17.VisionMobileDeveloperEconomics_2011 by ICLM Chile

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Contents

About VisionMobile VisionMobile is a leading market analysis and strategy firm, for all the things connected. We offer competitive analysis, market due diligence, industry maps, executive training and strategy, ranging from the industry's hottest trends to under the radar market sectors. Our mantra: distilling market noise into market sense. VisionMobile Ltd. 90 Long Acre, Covent Garden, London WC2E 9RZ +44 845 003 8742 www.visionmobile.com/blog Follow us: @visionmobile

Key takeaways

Chapter 1: Developer Mindshare: winners and losers in the platform race

Chapter 2: Taking applications to market

Chapter 3: The building blocks of mobile apps

Chapter 4: Brands go mobile

About BlueVia BlueVia is the new global developer platform from Telefonica that helps developers take apps, web services, and ideas to market. BlueVia is built on four Founding principles: Scale, Tools, Business Models, and Path to Market. BlueVia offers ground breaking, zero risk, business models for developers, along with 'mix & match' models to create multiple revenue streams.

License

Also by VisionMobile

Licensed under a Creative Commons Attribution 3.0 License. Any reuse or remixing of the work should be attributed to the Developer Economics 2011 report.

Mobile Industry Atlas | 4th Edition The complete map of the mobile industry landscape, mapping 1,350+ companies across 85+ market sectors. Available in wallchart and PDF format. www.visionmobile.com/maps

Disclaimer VisionMobile believes the statements contained in this publication to be based upon information that we consider reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. Opinions expressed are current opinions as of the date appearing on this publication only and the information, including the opinions contained herein, are subject to change without notice. Use of this publication by any third party for whatever purpose should not and does not absolve such third party from using due diligence in verifying the publicationâ&#x20AC;&#x2122;s contents. VisionMobile disclaims all implied warranties, including, without limitation, warranties of merchantability or fitness for a particular purpose. VisionMobile, its affiliates and representatives shall have no liability for any direct, incidental, special, or consequential damages or lost profits, if any, suffered by any third party as a result of decisions made, or not made, or actions taken, or not taken, based on this publication.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

Key messages The race for developer mindshare Use of mobile web accelerates. The last year has seen many twists and turns in the race of mobile platforms to capture developer mindshare. Mobile web as a platform has seen an impressive upturn in usage, and is now in third position in our Developer Mindshare Index. Android and iOS continue to lead with 67% of developers currently using Android and 59% using iOS. Windows is not yet the third horse in the three-horse mobile race. Use of Windows Mobile has dropped among developers in the last year, while Windows Phone is not yet seen by developers as a commercially viable platform. Yet Windows Phone 7 has managed to establish itself in the number two spot after Android in our Developer Intentshare Index, among platforms where developers plan to invest. Microsoft’s advantage comes from the influx of PC and Xbox developers, Microsoft’s best-in-class tools and the promise of a substantial user base with the Nokia deal. Symbian, Java abandoned. Symbian and Java ME are the two platforms with the highest developer abandonment rates; nearly 40% of developers currently using Symbian and 35% of developers currently using Java ME are planning to drop the platforms. Java ME is suffering from negative hype despite having been embedded on more than three billion handsets. Symbian is now officially a platform with an expiry date, with the Nokia Symbian handset line-up set to be discontinued. Experimentation on the rise. Developers are increasingly experimenting with more and more platforms and transitioning to new ones. Developers use on average 3.2 platforms concurrently based on our sample of 850+ online respondents, representing a 15% increase from last year’s figure.

Show me the money Money can't buy you love, but users can! Large market penetration (the ability to reach users) is the most crucial factor for platform selection, important for nearly half of the respondents across all platforms. Meanwhile, the ability to make money was deemed important in platform selection by just a quarter of respondents, alongside the low cost development tools and the ability to quickly code and prototype. Losing money. In the gold rush to the applications economy, not everyone is making money. About a third of respondents make less than $1,000 USD per application in total, which is loss-making given that an application often takes months to develop. Commissioned vs. direct monetisation. Approximately 50% of app developers in our survey make money through a salary or commission, confirming that corporate monetisation is becoming as important as making money directly through applications. For developers making money directly, the top revenue model is pay-per-download, followed by advertising and freemium (free download, then pay to upgrade). Platform revenue potential. Not all platforms are born with equal revenue potential. Our research revealed large discrepancies across platforms in terms of the revenues applications are bringing to developers. iOS topped the chart, making 3.3x © VisionMobile 2011 | www.DeveloperEconomics.com

more money per app than Symbian developers followed by Java ME (2.7x) and BlackBerry (2.4x). Android (1.7x), mobile web (1.6x) were the weakest performing platforms in terms of revenue per app and only ahead of Symbian (1.0). Role of operators. Traditionally, application developers have been cold and uncertain as to the role the operators can play in a software world. While the majority of developers agree that the role of operators is to delivery data access (61%) and voice (43%), there is no consensus on the role of operators in software. Developers across regions disagree on whether operators should be a payment gateway, an API platform, build the best mobile services, or just leave developers alone.

App stores deliver fragmented reach App stores are a one-way street. App stores have irreversibly changed the landscape of mobile app distribution. Today, app stores are the primary go-to-market channel for 45% of mobile app developers across the eight major platforms. Use of other application distribution channels has consistently declined across the board. Moreover, operator portals, whose ‘walled gardens’ once dominated content distribution, are now paling in significance compared to app stores. App stores deliver reach. Reach is by far the most important reason behind developers’ preference for app stores as a distribution channel. More than 50% of developers distributing through Apple, Google, Nokia or BlackBerry app stores cite the ability to sell to more users as the primary reason for app store selection. App store fragmentation is an under-hyped challenge for developers. Each of the fifty-plus app stores available has its own developer sign-up, app submission process, artwork and paperwork requirements, app certification and approval criteria, revenue model options, payment terms, taxation and settlement terms. The marginal cost of distributing an application through one more app store is significant, contrary to popular perception.

One size doesn’t fit all Developer segmentation is as sophisticated as consumer segmentation. But in whatever metric or measure is used, one needs to acknowledge that there are several types of “developers” out there, from hobbyists and students, to start-ups, self-financed professionals, commissioned developers, digital agencies, system integrators, as well as developers working within established businesses developing B2B or B2C apps – all having different incentives, aspirations, priorities, needs and wants. Attracting talent. Developers who are experienced with PC/Internet software development are jumping into mobile. However, our research shows that aside from Apple and Microsoft, platform vendors are not attracting enough developers with experience in mobile or PC/Internet development. Developer-market balance. Android is the one and only platform that is trilaterally adopted by developers across all three major continents active in application development - Europe, North America and Asia. On all other platforms, there is an imbalance of developer supply and market demand across the globe. iOS is lagging in developer mindshare in Asia while BlackBerry developers are almost completely lacking

in Europe. The traditional sweet spot for Java developers has moved out of Europe to emerging markets, with 42% more respondents coming from Asia, Africa and South America. Flash Lite has weak supply in South East Asia where the platform can deliver best-in-class experiences on mass-market phones.

Building mobile apps Learning curve. Contrary to popular perception, mobile web isn’t such an easy platform to learn, ranking sixth in terms of learning curve. This is due to the need for web developers to learn a complex stack of languages and technology frameworks across client and server environments, in addition to having to battle with the challenges of cross-browser portability. Fragmentation. Despite the bad press, Google is managing to contain Android fragmentation relatively well. On the contrary, it’s BlackBerry and Java ME that exhibit the greatest amount of fragmentation, with BB and Java developers needing to produce almost twice the number of app versions compared to Android developers. Localisation. Localisation will soon become a fundamental issue for mobile developers, as it becomes easier to distribute apps globally, and to develop regionallysensitive apps and content like news, music and social networks. Developers who are accustomed to creating apps for global distribution (for example Java ME developers) in their majority are reporting localisation issues. Cloud APIs. Cloud connectivity is not just a fad among developers; it’s also where a lot of the innovation is taking place. We found that iOS, Android and mobile web developers are the most active users of cloud APIs, while BlackBerry and Java developers were the late adopters of the ‘cloud’. Multi-screen future. The developer ecosystem is gearing up for a multi-screen future. In our research, almost 50% of respondents who develop for smartphones also develop for mid-range (messaging and Internet capable) phones. Nearly 25% of Android, iOS, Java, mobile web and Qt respondents are planning to target TV and settop boxes in the future. Moreover, our research confirmed that mobile web is also the most versatile platform, with mobile web developers currently targeting on average 2.5 different screen types.

Brands drive mobile Brands go mobile Where there is a company website or a corporate intranet today, there will be a mobile app tomorrow. Such is the momentum behind consumer brands and virtually every self-respecting company out there, whether it’s B2C apps for enhancing the core business, or B2B for mobilising the corporate intranet. More importantly, while app stores kick-started the mobile app economy, it is brands that are now fuelling it. Brand journey through mobile. Despite the diversity across verticals and regions, we found that all companies go through a three-stage journey as they extend their digital strategies into mobile. In their first steps in going mobile, “newbie” brands think of an app as a way to ‘advertise’ whatever product or service they are providing. As they get Street Smart, brands ask, “How can we use apps to drive our core business?” And

finally as Connoisseurs, the question becomes “Can we turn apps into a new, revenue generating business?” The platform conundrum. For brands, extending their presence to mobile is a very different beast, compared to any other digital medium. Whereas on the web one needs compatibility with two or three mainstream browsers to reach 80% of users, going mobile means using the top three or four mainstream native platforms (iOS, Android, Symbian and BlackBerry) to reach just over 20% of the devices sold, on average. Platform priorities For companies going mobile, platform priorities are mixed, but the core challenge is common – market penetration and reach across the customer base. Organisations developing B2C apps (targeted at consumers) are extending their offering first Apple and then to Android, to mobile web, to BlackBerry and finally to Windows Phone 7. For B2B apps (applications paid by the corporate IT manager or CIO), HTML is already the platform of choice- not just for deployment on mobile web browsers, but also by converting HTML and JavaScript into native iPhone and Android apps using tools from companies such as Appcelerator, PhoneGap, RhoMobile and Sencha.

