So here’s the mother of all IPOs then, and it was coming a long way. The web was buzzing, today analysts of any couleur are commenting and reading through the fine print of Facebook’s registration statement (known as the S-1) in order to find valuable nuggets of information that they had not had before and myriads of bloggers and journalists drool over the new wave of young wealthy people in the Valley.
No mobile revenue
Whilst I’d love to join into this frenzy, I want to focus on one point in the S-1 that caught my eye, and which might pose some interesting challenges for the social networking giant going forward, namely the large abyss between mobile use of the site and revenues derived from it. You will likely have read about the huge amount of Facebook users regularly using the site from mobile devices. According to the company itself, 425m active users (out of a user base of 845m) accessed the site using mobile devices; that’s more than 50%. And yet, Facebook does not derive “any meaningful revenue” (quote from their S-1) from it.
Why (these) ads don’t work as well
This is, of course, because it – thus far – did not find a good way to display ads in their various guises to mobile users. The screen real estate is scarce and it would be easy to destroy the user experience by doing so. However, with that growth in usage, they may have to review this approach. The challenge is then to successfully marry user experience on a small(er) screen with revenue-generating activities. And, alas, the latter are so far mainly display ads of various sorts. How successful will those be? My guess is not very much. It is likely one reason why Facebook so far has shied away from using them: it might just destroy the user experience to an extent that its users would be seriously upset.
And yet, it is only the latest case of highlighting one of the common fallacies of migration from web to mobile (and I am not even saying they are wrong to move that way; their user growth and occuption of that space will likely counter-balance that; I think it was Accel’s Rich Wong who said that it is easier to find revenue streams once you have 100′s of millions of users than to find 100′s of millions of users with a (pre-)defined revenue stream). Nevertheless, none of us would watch a TV commercial showing you a static picture and someone reading something out from the off (this is exactly how TV advertising kicked off). We were not overly thrilled by early attempts of online advertising; they were merely an attempt to convert billboards and printed circulars to the digital realm. It was not until Google’s AdWords that online advertising really hit it off. So why would we now be content with a mere port from another form of media?
The Japanese way?
Japan has shown that there are other ways. Japan’s GREE reportedly records similar revenues from about 5% the user base than Facebook does. It does so mainly with virtual currencies and goods (and, yes, it has moved to a slightly different target market); users can customize their experiences within that social network by buying “stuff” to embellish their avatars, play, use, customize content, etc. Japan has always been something of the Galapagos Islands when it comes to mobile usage: what worked there didn’t often work elsewhere (anyone remember i-mode?). However, we are seeing a similar effect on smartphone applications: 65% of the top-grossing apps these days use some sort of “freemium” feature. This approach might be too late for Facebook now though. Its users would be up in arms would they start charging for features that users have come to see as free.
I am fairly confident that the good folks of Facebook are here to stay but I am still thrilled to see if, when and how they will begin to adapt. With all the very smart people in the company, we may just see the next wave of mobile monetization, and I wonder what it might be…
A fresh new year and it is time for the latest numbers of the Angry Birds phenomenon, and they are impressive indeed!
Most mobile game developers would be quite happy if their game would clock more than 5m downloads. Hell, they would probably throw a massive office party for that! Well, Rovio made more than that in a day (OK, it was Christmas Day): 6.5m copies of the various Angry Birds games (paid and free) were downloaded on 25 December 2011 alone. Woah!
The formidable Stuart Dredge treats us to some more background on Angry Birds. To cut it short: by December 2011, Angry Birds had more than 600m downloads. That is more downloads than people living in all of North America – all the way from Alaska down to Panama! About 1/3 of those are monthly active, 1/8 daily.
