Stop wasting money on mobile marketing

This interview was written and first published by Roger Ström, Visiting Lecturer, Marketing Halmstad University, Sweden.

With a thoughtful approach and consistent implementation, mobile marketing holds a huge potential for retailers. The pitfalls are many, however.

The mobile phone has still not made a substantial impact as a new marketing channel. There are many examples of more or less successful attempts, but these have largely been individual campaigns, not as a permanent channel of communication. “Technology providers and mobile operators have long been pointing to the area’s potential for marketing, but still the majority do not use the phone for other things than normal phone calls and text messages, “says Martin Vendel, independent consultant and former Head of Product Management of mobile services at the largest Nordic and Baltic operator TeliaSonera. However, the market is gradually maturing constantly giving more favourable conditions. The vast majority of phones are now able to connect to the Internet and data transfer is not a problem anymore, thanks to 3G. Operators plan to or are implementing the next generation of mobile networks, “4G”, with the potential of reaching download speeds of 100 megabits per second. All phones sold today have a good high resolution colour screen. Pricing for data traffic is reasonable and close to understandable for customers. “Since the launch of iPhone, we see an increased focus on usability by all stakeholders. All these positive trends make mobile marketing even more interesting as a new channel of communication for both customers and retailers. Now the time is right to evaluate what mobile marketing can do for each player in the retail sector, “continues Martin Vendel.

Retail mobile campaigns have historically been primarily SMS-based. Retail clothing chains, such as H&M, have achieved good response on campaigns designed to drive traffic into their stores. According to the U.S. research firm Forrester more and more companies are still planning new marketing campaigns based on SMS, e.g. large one-off promotions or special offers. But is this trend sustainable? “The situation can be compared to the development of e-mail marketing in the middle of the last decade. Tolerance to increasing amounts of unwanted messages in your inbox is not likely to be greater today than fifteen years ago, “says Martin Vendel. The problem with spam to mobile phones was early identified and resolved in markets such as Japan. There are few examples where legal fines are imposed to companies spamming users with sms. The problem may be considered to be limited but with the expected increase of campaigns, the issue may arise again.

Mobile marketing can be seen as an extension of the web. Anything that can be done online can also be done using a mobile phone connected to the Internet. “Modern mobile phones are becoming more and more like small computers. But do not make the mistake to regard the mobile as a normal computer. The services must be adapted to the mobile’s tiny window and the phone usually lacks a proper keyboard,” says Martin Vendel. Furthermore, data capacity is still significantly lower compared to fixed broadband. This leads to further constraints on capacity-demanding services such as moving images.

The computer screen size, image and sound quality is well suited for large, multi-sensory, brand communications, while keyboard and mouse facilitate more extensive search, comparison and evaluation of information for purchasing decisions. The limitations of the mobile phone make it more suitable for simple messages in a simpler format, with less extensive search patterns.

The mobile phone is personal and almost always directly available to the user. It holds the potential to become the perfect media for communication close to and at the time of the purchasing decision, as a tool to support customers in their purchases in store. “I think customers shortly expect all retail chains to have a mobile service where the most basic functionality is available,” says Martin Vendel.

Features such as find the nearest store, goods in stores, expanded information about goods, other customers and “expert’s” opinions on products, other channels of supply and prices simplifies customers’ search process and decision. Shop capacity and sales can be increased by an increased degree of customers self service and by an increased conversion rate of buying customers not leaving the store because of lack of information, suggestions or not finding the right goods.

Loyalty programs may increase their value to customers through increased accessibility utilising the mobile phone. Enabling access through the mobile phone of features such as shopping lists, personalized tips and advice, bonus balance, account balance, discount and bonus offers and coupons, and club cards, will increase their relevance and value as being used in store and during a purchase. Coupons and club cards are for instamce often forgotten at home, especially within the consumer discretionary sectors.

You should have a realistic expectation on the mobile channel and it´s contributions. It is not realistic to expect that it will solve all the challenges and replace existing channels immediately. “It is more realistic to expect that only a few percent of the customer base migrate over to the mobile channel initially. Then it is up to the company to train and reward their customers so that they migrate to the channel most valuable to both parties, “according to Martin Vendel.

