportunities by mining user data, which allows them to understand and target users very efficiently.
This strategy works pretty well for the company, to say the least. Google ranked 92nd in the 2011 Fortune 500. The company is worth almost 200 billion USD. Last year, it reaped over $29B in revenue. If Google was a country, it would be bigger than Cyprus or Bahrain, based on GDP. Since its business is digital, it collected a net profit in 2010 of $8.5B (a healthy profit margin of 27%), despite providing almost all of its user-oriented services for free.
Let’s discuss Google’s three-pronged strategy in more detail.
Pillar 1. Flatten
The first pillar of Google’s strategy is to crush down anything that stands between consumer eyeballs and Google’s inventory, i.e. the ads that Google’s advertiser customers are providing. That is, any friction for users to be exposed to the ads should be removed.
For example, Google provides two operating systems, both immensely complex technologies, at low or zero cost to the world: Android (for smartphones and tablets) and Chrome OS (for netbooks and set-top boxes). Of both operating systems, open source versions are available for anyone to access, develop and build derivatives from.
Google provides OS’s like Android for free, because its goal is to commoditize the devices they will run on. They allow OEMs to make high-quality, low cost devices, which can then be delivered at a very affordable price to the mass market. If more people own and use smartphones and tablets, the reasoning goes, this gives Google more opportunities to reach those users and serve them ads.
In the same context, Google took a very active stance in the net neutrality debate. There the intention was to ensure optimal access of users to the network. It would not be good for Google’s buisiness if operators would impose restrictions of artificially increase the cost of network access.
The theoretical basis for this pillar is the economics of complements. A good analogy is cars and fuel. If the price of fuel goes down, the demand for cars will increase. The services that Google provides are the complements in this case (the fuel) to the core advertisement business. The value of the advertisement inventory increases with the amount of people that Google can reach. Services are subsidized to drive more eyeballs to Google: the price of the service is reduced (in most cases to zero) to indirectly push up the demand for the core product, being ads.
Pillar 2. Expand
Once lots of people have access to the Internet through connected devices, Google’s second goal is to expand its footprint across the user journey. Put simply, Google wants to be part of as many use cases as possible, since that’s where they can present users with advertisements.
Google provides dozens of different services, targeting as many tasks as possible that a user might consider when communicating or looking for information. If a user wants to send email, there’s GMail. For chatting, Google Talk and Google Voice. Want to find directions? Use Google Maps or Google Earth. YouTube allows you to publish your own videos and Picasa to share pictures. In a business setting, Google Apps (like Google Docs) allow you to collaborate with co-workers. If you want to keep up to date with your friends, there’s Google+. The list goes on.
In most of these services, Google ads are displayed. Unobtrusively, but always there for people to see.
Google doesn’t do all the work of reaching users itself. Google provides infrastructure for others to display ads, deriving about 30% of its advertisement revenue this way. Third parties can display ads on their websites (and share in the profits) using the AdSense platform. A similar system is in place to include ads in mobile apps. Despite some competition, Google is still the main advertisement provider on the Android Market. In fact, most developers on Android use advertisement as a source of income, rather than direct payment. The Android market has the lowest amount of paid apps of any app store.
Pillar 3. Mine
Finally, after flattening and expanding, Google squeezes the maximum out of the eyeballs it reaches. The company increasing the value of its ads by data-mining the user’s behavior. By understanding what the user is trying to achieve at the moment that an advertisement is displayed, the ad can be micro-targeted to be incredibly relevant to that user. This increases the probability that the user will click on the ad, measured by the combination of fill rate and click-through rate (CTR), and therefore the probability that she will eventually buy the advertised product. This is what makes the ad valuable to the advertiser.
In its early days, Google revolutionized the advertisement industry this way. Before, an ad was broadcast to a very large audience (think billboards or TV ads) in the hope that someone might find it interesting. Any targeting was crude at best, for example an advertiser could choose to print in magazines with very specific audiences. When Google Search came along (still its flagship product), all of a sudden you could target users almost perfectly, as they conveniently typed in what they were looking for. This made the return on an advertisement spend several factors higher.
A typed search query is only one way that Google can find out what a user is interested in. Scanning the content of emails is another, pretty controversial one. More recently, Google has tried to launch several social networks like Facebook-competitor Google+, hoping to learn something about the user through his social interactions. In fact, social networks are major competitors to Google for online advertisement dollars. With Google Latitude, the company can understand where you are and select advertisements that are relevant to your location. Many industry sources also confirm that the Android OS is used to collect user information.
Google doesn’t give away all its consumer services for free out of the goodness of its heart. Its purpose is to make profit. If services are provided for free, they are meant to flatten, expand and mine in order to sell advertisements.
Google uses complements everywhere. Where other products might have a single or a just a few complements (think fuel for a car), Google works hard to create as many as possible. Because the core business is to reach people, Google throws its nets as wide as it can. Once it has the user’s attention, it can then use its technology to monetize the opportunity to its maximum extent.
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[Want a more detailed analysis of Google's strategy and how it fits into the ecosystem puzzle? Check out our Software Economics seminars].