Given that they also make money (seemingly nearing $100m in revenues) and not only from games but from selling 1m toys and 1m t-shirts per month, too, it is perhaps understandable that they are said to have rejected a $2.25bn acquisition offer by Nasdaq newbies Zynga. I can understand that they may not have been too thrilled to work under the hard-charging (according to some, too hard-charging) “CityVille-ains” but I still wonder if that would not have been a worthwhile cash-in (though it would arguably have been a share deal and Pincus only knows what on which valuation of Zynga that would have been based!).
Rovio has great plans, they are hiring senior entertainment talent (Dave Maisel of Marvel fame for instance), they are diversifying quickly, they execute with adorable flawlessness. But they have not yet shown that they are capable of repeating the creative spark with equal vigour and verve. On the one hand, they are a very, very talented bunch (I published games by them previously: great content and lots of polish). And they have some serious reach now, which gets them a lot of promotional punch. They have also been great in getting out on as many platforms as possible to make sure to fuel the brand as a true mass market proposition rather than contentedly sitting on iOS only and being happy with that niche (bear in mind that J2ME is still many times larger than iOS in terms of reach; for brand awareness of a consumer brand, this is a crucial factor).
However, it is a hit business, isn’t it? And I doubt there is a recipe (or that Rovio has it): Anecdotally, Chillingo, the publisher of the original Angry Birds on iOS (subsequently acquired by EA), uses its Chillingo label for the “premium” games and their Clickgamer for the rest. Angry Birds was published under the Clickgamer label. So did anyone know? I don’t think so.
I would love to see them thrive because they deserve it: they are a hard-working and lovely bunch. So go, my good folks, mighty Eagles, Albatrosses and the whole swarm!
There seems to be a new round of buzz around the good old HTML5 vs native debate or, in other words of web vs apps. We had a Mobile Monday session in Manchester (@momomcr) on this, debate on ForumOxford is flaring up again, and more… So I thought let’s do this again and see – if anything – changed since I posted about this (for the record: here’s the first post from 2009 and the second one from 2010). Where has the battlefield moved to in the interim?
Mobile apps must die
There has been (as you may have sharply derived from this post’s title) a post from Scott Jenson, the Creative Director of Frog Design (they of much Apple fame – you know, they designed the Apple IIc and such), which he entitled – somewhat combattively – “mobile apps must die”. His argument is, in short, that the mobile desktop cannot cope with the plethora of native apps (or app icons?) and that it would be much better to use dynamic “use it and lose it” approaches for which the web is perfectly suited. He starts of on the value vs pain paradigm: if the balance is less than 0 (i.e. value exceeds pain), the solution wins. And he posits, that native apps don’t do that.
I am not doing the intellectual argument Scott poses any justice here (and I will pick up on some more points further below), so please make sure to read his post!
One size does not fit all
The challenge is to find a universal solution, I suppose. Jenson focuses merely on apps that – arguably – make a user’s life better if and when he/she is out and about and is looking for utilities to help mundane tasks/etc. There are tons of fairly one-dimensional apps for that: a retailer app for their catalogue, London tube map, some couponing app, a mobile banking app, apps using NFC, Bluetooth, camera (QR readers) and more. There will also be more complex ones: fancy AR-powered things, things like Foursquare (anyone near?), etc, etc. So, is this painful? Yes, it is. Would it be better if there was a seamless universal (cloud-based) solution that would make it “just so”? Oh, by all means.
BUT… it would not solve all use cases for smartphones (or mobile computing in general). There are tons of applications and use cases that are not the out and about equivalent of a Google search (and, yes, I am fully aware that 40% of Google mobile searches relate to locations), and I would posit that one has to judge each one on its own merits.
UX
The starting point should always be the user experience. Jenson points out correctly that this is not only about the perceived value of the product or service in isolation but it is more of a function: if the perceived value exceeds the pain to use it, it works. If pain exceeds the perceived value, it doesn’t.
But it is this very statement where things with Jenson go horribly astray. There is a reason why Apple has not yet moved Keynote to a cloud-based SaaS solution but keeps selling it as a stand-alone app: because it works better. The perceived value of using the product far exceeds the pain of having to download and install the application.