In the choice of technical infrastructure, it is important to select solutions that can be used by as large fractions of the customer base as possible. In this perspective, SMS has up until now been superior to more advanced services. There have been numbers of barriers for an easy access to Internet based mobile services such as incompatible mobile operating systems and operator phone settings. More advanced applications giving a superior user experience are available for smartphones such as the iPhone or phones built on the Android operating system. These applications do, on the other hand, only work and may be accessed through specific phone models, and cannot yet be seen as general solutions. Today there are good alternatives, such as the service Squace, which can reach the majority of customers independently of operating system and with all the functionality needed.

Companies that are evaluating and planning implementation of mobile marketing should according to Martin Vendel, consider the following:

• Revise and clarify your online strategy carefully. Build mobile extensions to existing web functionality, where it  makes sense and brings value.
• Mobile marketing will not replace existing channels, but should initially be seen as complementary. Attention must also given to clarifying the benefits and role of mobile marketing compared to other channels. Mobile marketing has to be an integrated part of the overall marketing, including other channels, to maximize synergies.
• Start with features that have high value for the customer and which are relatively simple and inexpensive to implement.
• Each company’s needs are unique. The solution should be based on existing systems and aspirations of digital marketing as a whole.
• The mobile channel will initially attract only a small but growing share of the customer base.
• The content of a mobile site must be constantly renewed so that it is not perceived as dead, this is even more important on a mobile site compared with online services.
• Encourage and educate the customer base to gradually incentivise them to move to more efficient and profitable channels.
• Mobile and the existing online services should interact and be based on the same technical infrastructure to achieve efficiency.
• Choose a rather simple and straightforward system that will not be expensive nor inflexible.
• The mobile service should be possible to be directly managed by the marketing department, so that marketers do not become dependent on suppliers or internal IT bottlenecks.

When done right, companies will find solutions that meet their unique needs while maintaining a good flexibility. Furthermore, these investments will create substantial value within a short time period.

In summary, the time is right to learn more about mobile marketing and what it may bring to each individual business. The potential is huge. Unfortunately, it is very easy to make mistakes in this area, which can be costly and could harm customers’ trust in the specific brand.

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New report by Ovum analysing the potential of UMI

“The concept of a universal mobile interface is appealing for many reasons. The independence it affords from tie-in to specific vendors, platforms, and distribution mechanisms will appeal to all those who prefer an open environment. For the B2B environment it is the potential to increase the return on investment and to get to market as broadly and as quickly as possible. Ovum is particularly supportive of the elimination of the boundary between the use of desk-bound Internet usage and that of all forms of mobile device,” concludes Ovum in their new report analysing the UMI concept and in particular the Squace service.

In their further analysis regarding the need for a Universal Mobile Interface they state: “If the mobile device is set to become the primary personal window into the Internet then all the issues regarding delivery of content and transparent availability of applications, and the ability to switch devices, suppliers, and operators becomes critical. It is quite possible that user communities will be happy enough to exist in a world that’s owned by a supplier that they trust, but in the end this limitation on freedom of choice is likely to slow down the widespread deployment of new and innovative features and content as developers struggle to keep up with all the varying platform requirements. The user community is rapidly getting to grips with the concept of cloud/server-based computing and the fact that they do not need to retain content locally if they are always connected to the Internet at realistic bandwidth. The idea that they could have one common interface that was under their control and available on any device they chose, regardless of the operator, platform, or hardware manufacturer becomes very attractive indeed – that is, as long as that interface supported the sort of rich environment that the current ecosystems can support. For those involved in the development and distribution of content, the degree of uniformity and the ease of deployment are obviously critical. Over the next few years we expect to see a major increase in the way users are targeted by mobile marketing, suggesting appropriate offers to them based on their profile and their location. A universal mobile interface would be very advantageous to those supporting that need.”

The full report is availed to download for free.

New Business Models, New Markets – Red Herring panel

“Will 2010 be the year when new use cases and emerging business models start to make their mark? What can we expect from the consumer market? And what are the latest in the mobile enterprise space?” These were some of the questions setting the framework for a panel which I chaired this week at the Red Herring Europe 100 in Paris. The venture capital community as well as entrepreneurs were represented by Jan Vocke, Cartagena Capital (technology-focused corporate finance advisory firm), Javier Rubió, Nauta Capital (VC specialized in technology, media and telecom), Stefan Hultberg, Accumulate (mobile payment and authentication solutions), Andy Munarriz, HulloMail (visual voice mail provider).