About Developer Economics Welcome to Developer Economics 2011, the quintessential mobile developer research report. In this second annual report, we explore both what drives developer mindshare, and how brands are fast-forwarding into the world of mobile. Developer Economics 2011 takes the reader across the entire developer journey, from the shift of mindshare and why “users can buy you love,” to how money is made in mobile. It covers the hottest issues, from app design and promotion to monetisation and user support. In this year’s research, we have delved into the world of brands that are going mobile, to understand what makes them tick, and how they are planning to conquer the mobile world. While app stores initially kick-started the mobile app economy, it is brands that are now fuelling it. We spent the last few months quizzing developers and industry executives about the future of mobile. Our research included 20+ industry executives, along with 900+ developers from 75+ countries working on 8+ major platforms. We believe our work has yielded important insights about the future of mobile development and hope you enjoy reading this report as much we enjoyed writing it! Matos, Elizabetta, Andreas, Michael, Anne and Vanessa at VisionMobile. @visionmobile www.visionmobile.com/blog

Thank you! We‘d like to thank the executives and developers who helped make this report a reality – those who spent the time on the phone or online to offer a glimpse of the world through their eyes, with its ups and downs. You know who you are. We’d also like to thank the many companies who helped us reach out to developers – Distimo, Enough Software, Flurry, Funambol, GetJar, LiMo Foundation, MEX, Microsoft, Mobile Monday London, Nokia, Oracle, Qualcomm, RIM, WAC, WIP – without which we would not have been able to reach such a diverse spectrum of developers. And of course – a huge thank you to James Parton and the team at Telefonica, without whose financial support this research would simply not have been possible.

Welcome to Developer Economics 2011 How quickly time flies! Last year we, like VisionMobile, felt there was a real gap in the market for a piece of research that credibly identified the issues facing developers in the mobile space. Based on the response to 2010’s inaugural report, it seems you agreed with us. The success of the publication really surpassed our expectations. The report was downloaded over 10 thousand times, while TechCrunch called it “one of the most profound [reports on mobile development]…to date”. We’re delighted to be supporting the project once again in 2011, as this allows the research to be made freely available for download. Telefonica remains steadfastly committed to understanding the needs of developers, in order to help shape the BlueVia roadmap, and 2010’s Developer Economics findings were a key input into the thinking that produced the initial release of BlueVia. This year’s edition delves into the hottest issues in mobile apps: which platforms gained and lost developer mindshare, what are the most popular revenue models, which go-tomarket channels are the fastest to pay, how apps in smartphones vs. tablets vs. TVs will play a role in the future, and more. We have more than doubled the number of respondents, compared to 2010’s research, with developers now representing 75 countries. For the first time, we have added insight into digital strategies from over 50 leading international and regional brands, through 20 one-to-one interviews with digital agencies, media, retail and Internet companies. I hope you enjoy reading the report as much as we have enjoyed working with VisionMobile to deliver it. James Parton, Head of BlueVia Marketing @jamesparton www.bluevia.com

Research methodology The Developer Economics 2011 research was conducted between January and April 2011. The research is based on a large-scale online developer survey, developer interviews, and interviews with industry executives working in commercial organisations and digital agencies. Among the 900+ participating developers, 850+ took our online survey. These developers represented 75 countries, across eight major platforms: Android, iOS, Windows Phone, Symbian, Java ME, MeeGo, mobile web (HTML and JavaScript) and Qt. Each platform was represented by at least 50 developers who reported spending the majority of their time on that platform. To remove platform bias, we averaged all results presented in this research across these eight major platforms. The developers that took part in our online survey came in their majority (90%) from Europe, North America and Asia while another 10% came from South America, Africa and Oceania. Respondents included both novice and seasoned developers, with an average of three years mobile experience, and six years PC development experience.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

Developers had a mix of roles, with 50% involved in a technical role, another 25% employed in a commercial role, and 20% being hobbyists. Note that many respondents were winners and runner-ups of developer awards, including Nokiaâ&#x20AC;&#x2122;s Calling All Innovators and the Android Challenge. Respondents also included five Microsoft MVPs, and 16 Forum Nokia Champions. In addition to the online survey, one-to-one interviews were carried out with over 40 developers. This group ranged from hobbyists to CEOs of games companies, and from one-person startups to technology giants. Moreover, 21 one-to-one interviews were carried out with senior executives from a wide spectrum of commercial organisations and digital agencies. All the executives we talked to had decision-making authority, and the majority worked within or with marketing and strategy departments. Sectors covered directly or indirectly included digital agencies, media, retail, pure Internet, telecoms, FMCGs (fast-moving consumer goods), sports, banking & financial, marketing & communication, health, automotive, travel, leisure, and music.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

WHO IS WINNING THE RACE?

1. Developer Mindshare: winners and losers in the platform race The impact of apps and software ecosystems in the mobile industry has been nothing short of astonishing. Apps have turned the handset manufacturer business upside down in the last two years, as players with strong software ecosystems like Apple and Google replaced the weakest of the 'old guard’ in the leaderboard of top-five handset vendors by unit sales. Nokia had clung for too long to the 10-year-old Symbian platform – and at the last minute it had to “jump off a burning platform” by partnering with the lesser of two evils (Microsoft rather than Google) to salvage its smartphone line. Sony Ericsson and Motorola failed to recapture the glory of the RAZR and Cybershot days, and are dropping off the top-ten chart.

The total market share captured by the top-five handset OEM leader-board has shrunk from 80% to under 60% in less that two years, as Apple stormed the high-end smartphone market and modular platforms from Google and MediaTek made it possible for tens of low-margin assemblers to take up around 30% of global handset sales. The number two and three handset OEMs Samsung and LG are the only ones who managed to survive with only minor scratch wounds, maintaining their sales ranking by aggressively responding to mobile operators’ demand for smartphones with numerous Android phone and tablet models. Software has also disrupted the network operator world in many ways. Today, software innovation outpaces network innovation by at least a factor of five: application developers often reach market in only three to six months, while operators take 18-24 months to launch a new service. In other words, it has become impossible to innovate outside software. Any such innovation will be outrun and marginalised by more agile, more nimble software-led players. More importantly, software-led players like Apple and Google have benefited at the expense of the very network operators who funded their entry into mobile; the vast majority of Android handset models produced in 2008-2010 have been sponsored by operators in order to attract new subscribers, while the majority of iPhones have been subsidised as part of a 12-24 month telco contract. It is these same software-led players that are now competing with operator services and challenging their established control points, including location look-ups, billing, service discovery, authentication. Softwareled players are even questioning the operator hold on mobile termination (see Google C2DM) and subscriber activation (see soft SIMs). As telecoms players are dragged to the software era, network operators and handset OEMs need to become ‘platforms’ (enablers) for developer innovation. They also need to rebuild their strategies on the game rules of software economics, as we shall see next.

The impact of software economics The single biggest surprise that software has brought to the mobile industry has been the change of economics – from supply-side economies of scale to demand-side economies of scale. The mobile industry has been built from the ground-up on supply side economies of scale; billion-dollar investments behind handset vendors have created production powerhouses where the few are able to dramatically drop supply and manufacturing costs. This is why Nokia has been able to buy handset components in far higher volumes and at far lower prices than everyone else, allowing Nokia to dominate emerging markets in terms of price points. Supply-side economics of scale are common sense: the bigger the company, the lower the costs; the lower the prices, the bigger the sales. What software introduced was demand-side economies of scale. Also known as “network effects,” these economies are driven by demand, i.e., the number of users or developers of a software platform. A classic case of network effects is a telephone network: the utility of a network increases with the size of the network. The more users, the more valuable the network is to those users. Software platforms like Windows, Android and iOS operate based on network effects: the more users, the more devices

are sold, the more developers are attracted to the platform, the more apps are developed, the more users, etc. The next diagram illustrates network effects in the case of Google’s Android platform.

The textbook ‘worst practice’ here is Nokia: the Finnish OEM has been excelling at creating supply-side economies of scale. With over 400 million devices shipped in 2010, Nokia can demand unbeatable pricing from its suppliers, and thus has an inherent advantage in cost-sensitive emerging markets. At the same time, Nokia – like most of the traditional top-five OEMs including Motorola and Sony Ericsson - failed to understand the demand-side economies of scale practiced by Google and Apple. For too long, developers were a second priority for Nokia’s Symbian and Java platforms. Lacking in the attractiveness of both its route to market (Ovi) and its platforms, Nokia quickly saw developer mindshare migrate to iOS and Android. Both these competing platforms managed to build self-sustaining network effects of unprecedented scale; for example, Apple reached 10 billion app downloads in the space of 30 months. Eventually, Nokia had to backtrack against 20 years of corporate strategy and outsource its smartphone platform to a coopetitor – Microsoft – whose Windows business has flourished due to network effects.

Winners and losers in the platform race Since the beginnings of the smartphone era, the platform race has never been so fast moving. In the space of two years, Apple’s iOS and Google’s Android have captivated

the attention of users, industry brands and mobile developers alike. Nokia’s Symbian – once the unquestioned king of mobile platforms, having been deployed in over 500 million devices as of Q1, 2011 – is now officially being phased out, while Nokia’s quarterly smartphone sales volumes have for the first time fallen behind Android. Microsoft’s Windows Phone 7 is making a strong comeback thanks to best-in-class user experience and developer tools. However, Microsoft has a challenging year ahead as it tries to stand on the shoulders of Nokia to compete in terms of user base with Apple and Google.

Mobile web (the platform for apps written in HTML or JavaScript) is continually increasing in terms of developer attention and media hype. At the same time, HTML apps can’t compete on equal grounds with native platforms, in terms of user experience or depth of API reach. Meanwhile Java, with its broken promise of write-once-runanywhere, is fast being eclipsed out of the smartphone-centric mobile developer agenda, with Java’s advantages in the feature phone market largely being ignored by developers. All in all, the platform race has not only intensified, but also sped up. Yet, amidst all the industry hype, there is no accurate metric of how mobile platforms are falling in or out of favour with developers. Our Developer Mindshare Index does exactly that, by tracking which mobile platforms are mostly used among developers. The next chart shows the top eight mobile platforms, and how the Developer Mindshare Index has changed in the last year.

The past year has seen many twists and turns in the mobile platforms used most by mobile developers.