Tackling the shortfalls
When looking at the UX chain (from product to discovery, maintenance, management and use), there is more than one answer to shortfalls of some of these elements. Rather than moaning about distribution and app management, one can also improve those processes. The OS-based app store model all but replaced the carrier stores for smartphones now, and why? Because the end-to-end solution is less painful (not only for users of the apps but also for its producers!).
It is possible to draw a map of this (and I would if I possessed more artistic skill) where you could derive on what is right for you: if you need access to hardware APIs (camera, 3D acceleration, Open GL ES, etc), native might be your way (one of the reasons why you are not seeing higher-end HTML5 games in large numbers yet). If you capture light-weight information-heavy content that relies on dynamic updates, a web “app” might be good for you, in other cases, a native app with some functionality coupled with a container for web functionality might be the right way.
So there we have it: it still is the old “it depends” answer. Having said that, with webkit and HTML5 adding functionality all the time, ever (?) improving bandwidth and better compliance on the browser side, the usecases for native apps will likely get less over time. Will it happen in full swing in the next 18 months or so? I doubt that very much.
Some weeks ago, I spoke at the most excellent Mobile 2.0 Europe conference in Barcelona (I had posted a slideshow of the slides to the talk). Now the good folks of Dotopen, who organised the event, now made a video of my talk available. After watching it, I will say that one never stops learning 
. However, perhaps you will enjoy it anyway. Here it is:
Volker Hirsch from dotopen on Vimeo.
Last week, I moderated a panel at Mobile 2.0 Europe in Barcelona on “How to Make Money as a Developer”. Interestingly, there was no developer on the panel… However, there were representatives from Orange’s Partner Programme and from Telefonica, and I asked them if they would move from the “classic” 50/50 carrier revenue share (no one confirmed or denied the accuracy of that classic share of course) and, whilst they were clearly not willing to confirm anything (they probably couldn’t, to be fair), they did indicate that a revision of legacy models was under way in view of the not so new anymore challenges of app stores with their – now prevailing – 70/30 split in a developer’s favour.
This week, Vodafone came out a little more openly: at MEM, their Content Services Director pondered to
give [...] it back to the developers to let them monetise it.
The big one then followed. She said – and this must be close to an industry-first – that carriers
don’t necessarily have to drive towards revenue for all of that content.
And that is the real point: I have long been arguing that the real value of (great) content to carriers may not lie in incremental revenues (be it 50% or 30%) but in softer albeit much, much more important values, namely marketing, positioning as well as customer retention.
An example: a couple of years ago, we shipped a whole suite of X-Men 3 content, game, wallpapers, tones, you name it. The launch was, of course, around the movie launch (which was tremendously successful) and we had carefully crafted marketing plans including many brand partners (20th Century Fox, Activision, Panini, etc). We managed to drive some exceptional campaigns to which carriers in a lot of countries contributed serious marketing dollars. Did they do this in order to obtain an SMS-margin-matching ROI? Not in the strict sense. To them, this was brand extension and affiliation. And, boy, did it work!
Carriers biggest trouble is ARPU and customer churn. I am not sure about the latest numbers but for years the annual churn was reaching towards a third. And that is real money. If you can reduce churn by only a few points if you provide your users with great content services, you will see your money back many times. It is (brand) marketing, not incremental revenues that make it.
Now, as long as the content guys have revenue targets, the (normally very mighty) CFO of a carrier will ask painful questions on ROI and margins; and they will always come up short. Classify it as a marketing task though, and you’re looking really good: effective marketing that should yield measurable results at no cost. Hang on: at negative cost. How cool is that? I know that many a content guy at a carrier agrees with me here. Would they ever admit as much in public? You must be kidding me.
It is therefore good to see that Vodafone starts thinking publicly about alternative approaches with a view to strengthening and/or supporting their core business. Now put it in motion, folks! 