The fundamental issue or frustration is the inability of the market players, except for operators and device manufacturers to make substantial revenues and profits. The area has looked so promising for so many years, but still has not materialized in line with the expectations. How can this be? We have the fastest growing new media and the highest global penetration ever with about 3 billion phones capable of browsing the Internet. There are many hundred thousands of apps available and billions are downloaded. The majority of the time spent using the mobile is for services other than voice and SMS. And still both investors and entrepreneurs seem frustrated about the malfunctioning business ecosystem and desperately seek new and sustainable business models. This is not a question about greed or maximising profits but rather that we need working models and systems to fully utilise the benefits and potential of the mobile media.

What is quite clear is that there is no doubt what so ever regarding the potential or that this media will influence and benefit humanity worldwide. From a technology point of view there are no real obstacles anymore and everything is possible. The three key areas slowing innovation down and that where pinpointed by the panel are the fragmentation of operating systems, the walled garden or protective approaches by present larger stakeholders (operators, device manufacturers and Internet giants) and that some enabling and supporting services are not yet openly available, efficient or well enough established. The general view is that the operating system fragmentation is here to stay and that there is a huge potential in services managing to bridge functionality cross platforms, which in essence is the vision of the UMI concept. The panel did not share the same view regarding whether the big players will open up further to facilitate partner businesses. We all agree that it in the long run would benefit all stakeholders but the ambition to capitalize on existing businesses and lock customers in may turn this into a very slow process. The general recommendation giving highest probability for fast uptake is to launch services and business models that manages to work well independently of operators or device brands and that can handle all relevant operating systems. Independent global players that can offer supporting cost efficient functionality such as payment solutions, security solutions, ad solution are also essential for a fast development. These supporting roles are of course very attractive positions and will create substantial value.

New business models and markets are thereby expected to be developed on top of and bypassing existing proprietary and closed solutions. Having a larger addressable market enables a very fast penetration and also very competitive cost levels. We can expect to see quite disruptive new services not only affecting the mobile market but also other areas in the same way that online Internet services more or less changed the rules of any business or market, being consumer or enterprise. 

What is also quite encouraging is that the company Squace, fully dedicated to establish a world class Universal Mobile Interface solution on the market, was announced Red Herring Europe 2010 Winner.

The iPad – how it may influence the mobile arena

Another hyped and as always well orchestrated launch by Apple. The iPad is since launch scrutinised and the comments are many. And what is really the iPad? Many views are posted on blogs like this one. All try to compare the iPad to some existing device: a laptop; a mobile device; a Kindle etc. It could be that the iPad does not really compare to any existing device but defines a new market. What need the iPad really can and will meet only the future can tell. The key difference to a laptop is probably not the lack of a real key board, missing USB ports etc. The iPad merge the large screen and usability of a laptop with the business ecosystem and the elegant UI of the iPhone/iPod touch. And as in most mergers one of the cultures may eventually be more pronounced.

Why does the iPad get all this attention? The main reason is that it is launched after the huge success of the iPhone and its app store. But is the iPad really building on the success of the iPhone? In many aspects the iPad is a lap top size iPod touch. The success factors of the iPhone/iPod are a superior UI making it very easy to find, explore, buy, access and use relevant Internet services and a working business eco-system incentivising 3rd party developers and companies to invest in the development of apps. In both these aspects the iPhone and the iPod has excelled compared to the competition and the key to the success has been a closed environment fully controlled by Apple. The competitive edge is on the other hand not so obvious anymore when doing the same for a lap top size device. A superior UI is nice to have but does not bring huge benefits and a working business eco-system is in many aspects already in place for computers.

What one may assume Apple hopes to achieve is yet another closed Apple environment where Apple guarantee the end user a superior user experience at the same time as they fully control the business eco-system within this closed environment, further driving hardware sales. The ambition is to extend the successful business model of the iPhone and its app store to more computer like devices. Many support this thinking, especially media conglomerates and publishers now see the opportunity to finally get a working business model, getting paid for digital versions of their news papers and magazines as well as new opportunities for advertising.