Developers are increasingly experimenting with more and more platforms. Developers use on average 3.2 platforms concurrently based on our sample of 850+ online respondents. This represents a 15% increase from last year’s figure, indicating how developers are more willing to experiment with new platforms and actively transitioning to new ones. In parallel, more experienced developers are entering the mobile app economy, which helps boost the average platform numbers. Android and iOS have further solidified their top two positions in the Mindshare Index, and are now established in a league of their own in terms of both developer ecosystem and user base. Apple’s iOS stands at over 350,000 apps and 110 million devices sold, while Android stands at over 200,000 apps and 110 million devices sold, as of Q1 2011. Mobile web as a platform has seen an impressive upturn in usage over the last year, and is now in third position in the Developer Mindshare Index. The popularity of mobile web as a platform is driven by four factors: 1. Mobile web is the primary choice for cross-platform development and for addressing the long tail of device models beyond iPhone and Android. 2. Segments of web developers familiar with HTML and JavaScript development are being attracted to develop for mobile devices. Moreover, web developers deal with fragmentation (resolution, aspect ratio, input methods) as part of their day-to-day work and so are well equipped to deal with the multi-platform nature of mobile. 3. Companies across industry verticals – from brands to banks – who are extending their digital strategies into mobile apps are using the mobile web as a low-cost, massreach platform across devices globally. Similarly, corporate IT departments that need to

take their legacy intranets to mobile devices are choosing mobile web as the default platform. 4. A host of HTML-to-native development tools are helping HTML/JavaScript developers target smartphone native app markets, as well as the long tail of massmarket phone browsers. Examples include Appcelerator, PhoneGap, RhoMobile, Sencha and The M Project. Moreover, native apps can be designed to encapsulate functionality in the form of web content, which eases cross-platform development. Windows is not yet the third horse in the three-horse mobile race. Use of Windows Mobile has dropped among developers in the last year, due to two reasons. First, the older Windows Mobile has been dying a slow death in the last two years, with Microsoft unable to match Apple or Google in terms of device sales or developer hype. A large number of Windows Mobile MVPs (most valuable professionals - the acknowledged community opinion leaders) have been attracted by the strength of Apple’s consumer apps proposition and switched to developing iPhone apps. Second, the newer Windows Phone is suffering from lacklustre sales, estimated at just over three million handsets sold by the end of Q1, 2011, according to Gartner and IDC figures. Java ME and Symbian platforms show a steady mindshare decline. Java ME is suffering from negative hype despite having been embedded on more than three billion handsets. Symbian is now officially a platform with an expiry date, with the Nokia Symbian handset line-up set to be discontinued. Across mobile platforms, Android is not just the king of developer mindshare, it’s also the easiest platform for developers to experiment with. This is for several reasons: 1. Android has fewer restrictions on ‘deep’ APIs like access to the home screen, multimedia codecs, SMS texting, telephony and streaming functions when compared to the iPhone. 2. Android Market offers instant publishing, versus Apple’s ‘undocumented’ app approval policy. That allows developers to iterate quickly on Android applications, versus waiting for Apple’s approval process to complete. 3. Applications on the Android are easy to sideload (i.e., to install from a connected PC, rather than from an official app store). This facilitates beta testing among peers, without having to meet quality standards needed for publishing an app to the Apple App Store. What’s even more telling of the future of the platform race? Our Developer Intentshare Index, tracking the top-eight mobile platforms developers are planning to use. Combined an indication of which platforms developers are abandoning, it shows the ebb end flow of developer interest across mobile platforms. Despite being a young, six-month old platform, Windows Phone 7 has managed to establish itself in the number two spot, claiming nearly 35% in the Developer Intentshare Index. Microsoft’s advantage comes from the strength of the XNA and Silverlight developer tools and the promise of a substantial user base with the Nokia deal. Microsoft has also cleverly targeted its Windows Phone platform - not to existing Windows Mobile developers who are disillusioned with the legacy platform, but to

previously untapped segments of desktop and games (Xbox) developers, which are new to mobile. Google’s Chrome OS ranks highly with the promise to follow Android’s market penetration with nearly one in four developer stating they plan to use - Google’s Chrome OS ranks highly with the promise to follow Android’s market penetration with nearly one in four developer stating they plan to use the platform. MeeGo and Qt still garner developer optimism. Nokia has left developers with no guidance as to the future of MeeGo and Qt, and yet developers show more interest in these two platforms than BlackBerry, on which RIM is spending hundreds of millions in acquisitions. As the platform abandonment chart shows, Symbian and Java ME are the two platforms with the highest developer abandonment rates; nearly 40% of developers currently using Symbian and 35% of developers currently using Java ME are planning to drop the platforms. The Java ME abandonment comes as no surprise: neither Oracle nor Sun have spent any marketing dollars visibly promoting the Java mobile platform. Moreover, what’s been missing in Java ME is the direct-to-consumer distribution channel (a.k.a. app store), which Sun did not have the vision or commitment to introduce. In the case of Symbian, Nokia dealt an epic public relations blow to its own platform, announcing on February 11 it would put all its smartphone eggs in the Microsoft basket.

“Windows Phone development tools are first class - for example both designers and developers can work collaboratively on the same project. This level of sophistication isn’t available on either iOS or Android.” Andreas Tsouchlaris R&D Manager Binary Logic

The Palm OS and WebOS mindshare decline is also to be expected, given that HP has managed to convince neither the mainstream media nor developers that it can compete as a platform vendor in a game where the rules are defined by Apple and Google.

Qualcomm’s BREW is perhaps the biggest surprise amidst platforms being abandoned. With the latest BREW MP platform, Qualcomm made a platform investment of hundreds of millions of dollars, including a development team of over three hundred people. And, it managed a major feat, in closing deals for AT&T and Verizon feature phone devices. Yet, with BREW remaining an aging development environment, Qualcomm has not managed to retain developer mindshare and compete in the new rules of the game, where apps and APIs matter over and above devices and carrier deals. Already 25% of respondents using BREW are planning to abandon the platform. Before WAC has managed to ship its first device (see our case study on Smart’s Netphone), developers are already abandoning the widget-based, operator-backed platform. This comes as little surprise given the poor track record of operator-driven software platforms, including SavaJe, the i-mode alliance, LiMo Foundation, and now WAC. Creating a developer ecosystem requires very different culture and organisational DNA than what’s needed to build a telecoms network. Flash is another platform that appears to be losing the battle for mobile developer mindshare. While overall mindshare for the Flash platform increased in 2011, we believe this is due to new segments of ActionScript developers and Flash designers who are starting to develop for mobile. In parallel, Flash runs sixth among platforms developers plan to abandon. The root cause is nothing else other than Adobe’s own mobile strategy, who much like Sun failed to materialise the vision of a write-once-run-

everywhere platform. We argue that the failings of Adobe’s strategy can be traced to three reasons:

“Flash Lite is in decline and many development houses have closed shop. We ‘re one of the few Flash Lite companies still running because we have been able to keep ourselves small.”

a. Reach over consistency. Adobe overprioritised reach over consistency in deploying its Flash Lite across mobile platforms. Despite Stefan Wessels having Flash Lite deployed across more than Co-founder one billion handsets, the platform ended up Breakdesign being fragmented, inaccessible to developers and with an aging platform installed base. As such Adobe had to scrap Flash Lite and start from scratch with Flash on mobile.

b. Old-school culture. Adobe has traditionally had a US-centric, media-conglomerate culture, contrary to Macromedia whose Flash Lite platform Adobe acquired. By being US-centric, Adobe has been unable to realise the opportunities in developing regions such as Asia. Moreover, by focusing on large business partners, it has been unable to cultivate momentum among developers in the long-tail. Last but not least, Adobe has not been playing fair with their developers, for example closing APIs in favour of exclusive commercial deals around those APIs or shutting down products like Flash Cast, completely. As a an old-timer Flash Lite developer notes, “you can never rely on Adobe to put developers ahead of its commercial interests.” c. Platform complexity. Adobe’ introduced a complex platform (ActionScript 3) which alienated their designer, non-programmer developer audience who has since been moving to native platform alternatives like iPhone and Android. At the other end of the application economy, brands and companies across verticals have had a slower, less refined approach to platform selection. Apple and, to a certain extent, Android are the preferred entry point for brands and publishers who want to extend their digital strategies to mobile with a ‘premium’ experience. Moreover, as brands and organisations increase their understanding of mobile, so their digital strategies demand reach into the mass-market. This demand for reach is usually served through three means: mobile websites (developed internally or outsourced), and in some cases use of mobile app publishing platforms (e.g. Communology, Conmio, Mobiletech) or magazine-style publishing platforms like Flipboard, Taptu and Zite.

Users can buy you love Developer mindshare has indeed shifted greatly within the last of 12 months. But what are the drivers of platform selection? In other words, what makes developers invest time and effort in this or that platform? Is it a question of money, features, fun or reach? We found that developers have become even more business-savvy in the last year. Among the top five reasons for selecting a platform, there is just one technical reason and four commercial ones, as shown in the next graph. Money can't buy you love, but users can! Large market penetration (the ability to reach users) was the most crucial factor for platform selection: half of the respondents across © VisionMobile 2011 | www.DeveloperEconomics.com

all platforms thought that market penetration was the top reason for platform selection. Meanwhile, the ability to make money was deemed relevant by just a quarter of respondents. In fact, the ability to make money, on average, is no more important than the ability to code and prototype quickly. Interestingly, the scoring of platform criteria doesn’t change significantly across developers with a technical role, compared to those working in a commercial role within a development house. The only notable difference was that revenue potential as a reason for platform selection was, understandably, twice as important for developers with a commercial role than for hobbyists. Platform selection criteria do not vary significantly by company size, either. The only notable insight is that as companies grow, platform selection criteria shift away from market penetration and into prioritising the platform the client has requested. However, before platform vendors go out and start adapting their marketing messages to emphasize user reach, there is some very important small print here: platform selection criteria differ considerably across developers using different platforms. For example, platform selection for iOS developers is heavily skewed towards commercial criteria. On the contrary, for Windows Phone developers the selection is heavily skewed towards technical criteria, an indication that Microsoft does not yet have a commercially appealing platform. The next chart shows the importance of the top two commercial and top two technical criteria for platform developers, relative to the average, across the top-eight platforms.

“Low cost of entry is critical for a new platform. For a small company, the main considerations in adopting a new platform are the cost of porting and hitting the max amount of users with a single version.” Roger Nolan CTO at Ambient Industries, producer of the Flook location browser.

Preparing for a multi-screen future It’s no secret the vast majority of mobile developers are targeting smartphones. Most of the news buzz these days is focused on Android and iOS. But beneath the veneer of ‘smart’ devices, the developer ecosystem is gearing up for the multi-screen future where smartphones are no longer the ‘cream of the crop’ amongst the digital channels to consumers. In our research, almost 50% of respondents who develop for smartphones also develop for mid-range (messaging and Internet capable) phones. Moreover, we saw a four-fold increase in the number of developers planning to develop apps for TV or set-top boxes, indicating that the market for living room apps is developing momentum. Nearly a quarter of Android, iOS, Java, mobile web and Qt respondents are planning to target TV and set-top boxes in the future. It is widely accepted that mobile web is the prevalent choice for multi-screen app development. Our research confirmed that mobile web is also the most versatile platform. Mobile web developers currently target on average 2.5 different screen types, ahead of Android and Qt developers, each of whom targets 1.8 screen types on average. Besides the mobile web, there is no other mainstream platform today designed for

“Programming and UI metaphors are very different on all platforms (iOS, Android, WP7).. in practice the code reuse is minimal between the platforms. We ‘re actively looking at HTML5 for multi-platform development.” Mobile software developer, working for a leading UK news publisher

cross-screen development. “Programming and UI metaphors are very different on all platforms (iOS, Android, WP7).. in practice the code reuse is minimal between the platforms. We ‘re actively looking at HTML5 for multi-platform development.” notes a mobile software developer working for a leading news publisher in the UK. Java, the king of cross-platform apps, has lost its allure. Java developers come third in planning to target multiple screens. Moreover, Java developers show a very strong intent in transitioning from mid-range to smartphones, away from the stronghold of the Java platform. The next graph shows the developers currently targeting different screen types. Currently iOS developers show strongest preference for targeting smartphones, whereas Java developers show strongest preference for targeting mid-range phones. But future intent is very different; iOS and Blackberry developers show least interest in a multi-screen future, whereas Qt and Android developers show most interest towards coding for multiple screens.

Mobile developers: one size doesn’t fit all We know by now that not all developers wear a ponytail, khaki shorts or propeller beanies. Such misconceptions date from the days when software engineers were perceived as unsociable geeks sitting in a back room, and never talking to their customers. Most network operators, handset OEMs or consumer brands often use the word “developer” to attach a label to anyone developing mobile applications, whether a hobbyist or a programmer within a Fortune-500 company. However, in today’s world, where developers are the foremost mobile innovators, we need to become more savvy in understanding who exactly these “developers” are. There are many ways to segment “developers”: by geographical region, platform used, level of experience, criteria for platform selection, by the category of applications they are developing or by industry verticals they are catering to. Developer segmentation is as sophisticated as consumer segmentation. But in whatever metric or measure is used,

one needs to acknowledge that there are several types of “developers” out there, from hobbyists and students, to startups, self-financed professionals, commissioned developers, digital agencies, system integrators, as well as developers working within established businesses developing B2B or B2C apps – all having different incentives, aspirations, priorities, needs and wants. We next look at some of the ways developers differ based on app categories, level of experience and geographical location.

Application categories matter Developers focus on different app categories based on their primary platform. We found that business apps are particularly popular among Windows Phone developers, but equally unpopular among Android developers. Entertainment apps are popular among iOS and Qt developers. Games are popular among Qt and Java developers, but rare among mobile web and Windows Phone developers. This implies that platform vendors need to cover their soft spots, in terms of app categories that developers are less active in. Operators, meanwhile, need to tap into the right developers to address their service portfolio. Finally, for developers, genre gaps on specific platforms may provide opportunities to stand out.

Experience matters Every self-respecting software platform today needs to have a fast learning curve (more on that in Chapter 3). At the same time, there’s no substitute for experience – and the distribution of development experience is anything but balanced across the developer ecosystem. We see platform vendors lacking sophistication in their targeting of the developer ecosystem as we discuss next. With the shift away from Symbian, Nokia is bleeding high-calibre mobile developers. Symbian developers are on average the most experienced in mobile software, with these developers being 15% more likely to have seven-plus years of mobile experience. We can also quantify the signs of Apple’s allure towards experienced PC and Internet developers, since the iOS platform attracts significantly more developers with sevenplus years PC/Internet experience, compared to other platforms. This confirms that experienced software developers are moving into mobile, using iOS as an entry platform, in what we believe is driven by the sudden rise in demand for developer talent, especially in North America. Since launching in late 2010, Windows Phone 7 has done pretty well in attracting seasoned developers. We see experienced mobile developers coming to Windows Phone, with a significant bias of current Windows Phone developers having between three and six years of mobile experience - an indication that Microsoft’s strategy to tap into PC and Xbox developer segments is paying off.

In conclusion, developers who are experienced with PC/Internet software development are jumping into mobile. However, our research shows that aside from Apple and Microsoft, platform vendors are not attracting enough developers with experience in mobile or PC/Internet development.

“Entry to Android is very very easy. There will be a stampede of developers on Android.” Kishore Karanala Experienced Symbian developer Teleca India

The developer-market mismatch We firmly believe software innovation will not just be global; like news and music, we believe that mobile apps will follow a regional route. That is, most popular mobile apps will be local (or locally adapted) apps. As such, it is important for platform vendors and OEMs to cultivate and capture local developer talent and mindshare. Yet, we are seeing many regional gaps across the mobile developer ecosystem where developer supply doesn’t match market demand, especially on BlackBerry, Java and Flash Lite platforms. BlackBerry developers are naturally concentrated in North America, with 16% more respondents from that region; but in addition, they are almost completely lacking in Europe. This reveals a major gap in RIM’s developer marketing efforts. The traditional sweet spot for Java developers has moved out of Europe to emerging markets: Asia, Africa and South America, with 42% more respondents from these regions. This is due to low penetration of iOS and Android in Asia, Africa, and South America, and also to Java having suffered from negative hype in the traditional development hubs of Europe and North America. Flash Lite is another platform that exhibits a huge gap between markets (demand) and developers (supply). The sweet spot for Flash Lite is in emerging markets where the platform delivers best-in-class experiences on mass-market Nokia Series 40 handsets and not on the iPhone or Android platform where Flash can’t compete with native apps in terms of user experience. Yet there are very few Flash developers targeting such emerging markets. “We are one of very few developers for Nokia handsets in the South East Asia region. The Flash Lite theme market for low-end phones is a blue ocean,” notes Stefan Wessels, co-founder of Breakdesign, a company with more than 7 million app downloads. Android is the one and only platform that is tri-laterally adopted by developers across all three major continents active in application development: Europe, North America and Asia. “Entry to Android is very very easy. There will be a stampede of developers on Android” notes Kishore Karanala, a seasoned Symbian developer with 5+ years of mobile app experience working for Teleca India. In contrast, iOS is lagging in developer mindshare in Asia, due to the relatively low penetration of Apple devices in Asian countries.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

WHERE IS THE MONEY?

2. Taking Applications to Market The developer journey The life of a mobile developer is a complex one. It’s not just a two-step, idea-to-app process. In today’s global application market, there are tens of steps in taking an idea to market – including planning, developing, debugging, support forums, test frameworks, packaging, pricing, publishing, billing, marketing, sales tracking, user support and application updates, to name just a few. To illustrate the intricacies of app development, we’ve put together the Developer Journey, a chart showing the tens of touch points in the life of a mobile developer. The Developer Journey is an important tool, not just for appreciating the complexity of mobile development, but also for helping platform vendors map the competitive landscape of supply and demand, and understand how to differentiate. The Developer Journey consists of the following six stages. Note that the Developer Journey presents a comprehensive model covering every possible touch point – which implies that most developers will selectively touch on some of the stages below, but not all.

1. Application planning is the stage where a developer takes a concept through the initial stages of feature design, prototyping, selecting the right platform, and designing for the right users. 2. Develop & debug, is where the hard work takes place: coding the application, designing the UI, testing and porting. This stage is where the vast majority of developer programs are focused today. 3. Market readiness, an often under-hyped part of the developer journey where the application is readied for publishing to the market – including localisation, packaging, variant management, certification and submission. 4. Distribution & monetisation is the stage addressed by app stores. It involves publishing the application, establishing billing and distribution agreements and making money from application sales, ads or other monetisation means. 5. Retailing & discovery is the stage where an application needs to be promoted through as many channels as possible, so as to grab user attention. Retailing is the stage facing the most challenges today, due to the over-supply of applications and the bottleneck of discovery. 6. In-life use is the final stage, in which developers need to track sales and usage analytics, support users and manage ratings, as well as update the application with bug fixes and features. Chapter 1 in this report has looked at the application planning stage. Chapter 3 will look at the develop & debug stage. The rest of this chapter will examine the last four stages of the developer journey, i.e., the challenges and opportunities in taking applications to market.

The application store duopoly In 2011, app stores are a fact of life and they are here to stay. Our research found that use of app stores as a primary distribution channel has surged by over 30% compared to 2010. Today, app stores are the primary go-to-market channel for 45% of mobile app developers across the eight major platforms. App stores have irreversibly changed the landscape of mobile application distribution today. In the last year, use of other application distribution channels has consistently declined across the board; most notable are the year-on-year 20-30% declines in app distribution via third party aggregators, on-device preloads, and via developers’ website. Operator portals, whose ‘walled gardens’ once dominated content distribution, are paling in significance compared to app stores. “Downloads through operator portals are still less than one million per month on average per operator,” notes an executive at one mobile app development house and continues, “Compare that to one billion per-month downloads from the Apple App Store”.