Sometimes we seem to forget what really made the PC and the Internet into the huge successes. And what ones almost killed the Mac in the process. It was certainly not a superior UI or a closed environment but rather the opposite. We may question the dominant position of Microsoft but getting one ubiquitous operating system, Windows, made it possible to launch services and software reaching the full market independently of device brand or ISP. The limited fragmentation and easiness by which you could address the market spurred innovation and diversity. This is unfortunately not the case within the mobile area and will not be for the foreseeable future, the mobile operating system jungle is here to stay. The success of the iPad can therefore not rely on the same criteria as the iPhone and we will most probably not accept a development where we now at this level of maturity get more closed environments within the personal computer area.

The iPad may find a niche as for instance a wireless reading device, such as the Kindle, where users are expecting a closed environment. But if the iPad becomes more of a general lap top for any media consumption the users are likely to expect more of an opened environment. Apple will, in this case, most probably be forced to open up to meet the customer expectations and not to limit the iPad to a few niche markets. With the similarities between the iPad and the iPhone it may be hard for Apple to justify a more closed environment for the iPhone. What may first have been seen as a very clever idea to expand the successful business model of the iPhone into the computer market may backfire and gradually open up the iPhone eco-system. The present willingness to pay for services in the mobile arena may be transferred to the online environment and maybe vertical approaches are a way to get there but it can’t be a general and sustainable solution.

The successes of vertical approaches such as the iPhone confirm the enormous potential of Internet services accessed through the mobile as well as the willingness to pay for useful services. To fully capitalize on this huge opportunity the answer is not to build more verticals, but rather to make services and communication platforms work across all mobile platforms unleashing the true potential. This is what the UMI concept is all about.

Does anyone dare to say no to apps?

Most consumer brands are in the process of experimenting how to utilize the mobile channel in the best possible way. Many have a quite limited experience of the mobile and the obvious answer seems to be app stores and apps. Even being the phenomena driving the development and being the by far most massive mobile success story in years, investing in apps may turn out to be quite a disappointment. The issues are that the space is quite crowded, you have to invest over and over again to cover all different operating systems and most importantly the majority of the apps generate a rather limited usage. Most apps are unfortunately a waste of money but do you still dare to say no?

The Canadian newsstand platform service provider and publisher Mygazines announced a few days ago the launch of a Universal Mobile Interface. It may not fully be in line with the general UMI definition, nevertheless the basic thinking is the same. “We want to allow our publisher’s content to be accessible anywhere and everywhere,” says Yoav Schwartz, CEO of Mygazines, Toronto, in an interview by Chris Harnick in the Mobile Marketer. Yoav Schwartz continues: “If a person receives an email with a link to the latest issue of Relevant, then he or she can click on that link and open the magazine on whatever device they want – you can’t do that with an app.” “If I’m a publisher and sending out e-delivery to my subscribers, I want them to start engaging right away. With a traditional app, it’s up to the user to then either download or install an app or visit the app to access the content.” “Apps are great, don’t get me wrong, but they’re a closed environment.” Mygazines dares to say no.

Mygazines clearly supports the basic thinking behind the UMI concept. We can expect their approach to become quite successful within the online publishing arena and to be followed by others. This in not a battle between apps and UMIs, both will become successful on their own merits. For those that want a very efficient way to reach all mobile phone users not bothering about different mobile operating systems and high development costs the UMI approach should be carefully considered as an alternative to apps.

GSMA Mobile World Congress in Barcelona – Anything new?

So what can we then conclude from this years big European mobile event? The most striking is probably that there was not any big news or underlying trends. It seems like the main movements already spotted, are just even more pronounced.

The app mania is continuing. However, there are now a number of companies addressing the issues with the approach, offering tools for cost efficient development of apps and somewhat trying to overcome the problem with development for each individual OS. The next phase that may be seen, if you look carefully, is that the apps will decrease in importance replaced by better mobile browsers in combination with better services in the cloud.

The developing countries stand for the majority of the growth of the overall mobile penetration. According to ITU we will pass 5 billion mobile phoneusers worldwide during 2010. Even if this is a European event a strong interest and targeted products for developing countries could be seen. With the majority of the world’s mobile phone users in emerging markets this will certainly influence the industry focus and hopefully also drive innovation globally.

And then we have the Microsoft launch of Windows Phone 7 Series which seems to have been recognised more in the media compared to at the congress itself in Barcelona, where few did seem to care so much. Microsoft certainly knows how run the PR. It’s a bit early to judge Windows Phone 7 Series but it looks like we get just another OS, further fragmenting the market. It looks nice but may follow the general rule: the nicer the UI the more of a closed environment.  

The number of phones running on Android is growing but to announce Andriod as a clear winner that will solve the OS enigma is not only premature but will probably not happen. We have for instance the announcement of the Nokia and Intel cooperation regarding MeeGo. The operating system war will continue and those that hoped for common standards etc. will just have to wait a bit longer, quite a bit longer. The operating system jungle is here to stay.

There’s a lot of tension in the market and it is clear that there’s not room for all. It will be quite interesting to follow the development in a market where all are so dependant on each other and cooperate at the same time as all are competing. This time we had announcements like the one from the Vodafone CEO Vittorio Colao warning about Google and other companies dominating parts of the mobile value chain and even suggesting that the regulator should interfere. When did Vodafone all of a sudden become so pro regulation?

In conclusion, there was not a lot of news or surprises this time. It’s however clear that the industry has gained some momentum compared to last year. There will be a lot happening in the market but presently the established players seem to think that everything will continue more or less as today not recognizing that the mobile is just another Internet access point.

The role of the operator

The roles and perspectives of five kinds of stakeholders are discussed and debated: the end user; the device and hardware manufacturers; the traditional media houses; the Internet giants and the telecom operators. All are very important and play essential parts in the mobile/Internet eco-system. The balance between them has shifted over time and will continue to do so. The telecom operators seem to be the most criticised and questioned. Is this unfair or have they earned it?

Historically the telecom operators have been enormously successful offering high quality global fixed line telecom services. Next in line was mobile telephony developed in cooperation between Nordic operators, such as Telia and Sonera, today merged into TeliaSonera, and hardware suppliers such as Ericsson and Nokia. The success of the operators has been based on a network centric business model. Even with many attempts to expand into new adjacent areas almost all of the profits still come from the original core of the business. Moving into new areas has shown to be difficult. This is probably due to limited knowledge and experience, cultural differences and conflicting business strategies. Focus has been on increasing traffic and not end user value, a strategy which now even may show quite dangerous risking ending up in a network apocalypse scenario. Should then the operators avoid new tempting areas and just stick to what they clearly understand, running networks and offer access?

The operators struggle with the dilemma of finding new revenue sources at the same time as they desperately defend the existing cash cows. The main difficulty lies within that the old network business is local/national and telecom centric and most new business is global and based on IP/Internet logic. You can’t move into the new business without starting competing with the old thinking. Moving from a fully controlled stove pipe environment to a horizontally layered business structure with fierce competition on each layer may be an almost impossible equation.

What we see over and over again are attempts to move into new value added services without understanding what it takes to become successful. The new services most often need to be competitive by their own on a regional or global scale utilising significant scale advantages. Instead the new business is subsidised by the old until some brave young business controller analyse the case, showing that the new business is not competitive, have a far too high cost level and do more harm than good.

We have entered into a situation of access independent services also for the mobile. As outlined in a recent report by Gartner the mobile will already in 3 years be set to overtake the PC as the most common web browsing device. Internet will finally be available for all of humanity through Internet enabled mobiles, especially important to developing countries. The operators are of course instrumental to make this happen. We need well run high quality and efficient networks. There is also a number of enabling functionalities, such as efficient payment solutions, location data, device management etc. that the operators may offer partners. However, there are still some very basic elements related to cost control that urgently need to be in place, the two most important being: affordable flat rates and reasonable and transparent data roaming charges.

There is also a lot of talk about utilising all the data the operators have about usage and the end user. However, this data is hard to get out of the systems and is rather technical in nature and not originally defined for marketing purposes. It’s time to realise that the huge amounts of detailed data hidden in the operator’s systems is rather useless. We need specific data depending on business logic, that can be used for marketing purposes, and that is automatically generated and monitored without first involving the technical staff for weeks.