It’s no wonder operator portals have lost their shine. Telcos have typically outsourced their portal operations and development to major IT suppliers who have lacked the culture and incentives to evolve with the times. “The same people who failed in WAP portals are doing operator app stores now,” points out the CEO of a leading mobile app agency in Germany. Moreover, the discovery and purchase process through an operator portal has major drawbacks to modern app stores. “It’s more complex to download a game through an operator portal than to open a bank account,” notes Christopher Kassulke, CEO “What T-Mobile does in one at Handygames, a major app development house. year in terms of downloads, And still, in 2011 – in the era dominated by app we do in one week.” stores and long-tail innovation – there are tier-one Manager telcos who require developers to sign 20-page Top-ten games developer contracts before they can discuss a deal. Use of each channel to market also varies significantly per platform. App stores are used primarily by iOS (77%) and Android (54%) developers. In contrast, mobile web and Java ME developers distribute apps primarily through their own websites and portals, due to the lack of app stores with sufficient reach and discoverability. Reach is by far the most important reason behind developers’ preference for app stores as a distribution channel. More than 50% of developers distributing through Apple, Google, Nokia or BlackBerry app stores cite the ability to sell to more users as the primary reason for app store selection. Exclusivity is not a critical reason for app store selection, either; only one in five Android and Blackberry developers choose an app store because it was the only distribution channel available. Moreover, neither the revenue share split nor the speed of payment are cited as important reasons for distributing via an app store. Support for marketing and promotions is the third most important reason for using app stores as a distribution medium; we expect marketing support to increase in importance as app stores develop more sophisticated targeting and promotional programs.

All in all, app stores dominate over every other distribution channel because of reach, not exclusivity or payment terms. App stores are relatively quick to pay, too. Just over 60% of respondents using app stores get paid within one month from submission. The only distribution channel that’s faster to pay is when developers are using their own website, where 75% of respondents get paid within a month of the purchase. Drilling down into the ins and outs of the four main app stores, our research reveals significant differences across Android Market, Apple App Store, BlackBerry App World and the Nokia Ovi Store – as the next chart reveals. Apple’s App Store has a notoriously unpredictable quality control and curation process during app submission, which causes some dissatisfaction across developers. The mainstream press is peppered with stories of apps whose approval was inexplicably delayed or even rejected when the apps conflicted with Apple’s own agenda. Android, on the other hand, places priority on developers with an automatic submission process with no QA or curation, resulting of course in an increase in ‘noise’ from low-quality and even copyright-infringing or malicious applications in the Android Market. “The problem with Android Market is that you cannot tell if an application is an official app or a look-alike” notes an application developer who’s been developing on Symbian and Bada platforms. “Something needs to change in Android Market to get the quality of apps up to the same level as the Apple App Store” says Roger Nolan, CTO at Ambient Industries, producer of the Flook location browser. The application quality review process is straightforward in the case of Android, but not so for Nokia’s Ovi Store. Developers that we spoke to report that the Ovi Store submission process is cumbersome and unnecessarily restrictive. Due to tough approval criteria, an application typically takes five or more review cycles before it can © VisionMobile 2011 | www.DeveloperEconomics.com

appear on the shelf. Given that the turnaround time for each review cycle is 7-10 days (compared to just 24 hours for the GetJar store), that means that the time-to-market for Ovi Store apps is often 1.5-2 months. Moreover, Ovi Store content needs to be approved on a country-by-country basis. To make things worse, the review cycle isn’t streamlined, which means that each cycle is handled by a different reviewer within Nokia. Another important issue is that the root certificates have not been installed on some S40 handsets (esp. in India), which means that even if an application is approved, it can’t install on the handset. “The only reason we persevere with Ovi is that once we get the app approved, the downloads are quite substantial” notes an application developer who uses a multi-channel distribution strategy. Ovi is not alone in being criticised for its problematic application submission process. “It’s difficult to get a sign-off for Bada apps. Every week we have a new problem with the Samsung App Store, including poor documentation, language barriers and unreasonable control from Samsung, even on application design issues” notes a developer in the UK who has already published four Bada apps.

“Typically it takes 1-2 days to have an app published on GetJar and 24 weeks on the Nokia Ovi Store.” Mark Shoebridge Binu Sydney, Australia

The fragmented app store landscape Besides the four main native app stores – Android Market, Apple App Store, BlackBerry App World, and Nokia Ovi Store – there are hundreds of distribution channels to market. There are over fifty different app stores, and many more if one includes the many operator portals globally. Furthermore, the selection of app stores available varies by region, operator or manufacturer deals.

App store fragmentation is an under-hyped challenge for developers. Each of these fifty-plus app stores has its own developer sign-up process, app submission process, artwork and paperwork requirements, app certification and approval criteria, revenue model options, payment terms, taxation and settlement terms. This implies that the marginal cost of distributing an application through one more app store is significant, contrary to popular perception.

“Eventually apps will evolve to a consolidation of submission and payment mechanisms but a multitude of discovery options. In the world of scarcity you can win a lottery ticket. In the world of abundance, the competition is for attention.” Jai Jaisimha CEO Open Mobile Solutions

Therefore, while the native app store is used by 40-80% of developers (depending on the platform), there is a significant opportunity – and associated cost – in using a multichannel strategy in app distribution. In platforms like Android, where tens of app stores compete for user attention, the picture is quite complicated. Unfortunately, the vast majority of developers do not have the resources to distribute their apps through more than one or two app stores. At the other end of the spectrum, only a dozen or so software houses can deliver apps to the majority of app stores, with that number typically ranging to 70+ app stores. We believe that the app economy needs a single entry point for application submission (one per platform), along with a million distribution channels: - one app submission process, i.e., a single website, single contract, single approval process, single billing & settlement and a single mix of business models per platform - a million distribution channels, i.e., a million different channels through which to retail and sell apps to consumers with a variety of prices, promos, bundles, and regional access that help developers more effectively market their applications. An early role model for this single-in, many-out distribution model is perhaps Amazon. Amazon’s app store addresses many of the challenges of Android Market, including quality control and curation, relevance and recommendations, as well as device compatibility, showing only those apps that are compatible with each handset model. Amazon further leverages its retailing expertise and consumer insights to set the price for each application, between 70% of the sale price and 20% of the list price. More importantly, Amazon offers a wealth of cross-selling opportunities for applications, by listing an application next to relevant digital or physical goods, based on the click-stream of each user and their preferences. Amazon is playing the “doorkeeper” role that operators used to play in the past, but more importantly, is allowing developers to reach out to more users through cross-selling and recommendations mechanisms. We believe that app store fragmentation offers two opportunities. First, for app store brokers with a develop-once-publish-many model, who can take an application and publish it across multiple app stores. Second, for app stores that offer sophisticated marketing and promotional channels that can optimise app pricing based on the user, region or bundle the app appears with.

Getting ready for launch Planning and testing comes before publishing an app. The vast majority – around 90% of developers – use some form of planning or testing technique before publishing their apps, whether it is peer reviewing, beta testing or market research. In fact, developers use two planning techniques on average, irrespective of their primary platform, pointing to how planning is seen as essential for developers to compete within the crowded applications marketplace. By far the most popular planning and testing techniques before app launch are peer reviewing with friends or colleagues and beta testing with customers. Both these techniques are used on average by about 50% of developers. Use of market research has significantly increased in the last year, and is most popular among developers who use app stores as their primary channel to market.

Despite the importance of app planning, most developers still use rather unsophisticated techniques, like peer reviewing, for establishing whether an application is ready for launch. And it’s not a question of price; beyond the use of elaborate, costly techniques, like running focus groups or using scenarios and personas, there are more accessible planning alternatives that exist today that can help in the stages leading to the launch of the app. For example, application analytics (e.g. Distimo, PositionApp) can reveal important competitor intelligence about apps in the same region or genre, while crowd-sourced beta testing (e.g. Mob4Hire, uTest) can offer crucial, unbiased feedback to developers before app launch. The unpopularity of sophisticated planning techniques is due to a lack of awareness marketing and, in some cases, affordable pricing on the part of tools vendors. Some poor planning also results from the ‘not invented here’ syndrome, a not uncommon

phenomenon in which software developers assume ultimate knowledge of their target customer. Regardless, app developers’ lack of planning presents a ‘blue ocean’ opportunity for platform vendors and OEMs to differentiate their developer programs by offering subsidised access to app store analytics and crowd-sourced beta testing.

“On Android and iPhone your app is going to be buried almost instantly. But if you can go from 1,000 to 10,000 to 50,000 downloads very quickly you get picked-up by the app store algorithm - which means you immediately get calls from Nokia and Samsung who want you on their platforms.”

In the case of branded apps, marketing Cross-platform app developer, UK managers in industry verticals are used to very sophisticated marketing techniques, spending millions to better understand their customers. Getting to know the behaviour, preferences and expectations of mobile users is becoming imperative in the case of mobile apps, too. To improve targeting, brands are routinely measuring downloads, frequency of use, patterns of feature use and time/day of use.

Post app launch blues The biggest challenges for developers, post-app launch, are customer support, updating apps in the field and developing incremental features, as voted by over 40% of respondents. Managing negative user ratings is another important challenge, particularly for developers who distribute via Apple, Google or Nokia app stores. App promotion is another thorny issue for developers publishing their own applications. Developers are clearly discontent with the lack of promotion options across most app stores; there are very few off-the-shelf tools available to help developers promote their apps. Four out of five developers do promote their apps, with

the primary techniques being social networks (Facebook, Twitter, etc), followed by free app demos, and – particularly amongst developers using app stores – blogs and forum postings. Only one in 10 developers promote their apps using ad networks, with web keyword search being the most popular, followed by mobile keyword search and mobile ads. “Printed ads and web ads do not work well for apps. The user has to be one click away from downloading the app” notes Olivier Milcent, Chief Marketing Officer for Momac, a mobile app platform house.

Despite the challenges in application promotion, best practices are starting to emerge in up-selling and cross-selling. A major games house sees a 20% conversion rate from free to paid with an ad-supported, “full freemium” model. In other words, one in five users who try a fully functional, ad-supported game, go on to buy the paid, ad-free version of that game, or buy another game that is advertised. In contrast, ‘light’ or ‘demo’ versions with limited features or levels result in lower conversion rates. Given the long tail of hundreds of thousands of application developers, what the app economy lacks is an out-of-the-box “SDK” for app marketing. Such a toolkit would allow developers to invest in targeting the right users and increasing exposure. This lack has prompted tens of startups to offer recommendation and promotion tools that help connect the right app to the right user; examples include Appaware, Appboy, Appolicious, Apprupt, Appsfire, FrenzApp, Flurry, Explorapp and Chorus. However, such tools are still a long way from becoming mainstream, with promotional platforms like Flurry’s App Circle being used by less than 4% of our respondents.

Show me the money Money matters. But in the gold rush to the applications economy, not everyone is making money. About a third of respondents make less than $1,000 USD per application in total, which is loss-making given that an application takes months to develop. Moreover, not all platforms are born with equal revenue potential. Our research revealed large discrepancies across platforms in terms of the revenues applications are bringing to developers. We compared per-application revenues reported by developers for different platforms. Symbian scored lowest, so we assigned a base value of 1.0 to its reported per-app, then rated other platforms relative to this â&#x20AC;&#x153;revenue indexâ&#x20AC;?.

iOS topped the chart, making 3.3 times more money per app than Symbian developers followed by Java ME (2.7x) and BlackBerry (2.4x). Java should come as no surprise here, given it is still the primary platform for developing games on feature phones which often have higher price points than smartphone apps. Android (1.7x), mobile web (1.6x) were the weakest performing platforms in terms of revenue per app and only ahead of Symbian (1.0). The important insight here is that large device sales do not translate into higher app monetisation for developers, as the case for Symbian shows. Note that we excluded developers making more than $100K per app, and those who did not know or could not indicate revenues.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

The amount of revenue generated from an application on average is not just about market reach. It’s a complex orchestration of techniques across the entire go-to-market lifecycle of an application, including usability guidelines, quality control, application discovery, and billing options. Even small details like the mix of revenue models make a difference. For example, the Apple App Store does not allow trial versions of applications, which motivates users to buy before they try, which indirectly increases developer revenues. As a counter example, Windows Marketplace offers a trial version for applications, which doesn’t help developers monetise from impulse purchases – a naive differentiation move on the part of Microsoft. There are more complexities around monetisation. For example, while Java ME offers

relatively high revenues per app, Java ME developers did not necessarily respond positively when we asked about their level of satisfaction with revenues (i.e. whether revenues were above or below expectations). The previous graph is quite telling. The good news? One in three developers see the level of revenues they expected. The bad news? On average, there are five times more developers who are dissatisfied with their mobile application revenues than there are satisfied developers. The platforms do add some colour to the picture; iOS developers have more positive impressions than any other platform, whereas Java ME has the most developers dissatisfied with revenues, since feature phone Java games downloads are in decline. Besides the revenues individual developers are seeing, how are revenues distributed across app categories? Games dominate all other application categories bringing in a total of 45% of revenues from paid downloads and in-app purchases in the Apple iOS App Store in April 2011, according to analytics firm App Annie. The revenue breakdown by category is based on a bottom-up statistical model drawn upon more than 40,000 apps, which use the App Annie sales analytics service.

How do developers make money? Much like the web, the application economy is steadily shifting to corporate funding; more and more developers are working for a salary or commission. Approximately 50% of app developers in our survey make money through a salary or commission, confirming that commissioned app development is becoming as an important part of the app economy as making money directly through applications. For developers making money directly, the top revenue model is pay-per-download, followed by advertising and freemium (free download, then pay to upgrade). Despite the hype surrounding newer revenue models, we found that subscriptions and in-app

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

purchases are three times less popular than the pay-per-download model, across all major platforms.

The distribution of revenue models varies widely by platform. Among mobile web developers, advertising was the most popular model, with many Android developers also using this model. Pay-per-download was most popular among iOS developers. App stores have radically enabled new revenue models. For example, use of pay-perdownload is three times higher for developers using an app store, as opposed to developers who primarily distribute apps through their own website. Use of advertising and in-app purchase is almost double for apps distributed via an app store. Finally, a small percentage of developers (on average one in 10, irrespective of platform), make money through brand extensions or service revenues. This revenue model appears to be more popular than average amongst mobile web developers. When it comes to brands and commercial organisations, generating direct revenues from a mobile app is not often the top priority. Most brands introduce apps as a way to increase accessibility and interaction with their target market. However, organisations becoming savvier in extending their digital strategies into mobile, are seeking to generate revenue as well. Our research highlighted three main mobile revenue streams that brands are looking into: advertising, one-off or subscription-based app sales (if the ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

application adds genuine value, e.g. as a game, utility, business, travel, fitness, or other app) and in-app purchases, especially in games, social networking, travel and sports apps.

The role of mobile operators In the last few years, mobile network operators (‘carriers’ if you live in North America) have been unwillingly dragged into the software era – one dominated by economies of demand that Apple and Google live by, not economies of production that operators have been accustomed to. As the innovation in mobile has shifted to software, so network operators have been keen to re-establish themselves and take part in software-led innovation. As such, the leading operators in Western, smartphone-populated markets – including Telefonica, Vodafone, Orange, Telenor, AT&T and Verizon – have launched developer innovation programs and network API platforms. Many have also launched their own app stores. The Wholesale Applications Community (WAC) is essentially an operator-centric initiative to help operators compete against Apple and Google, who dominate the smartphone innovation and value chain. The WAC aims to help operators develop a solution that encompasses an application runtime, app stores and APIs. Traditionally, application developers have been cold and uncertain as to the role the operators can play in a software world. While the majority of developers agree that the role of operators is to delivery data access and voice, there is no consensus on the role of operators in software. For example, developers don’t agree on whether operators should be a payment gateway, an API platform, build the best mobile services, or just

leave developers alone. However, marketing efforts on behalf of operators have been paying off. There is now much more awareness amongst developers that the role of operators should be to offer a platform of network APIs. We are also now seeing important regional differences in how developers perceive operators. For example in Asia, many more developers (14% above the global average) see operators as a payment gateway or API platform, and not just a data or voice pipe. In Europe and North America, developers are showing signs of discontent with operator-owned services, with many more developers (20% above the global average) suggesting that the role of operators is to deliver data and voice, and not to own services or to offer a supermarket-like proposition. Yet, operators still have a lot of ground to cover in capturing developer mindshare.

Business model polarity A fundamental change that we believe operators need to undergo is to see developers not as resellers of network APIs, but as benefactors or agents driving end users to the network’s core business. Operators need to greet developers not with price-lists, which are commonplace among network API programs, but with partner programs in which developers get to share in the revenue generated when they drive users to the network. They should let developers focus on finding new ways to innovate with apps that use telco capacities, instead of worrying about whether their cash flow is adequate. In other words, operators need to change their business model from a “developer pays” model to a “developer gets paid” model. If developers create apps that use telco APIs, they drive traffic or usage, which benefits both the user and the telco. It’s not the developer that needs to pay – it’s the user. What needs to happen is a change in what we call “business model polarity”. Consider this scenario in the traditional developer-pays world: A developer builds an SMS-to-Twitter service; the user sends a new tweet as a text to a short code. The reply, an SMS back to the user, is then paid by the developer. The developer is penalised for generating traffic to the network. This is the “developer pays” model and it doesn’t work. In the “developer gets paid” model, a single API allows the user to pay for both outgoing and return SMSs in one shot, and the developer gets to use the API for free and even get a revenue share kick-back in return. The developer can focus on building a viral service, and won’t have to worry about success costs.

This is a fundamental polarity change. Instead of the developer paying for access to network resources, the developer gets paid for driving increased voice or messaging revenues.

Matchmaking developers to users Besides tools or APIs, operators have an even more important role to play, by connecting developers to users. We believe operators are sitting on a pile of gold: a pile of untapped intelligence on who their customers are, their interests, where they are going, and who are they influencing and being influenced by. Before we conjure any images of Big Brother here, letâ&#x20AC;&#x2122;s view this customer intelligence in a different light. Namely, as helping users find the right applications. We fundamentally believe that operators can leverage the mountain of customer intelligence to support developers in solving the discovery problem - which still plagues the app economy - by helping users find apps relevant to their location, social circle, and buying habits. In other words, operators can become the best matchmakers between developers and users, between the right app and the right user.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

HOW DO PLATFORM CHARACTERISTICS STACK UP ?

3. The building blocks of mobile apps Getting to grips with mobile Not all platforms are designed equal – and getting to grips with mobile development can be a major investment of time and effort, depending on which platform you choose to learn. Android and Qt are by far the easiest platforms to learn, with respondents requiring an average of under six months to master. In contrast, Java ME and Symbian are the hardest platforms to get to grips with, taking over 10 months to master. Contrary to popular perception, mobile web isn’t such an easy platform to learn, ranking sixth in terms of learning curve. This is not due to the complexity of any one language like HTML or JavaScript, but due to the need for web developers to learn a complex stack of languages and technology frameworks across client and server environments, in addition to having to battle with the challenges of cross-browser portability. The next chart illustrates the relative learning curve per platform, and how not all platforms are born equal.

Measuring fragmentation Fragmentation is as old as software itself. Fragmentation challenges have been a key topic of discussion in mobile industry circles since Java ME started proliferating in 2004-5. No matter the platform advances, fragmentation remains an unsolved problem – both for developers targeting multiple platforms, but also for the likes of Apple, Google and Microsoft, for whom fragmentation can break the ‘platform story’.

“Commercial and UX considerations aside, 97% of the application code across iPhone and iPad is usually the same.” Alex Curylo Winner of "Most Innovative Product", Apple Design Awards

Moreover, fragmentation is a challenge for brands and commercial organisations going mobile, as it adds a completely new dimension of complexity. For brands, extending presence to the web is a straightforward process involving developing a website and testing it across the two or three mainstream browsers found on 80% of devices. Going mobile complicates things much further, as developing across the top three or four mobile platforms (iOS, Android, Symbian and BlackBerry) reaches just over 20% of the devices sold on average, and represents a much more resource-intensive operation as there is very little code reuse across these platforms. Extending user reach beyond this 20% presents formidable challenges which can only be addressed only with a lowest common denominator approach. To quantify platform fragmentation we asked developers how many versions (also referred to as SKUs - stock-keeping units) of their apps they need to develop.