The operators need to shift focus from traffic maximisation to end user and partner value creation. They also need to support device and operator independent initiatives, such as UMIs, as all will be winners when penetration of Internet access through the mobile increases. Differentiation of the access offering through exclusive value added services and content is a very costly and is not sustainable. Stop doing costly experiments in attempts to find new revenues sources in business areas you don’t understand. There’s no reason why being a bit pipe provider should not be a profitable business even in the future, except for if the regulator mess things up completely. Please realise that moving into an IP environment gives access independent services, focus on making data charges understandable and affordable and incentivise all to maximise the value to traffic ratio.

Key mobile trends

I was asked at the Mobile Monday event at the Squace office in Stockholm yesterday what people read on this blog. Going through the statistics over the last year some conclusion may be drawn. If this says anything at all regarding general mobile trends could be debated. The top three posts discuss the importance of the mobile to developing countries, as a new marketing channel and as a way to distribute long-tail content. Reflecting key industry trends? Yes, I think they do.

Below the top 10 blog posts are ranked based on popularity:

The importance of the mobile phone to developing countries

Key considerations when choosing mobile marketing platform

The Reversed Long Tail – Key to the success of mobile Internet

The first ever true UMI is born!

Why companies should do mobile versions of their web sites

Will the business models of web 2.0 services work when expanded to the mobile?

Why search will not be as powerful when accessing Internet through the mobile

Cloud computing – a key enabler for mobile service development

Microsoft moves into the Universal Mobile Interface space launching OneApp

The operating system forest may turn into a jungle

Avoiding app stores turning into app graveyards – Part 2: Any solution?

The app stores grow in size and it becomes very hard to gain visibility and sufficient usage for the majority of the services offered. What was first a market place for small developers has now become an important marketing and sales channel for well established brands.  Less known services and brands, that initially may have gained some attraction, now find it harder and harder to succeed. The app stores have turned into huge warehouses where the consumer may find what she’s already familiar with and is looking for, but with quite limited or low precision support to encourage exploration of new services. Increasingly the most successful and used apps rely on a brand with an existing user base from other media such as the online web, television, and print. There are exceptions but they become more and more rare.

Why have the very promising phenomena of the app store resulted in a very limited usage for most services offered? There is fundamentally nothing wrong with the app stores but the expectations are far too high. Why?  This is due to a number of reasons:

• The app stores are not really built as stores. Let’s just compare to the ordinary grocery store. The most frequently bought items, such as the milk, is far into the store and on the way there you are bombarded with promotions and offers. The business is carefully managed to: promote products in cooperation with the suppliers; align with other marketing channels; make us buy specific products by intelligent shelf management; improve loyalty by cards and programmes resulting in increase revenue and decreased customer acquisition cost etc. For the app stores to really become stores there is a long way to go.
• Most of the services offered are actually not good enough. The services are actually not meeting a demand from a big enough market segment. Many developers are prepared to take a chance developing and launching a new service, but many times with limited knowledge about the market need or how to reach a specific target group. Most services should never have been developed and are just a waste of resources. Trial and error may many times be a quite costly way to determine if there is a true market need or not.
• There are very limited means to reach a specific target group. Many apps would probably be quite appreciated by a specific and limited group but there are not good enough support to make this happen. The logic is now mainly based on that the end user knows what she’s looking for or that she’s regarded as an average user offered the same as anyone else. There needs to be ways for the suppliers to target specific groups is a cost efficient way.
• Most services are not marketed at all. With the exception of established brands with existing marketing channels, the services are hardly marketed at all. You can hope for that you get some free PR, being mentioned in a popular blog or similar, but what are really the chances of getting attention among 100.000 apps without a know brand or a substantial marketing budget? I would say that they are quite slim.
• Recommendation is underdeveloped. As the number of apps grow to very high numbers it starts to become much harder to find what you are looking for. Search will help you to find what you know exist, while recommendations will help you find what you did not know existed or that you were looking for. The recommendation tools are today quite limited and recommendations are mainly found on online web sites. Seems like quite a detour.
• The app stores have a too wide scope. As the stores grow and the end users become more advanced there is a growing need for niche app stores or sites focusing on specific interests. You need to put the services in some kind of context which will also improve the marketing and PR possibilities significantly.
• Most apps are bad business. The business cases for most apps are rather optimistic. Far too little resources, if any, are allocated to marketing and with limited revenues further development and promotion of the service become quite a challenge. Even a very good app may be buried under piles of other less attractive services and with very limited possibility avoiding a slow death.

Is there a solution to the problem? From the app store owner perspective they need first to figure out what they want to achieve running a store. With the limited competition a warehouse approach may be ok for the time being. However, eventually the present app stores have to decide if they should stay as “app warehouses”, if they should develop into real managed niche stores or shopping malls. One may also question the sustainability of the business models and if there’s really a need for the app stores further down the road. If staying with the present strategy they need to strengthen the recommendation functionality and possibilities to involve the end user. There need also to be better possibilities for suppliers of apps to directly target specific customer segments.

As the app store owners presently are quite happy, advice given to the developing community may be more worthwhile:

• Add the chapter Marketing to your business plan. As we all know, no product will sell itself. Don’t rely on that the app store will market and sell your service. Partner up with known brands, market through existing channels and allocate resources and money for this.
• Address specific needs of a defined segment that you have the possibility to target. Do the homework. Is the market really big enough?
• See to that the service is good enough. Depending on addressed market you have to see to that you really fulfil the needs of that target group. Services giving a close to good enough experience for many but not really good enough for any, will hardly gain usage or loyalty.
• Enable viral marketing. Make sure a happy user can act as an ambassador for the service and recommend this within her network.
• Keep costs down and have a realistic view on the revenue potential. Make sure you have enough to develop a good enough product and to market it. Go for general platforms, such as UMIs, to avoid high additional costs redoing the same service in different versions for all different devices. Consider a browser based approach as opposed to the more costly and harder to manage app/client approach.
• Minimize your risk. Have a portfolio approach as it is very hard to predict what services that will really become successful. Calculate and prepare for that the majority of the services will fail.

Avoiding app stores turning into app graveyards – Part 1: So what’s the issue?

The development of app stores has been beyond anyone’s expectation. The key driver for the development the last 18 months has been the iPhone app store but similar concepts have been around for many years with services, such as Handango and GetJar, as well as many operator portals. The overall numbers are really impressive. There is today about 115,000 iPhone apps and more than 100 million downloads a month (incl. iPod Touch), while the second largest app store Get Jar, serving all types of mobile phones, has about 60,000 apps and 50 million downloads a month.

With close to 40 million iPhones sold the number of apps downloaded per user is on average quite high. Some claim that the number is as high as 11 apps per month and user, but I’m not really sure they got the math right. Anyhow, is this a gold mine for the developing community? We do have success stories but the app stores are now quite crowded. On average each app is downloaded about 1000 times a month. But looking at the usage patterns for free apps presented by Pinch Media only about 20 % return to the app a second time, only 5% return to the app after 25 days and after 90 days only 1% still use the app. Keep in mind that these numbers are all averages. Also taking into account that the top 1% of the apps in the larger app stores probably account for 90% of all downloads, then the numbers become quite disappointing for the majority of the apps not making it to the top. Most apps do probably not have more regular users than, well, those involved in developing them. Sad but probably true. The numerous launches of app stores by device manufacturers and mobile operators do expand the market but it also becomes quite fragmented. All different operating systems and specific demands result in that each app have to be made in many different versions, driving cost even further.

The likelihood that a new app after some initial attraction ends up in a close to zero down load frequency and that those initially downloading it stop using is, despite the over all success of the app stores, quite high. The app stores are turning into app graveyards for most new apps, buried under piles of more attractive apps and with very little possibility to gain visibility. Gaining visibility is a marketing issue but the limited stickiness of the services may indicate that most of the apps should never have been made as they do not meet a specific customer demand. Services with a limited but loyal segment are fine but with false expectations on future take up and revenues the cost levels are usually far too high for the development.

The term app graveyard has been used for clusters of apps that were not approved and never made it into the so attractive looking gated communities of the app stores. The question is if they actually have a better chance of succeeding outside the fence. The app stores may be fantastic and one of the most disruptive elements seen for quite a while within the mobile sphere, but please remember that they still can’t sell services that are not really marketed, nor sell services that actually do not meet a customer need.