We were able to quantify that indeed Apple’s iOS is the platform with the least fragmentation (on average four versions per app), as has been widely noted from empirical evidence in the past. Apple manages fragmentation through two primary means: first, it has standardised the screen size and resolution for its handsets and tablets; and second, as an OEM and platform vendor, it has commercially streamlined the means by which most iPhone or iPad users are upgraded to the latest OS version.

“Anyone who states Android is fragmented must have no experience developing on BlackBerry or Nokia platforms. Even iOS has a six different devices of varied capability now.” Brian LeRoux Nitobi Software

In contrast, our research indicates that Android developers must create six versions of their apps on average, which is on par with mobile web apps. The stark difference in fragmentation across Apple and Android devices is also evident amongst the different platform versions in the installed base of devices. According to Google data released on May 2011, 25% of active Android handsets run on platform versions more than 18 months out of date. Meanwhile, according to app analytics firm Localytics, only 20% of existing Apple 3GS devices had not yet been upgraded, just two months after the introduction of iOS4. In other words, Apple devices have the youngest runtime age in the mobile industry. The intensity of Android fragmentation has been widely discussed, and is often cited as the biggest sore point for the platform. We analyse Android fragmentation into five dimensions: 1. Release speed: Android’s unprecedented speed of innovation (three major versions released between Q2 2010 and Q2 2011) means the core platform itself is changing too often for developers to keep up. 2. Complex incentives: Unlike Apple, Google doesn’t make its own hardware – meaning Android phone OEMs lack commercial incentive to keep updating handsets that have already been sold. Instead, they have an incentive to push users to shorten their device replacement cycles. The commercial update process is especially entangled when handsets have been produced for a particular mobile operator. Note that Google recently unveiled a compliance program that will force handset manufacturers to update their platform for the first 18 months since handset launch. 3. OEM fragmentation: Many handset OEMs differentiate by customising Android with user interface changes, and their own applications and features. For example, HTC’s Sense UI differs from Sony Ericsson’s Rachel, Motorola’s MotoBLUR, Samsung’s TouchWiz and LG’s S-Class user interface. All OEM additions – whether UI layers, features or even bug fixes –create traces of fragmentation for developers. 4. Screen fragmentation: As Android is being used for multiple screen resolutions and form factors, from smartphones and feature phones to DECT handsets, set-top boxes and cars, there will inevitably be the need to adopt an application for different screen sizes – not to mention adapting the Android codebase to run on a different type of ‘screen’ than Google designed it for. For example, the Android Honeycomb platform

for tablets and TVs is very different than the Android Gingerbread platform for smartphones, in addition to differences across tablet screen sizes. 5. Codebase forking. China Mobile’s Ophone and China Unicom’s Wophone are ‘forked’ (branched) versions of Android for the China market. Other forks include Cyanogen and MiuiAndroid, which are unofficial, customised versions of Android targeted at tech enthusiasts. Our research confirmed that, contrary to popular perception, Android is still relatively unfragmented. Rather, it is Java and Symbian that are amongst the most problematic platforms in terms of fragmentation, with developers needing to create on average about twice the number of app versions for these platforms, compared to Android. Moreover, BlackBerry – alongside Java ME – is one of the platforms with the greatest amount of fragmentation. This should come as no surprise, given the diversity across BlackBerry device capabilities, input mechanisms and screen resolutions. As of March 2011, close to 40% of installed base of BlackBerry devices run versions of the OS that are older than version 5. Note that only devices running version 5 and above are capable to support the BlackBerry App World application store. On the flipside of fragmentation challenges is opportunity. A number of companies have emerged to offer porting tools aimed at bridging the gap across platforms. These companies include Appcelerator, Ansca, Didmo, DragonRAD, iFactr, Innaworks, Metismo, Mobile Distillery, MonoTouch, MoSync, Open-Plug, Recursion software, Rhomobile, RunRev, Sencha, StackMob and TapLynx.

Source: VisionMobile Mobile Industry Atlas, www.visionmobile.com/maps

Going global: Localisation issues With close to one billion apps available, and over 800 million smartphones shipped to date, apps are a global phenomenon. But, in going global, many developers are having to deal with localisation, i.e. translating their application to local languages. Localisation is not yet a mainstream issue: nearly 70% of our respondents either have not tried localizing their apps or have never had any issues with it. But localisation will soon become a fundamental issue for mobile developers, as it becomes easier to distribute apps globally and to develop regionally-sensitive apps and content like news,

music and social networks. Currently, developers who are accustomed to creating apps for global distribution – for example, those working on the Java ME platform – in their majority are reporting localisation issues. Overall, the biggest challenge, as reported by one in three developers who address multiple regions, is that localisation is a completely manual process. The other two major challenges reported are the cost of localisation and the complexity of managing language packs. Yet, neither platform vendors nor OEMs have developed frameworks that allow developers to easily adapt their applications to different languages. We should note that there are frameworks that facilitate crowd-sourced translation of software and can be used to localise mobile applications as well – for example Transifex. This presents an opportunity for mobile platform vendors who want to differentiate with developers targeting regional markets outside North America. What’s still not certain is the shape that the app localisation market will take. There are two prevailing scenarios: - Superficial: in this scenario, app localisation will resemble the movie business where only the subtitles are localised. - Pervasive: in this scenario, localisation will result in pervasive changes across the application, adapting to region-specific traditions, culture, holidays, and currencies, for example adapting a shoot-’em-up game to sport a Kalashnikov in Russian markets and a T3 in Germany. For now, the future is headed towards pervasive localisation. Already, startups have sprung up that specialise in localising social games features – from virtual goods to the entire game – to local markets. These startups include Mentez, which specialises in localisation for Latin America regions, 6waves, for Asian audiences, and 101XP, for the Eastern European market.

Help: support needed Support is an integral part of the development process of a mobile application – whether it involves looking up code samples, getting devices to test the application or accessing undocumented APIs within the platform. The question is: which types of support activities are developers willing to pay for? Developer preferences for marketing and tech support in this year’s Developer Economics research were very mixed. Approximately one in four developers would be willing to pay for premium app store placement. Access to device prototypes was equally important, as was access to hidden APIs. Another important finding was the decline of interest in operator portals; developers would be twice as willing to pay for preloading on OEM devices, compared to being listed on operator portals.

Connecting to the cloud: maps, social and search Cloud connectivity is not just a fad for mobile developers; it’s also where a lot of the innovation is taking place. Connecting your app to Facebook’s or Twitter’s authentication system, retrieving local points of interest via Google Maps, sharing pictures through Flickr, storing documents on Amazon S3, integrating with Microsoft

Bing or charging a transaction via Paypal are features that allow app developers to leverage the best of breed into their own applications. There’s no shortage of long-tail cloud APIs, either, with Programmable Web listing over 3,000 APIs, including music (Last.fm), telephony (Twilio), messaging (411sync), advertising (AdSense), shopping (eBay) and enterprise (Salesforce.com). Moreover, social cloud APIs can help developers reach new users, as content can be more easily shared within an established social network with many millions of users. We asked developers which cloud APIs they are using, and which they plan on using. We found that iOS, Android and mobile web developers are the most active users of cloud APIs, while BlackBerry and Java developers were late adopters of the ‘cloud’. Map APIs are the most common cloud APIs currently used by developers, as testified by over 40% of our respondents, followed by social networking and search APIs. The most active users – iOS developers – use map and social networking APIs in their majority (55% of respondents). Besides continuing use of maps, social and search functionality, the most important cloud APIs developers are planning to use are billing (one in three respondents), followed by carrier billing and advert management APIs. Multi-player game APIs are also favoured, with one in five respondents planning to use them in the future. An opportunity that’s currently unaddressed by cloud APIs is a cross-application user profile management API. “Currently apps are too much standalone, they do not talk to each other, and so there is a lack of cross-app experience for the user” notes Olivier Milcent, Chief Marketing Officer for Momac. While social networking sites (e.g. Facebook, Twitter) are providing user authentication and access to user messages or contacts, they are mostly designed as read-only, not read-write. Gaming networks OpenFeint and Scoreloop offer a way for games to share high scores, leaderboards and to establish a social network among users, but are not designed for broad application © VisionMobile 2011 | www.DeveloperEconomics.com

use. This points to an opportunity for a user profile management API that can be shared across applications in a read-write fashion.

Certification: getting the stamp of approval In 2011, mobile platforms are maturing and vendors are learning from past mistakes. As such, certification no longer seems to be a top-level challenge for modern platforms. Older platforms, like Java ME and Symbian, are still plagued by certification issues, particularly cost. This is especially true for Java, with nearly 50% of developers who take their applications to market reporting issues. Newer platforms, like iOS, suffer from different go-to-market issues. Some 38% of respondents who develop primarily on iOS, report that application approval has ‘unwritten rules’ in the App Store, while over 35% of them find that approval takes too long. Android developers are the most indifferent to certification challenges, due to Google’s ‘hands-off’ approach to application approval. Nearly 40% of respondents state they have no issues, while another 20% state they don't need to certify their apps. Mobile web is perhaps the easiest platform with regards to certification, since there are (as yet) no formal requirements for submitting widgets or other web applications. Overall, certification no longer seems to be a top-level challenge for developers, as it was in 2010. Instead, in 2011, the top two challenges encountered by developers are time-to-approval and the complexity of app signing, reported respectively by 29% and 19% of respondents who take their apps to market, irrespective of their main platform.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

WHY, HOW AND WHEN DO BRANDS GO MOBILE?

4. Brands Go Mobile

The developer equation Our Developer Economics 2011 report has analysed in depth the changing landscape of today’s mobile software industry – from Apple to the mobile web – including the needs and wants of today’s mobile innovation machine: software developers. But we shouldn’t forget that while developers and platform vendors have spawned the apps phenomenon, it’s the global brands and local businesses that are funding and fertilising the mobile app economy. Brands, from The Times and Burberry, to Gap and BMW, across every single industry vertical (FMCGs, music, retail, publishing and entertainment), from New York to Seoul, are jumping on the app express train. Some brands are building their own development teams to better control and integrate their apps into their core products. A few are even turning mobile apps into new profit-making business entities. To understand how brands are going mobile, we looked at over 50 leading international and regional brands, through 20 one-to-one interviews with digital agencies, media, retail and Internet companies across five continents. The innovation is not just coming from the entrepreneurial developers, who create the bulk of nearly one billion apps out there. To date, tens of thousands of companies have “gone mobile,” from physical and online retailers (Walmart, Amazon) to music companies (Sony), international sports teams (Chelsea FC), newspapers (The Guardian), transport institutions (TFL), social networks (Facebook) and car manufacturers (BMW). In going mobile, each has extended the reach of their brand, while at the same time injecting much-needed funding into the app economy. Mobile is global. Mobile applications and services are no longer being limited to one specific country - for example companies that offer a global Internet service provide global access to their app. In most instances, an international strategy is outlined based on core app functionalities, followed by specific language and cultural adjustments made at a local level. Most of the activity is happening in regions with a high penetration of iPhone and Android devices, i.e. North America and Europe. At the same time, areas such as the Middle East are gaining interest, due to high smartphone penetration, high disposable income and fast technology adoption.

The Brands’ Journey through Mobile It seems everyone needs to have a mobile app these days. It’s an imperative that has even made it into the boards of some global companies, from realtors to multinational retailers and beer brands to clothes designers. Yet, despite the diversity, we found that all companies go through a three-stage journey as they extend their digital strategies into mobile. We call it the brand journey through mobile.

The Newbies In their first steps in going mobile, most companies think of an app as a way to ‘advertise’ whatever product or service they are providing. Most early apps are developed for the iPhone, and do not do much more than promote the physical or digital service the brand is offering. In many cases, it’s the digital agency that proactively pitches a mobile app as part of an existing digital marketing budget. In other cases, it’s the CEO who storms into the marketing manager’s office, enquiring why the company does not have a mobile app yet, when his daughter’s iPhone is crammed with apps. During this Newbie life stage, all that brands want to do is experiment and see what is possible on this new digital medium. Efforts are focused on providing apps that extend the brand’s PR and advertising efforts. In the more mature cases, apps are extended to include some kind of service (a ‘brand butler’), but the main objective remains that of increasing brand awareness. Time-wise, the initial roll-out takes about three months, with up to one year in some instances.

Platform-wise, most brands irrespective of “I love how even the most boring industry have focused their initial foray into US employers are looking for apps by developing services on Apple’s iOS. "rock star" developers.” The platform is perceived as simple and Sebastian Brannstrom (@teknolog) accessible, providing a clear structure to use Senior Platform Engineer and develop on. iPhone users are also Zimride, Inc. perceived as more receptive to trying out new apps. Distribution is straightforward, since the Apple App Store offers publish-once-sell-everywhere convenience. At the same time, very little thought is given to how the effectiveness of an app is going to be measured – other than number of downloads and maybe frequency of use. As their mobile strategy matures, brands aim toward higher levels of integration with their digital and, in some cases, their corporate strategy.

The Street-Smarts Once the first mobile apps are out in the field, senior executives start to demand much more from the channel. The key question for Street-Smart brands becomes, “How can we use this mobile channel to provide a better service?” Or, “How can we help customers make their life easier?” In most cases, the core application is provided for free, so as to ensure reach. In the initial stages of any organisation’s foray in mobile apps the tendency has been to subcontract the app development to a mobile software house or their digital agency. Now that demand is scaling Street Smarts are bringing more of the design and development in-house, only outsourcing basic coding functionalities to freelance developers. The objective behind this is twofold: to provide better integration with the current digital or overall business strategy, and as importantly, to have tighter control on cost, process time and overall quality. Platform-wise, Street Smarts extend their apps to Android handsets, and increasingly, to those platforms featuring web browsers. Global brands integrate mobile offerings within their overall advertising strategy, for example viewing apps as an advertising channel, avenue for community interaction, or even a channel for cross-selling users from one product to the next.

The Connoisseurs Connoisseurs are the “experts”, the brands with a successful digital business, whose move into mobile has been integrated within their overall strategy early on, as another touch-point. Most verticals have not made it to Connoisseur status yet, except for games and media companies. Games are one of the most mature verticals, with mobileonly versions of traditional games and social games being developed for mobile for more than five years. In turn, media companies have recently become aware that mobile is one of their top priorities, and that all mobile initiatives must be driven by clear business objectives. As an example, mobile apps within media companies are increasingly driven by editorial strategy.

Connoisseurs are more business-case savvy, looking into the potential returns before any investment is made. The final decision depends on budget size, and we find that although in most cases the digital marketing directors make the final decisions, board members and senior officers are becoming more involved in the approval of design and functionality concepts and business case.

Mobilisation drivers What drives brands into mobile? There are several reasons brands are using to extend their digital strategies into mobile: • • • •

• • •

Public relations and advertising, so as to increase brand awareness and accessibility To increase customer retention and loyalty To enhance the customer experience, for example through location-specific services To create a stronger community around the brand. Mobile and apps are seen as a newfound social connector, for example for keeping people connected within events, or for creating communities around popular interests like running, music or organic food. To increase retail or point of sales channels and make mobile shopping easier To provide instant gratification to customers To attract and keep customers longer in a physical location

•

To keep-up with competitors, especially as first mover advantage in helping a brand project an innovator image to its customers.

Most companies across industry verticals have focused their mobile initiatives on the B2C market. Interest in B2B, and more specifically, internal & operational efficiency apps, is only recently gaining momentum.

“As an app agency for brands, 100% of our inbound calls are about iPhone, 60%-70% of these also request Android. iPad is the third platform, with about 50% of calls.” Alex Trommen CEO AppsFactory.de

In the B2C market, the main reasoning for developing apps focuses on extending above and below the line PR and advertising efforts and increasing brand awareness and accessibility. Brands are commissioning apps to support a product launch or even create a ‘brand butler’ Most media companies provide a mix of infotainment services, such as real time football results from Sky Sports. We are also seeing a rise in branded utility apps, helping a user find the nearest bike shop or store the details of their loyalty cards. The end goal is usually to aid the user carry into mobile what they do on other digital or physical channels.

From Apple to web: charting a mobile platform strategy For brands, extending their reach to mobile is a very different beast, compared to any other digital medium. Whereas on the web one needs compatibility with two or three mainstream browsers to reach 80% of users, going mobile means using the top three or four mainstream native platforms (iOS, Android, Symbian and BlackBerry) to reach just over 20% of the devices sold, on average. It gets more complex; a platform choice is not just about Apple vs. Android, but a sophisticated trade-off between functionality, user experience, reaching the right customer demographic and the cost of rollout. Beside these dimensions, companies need to consider demographics (who are Apple or Android users and how do they use apps?), functionality requirements (can we implement this or that feature?), as well as the cost of rollout (how easy is it to produce the app and maintain it?) and of course the business model (how does it make money?). No doubt most brands are finding it very complex to decide which platforms to focus on. Apple’s and Google’s mega-marketing campaigns can convince a fair share of marketing managers that their respective platforms are all that’s needed. After all, most marketing managers are new to mobile, and underestimate the complexities of this new medium and the many trade-offs it involves. Platform priorities are mixed, but the core challenge is common – market penetration and reach across the brand’s customer base. In our discussions with executives responsible for digital strategies, we found that hardly any organisation tends to develop across all platforms.

Organisations developing B2C apps, i.e. targeted at consumers, are extending their offering (in order of importance) to Apple, to Android, to mobile web, to BlackBerry and finally to Windows Phone 7 (although with a mix of hesitation and expectations).

“The problem with platforms like Samsung’s bada is that they lack hype and mindshare among brands nobody asks for bada projects. Symbian is starting to enter this category, too.” Maximiliano Firtman

Forum Nokia Champion 2005-2011, Most of the executives we talked to were Adobe Champion 2011 hopeful that in the future all the basic apps and mobile services will be developed on HTML5, citing a number of reasons: mass market reach, cost efficiency and the fact that their customer base is already accessing the company’s website from their mobile phone.

HTML is already the platform of choice for companies developing B2B (business to business) apps, i.e. applications paid by the corporate IT manager or CIO - an estimated 40% of which are developed by system integrators. These are point solutions like applications that connect to Exchange, SAP, sales force and enterprise resource planning applications to be used by company executives. The default platform for B2B apps is HTML, not just for deployment on mobile web browsers, but also by converting HTML and JavaScript into native iPhone and Android apps using tools such as Appcelerator, PhoneGap, RhoMobile, Sencha and The M Project.

First walk, then run: challenges in going mobile We believe that where there is a company website or a corporate intranet today, there will be a mobile app tomorrow. Such is the momentum behind consumer brands and virtually every self-respecting company out there, whether it’s B2C apps for enhancing the core business, or B2B for mobilising the corporate intranet. But in storming into mobile, digital strategists need to heed best practices from companies that have established successful mobile apps.

Table: Best practices for brands and organizations going mobile

Setting objectives

- Establish objectives and measure performance against expectations - Identify more relevant evaluation metrics (such as frequency of use, behaviour and engagement). Current platform metrics (number of downloads) are often not relevant

Business Model

- Look for business models that support the investment required to develop and run the mobile app - Budgets are still small compared to what is spent in traditional marketing and sales channels. Your marketing budget can go a long way in mobile - How much revenue can realistically be generated directly or indirectly? - What functionalities can be added to provide enough value to justify and attract revenue?

Revenue

- How much revenue can realistically be generated directly or indirectly? - What functionalities can be added to provide enough value to justify and attract revenue?

Customer Experience

- Provide users with an experience that is aligned with overall brand values - Be wary of slow download rates and limited data coverage and accessibility that negatively impact the customer experience

Security

- Be wary of look-alike, non-official apps in Android Market or other app stores that don’t enforce quality control - Mobile payments are easier said than done. Leverage on an existing payment provider with a trusted security infrastructure

As always, the mobile app economy is continually evolving – and often in surprising ways. The platforms race continues in twists and turns, new business models spring up, and apps take retailing into new levels of sophistication. Apps stand to power the fast moving digital goods world. We ‘ll keep watching the app economy closely. You should, too. The VisionMobile team Twitter: @visionmobile

Ecosystem Showcase We â&#x20AC;&#x2DC;d like to thank the following companies, across the mobile ecosystem, that helped make Developer Economics 2011 possible.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com

knowledge. passion. innovation.

ÂŠ VisionMobile 2011 | www.DeveloperEconomics.com