Mobile Apps: A Long-Term Investment
By Rebecca Henely
With 4G/LTE technology looming and more than 140,000 mobile applications currently available in Apple.com’s App Store, mobile apps have become an attractive new venture for companies.
Yet as with any new technology for a new marketplace, the profitability of putting out a new app for a company can be uncertain.
According to a new Forrester study titled the ROI of Mobile by Julie A. Ask, start-up costs for an app encompass more than just the initial creation, and companies must consider a variety of factors when estimating consumer adoption.
“Calculating the ROI of emerging technologies and services that depend on consumer behavior is challenging,” Ask states in the study. “Some may argue that it is part art and part science.”
Ask’s study states apps can be beneficial to a company. They can increase sales and customers not only through purchases via mobile device, but also by guiding customers to brick-and-mortar locations and delivering promotions to increase the amount of purchases per visit. Some company infrastructure costs like facility leasing and maintenance, personnel, costs related to inventory, or material costs may also be cut down company-wide if the app is popular.
Many companies want to have a mobile presence, as well. In a recent survey by R2integrated, 22 percent of respondents named mobile marketing as “very important” to their overall marketing strategy, with 26 percent naming it ”important” and 28 naming it “somewhat important.”
However, Ask states, building and distributing an app can increase costs in other areas aside from the initial cost for building the app and the licensing. These can include service fees, costs of delivering messages to customers, distribution deals with carriers, marketing the app, time spent training or re-organizing personnel to handle support for the mobile app.
“The cost and time to build the apps is greater than anticipated,” Randy Paskal of Moviola, which recently created the
Pro Video Guide app for sale on Apple. “The more time we spend making sure that we are building a quality product the better the results. A fair amount of trial and error has occurred during this process.” Then there comes the question of whether the app will be used.
“With an emerging medium like mobile, it is difficult to forecast consumer adoption and usage,” Ask states. “Benefits such as sales are easily quantified because they go directly to the bottom line. Others - such as increasing customer satisfaction by 0.2 percent - may be more difficult to quantify.”
The article suggests companies must estimate consumer adoption over the next three to five years, but also how often consumers will use the device and how much profit will be earned through usage.
“For a mobile app to be a considerable additional revenue stream, you need to ensure what’s been offered is enticing,” states Marc Edwards, director and lead designer for mobile app development company Bjango Studios. “Also, make sure you do your homework on what’s available. The App Store contains almost 200,000 apps, so most ideas have been done at least once (often badly).”
Edwards, as well as other companies, seem to be following Ask’s advice already. Paskal stated Moviola expects its app to recover its cost within the first year.
The tax-assistance company TurboTax says it sees its SnapTax app, which is available to California residents who want to file a 1040EZ or 1040A form this year, as a test to see if the market for doing taxes on mobile is viable.
“The challenge is how to balance the scope of what you want (or could) cover with maintaining a simple, easy customer experience,” says Colleen Gatlin, manager of corporate communications for TurboTax. “For example, we could consider broadening the reach to audiences with more complicated tax situations but is that the right kind of experience for filing taxes from your phone? Also, is there enough of an audience for the app and in this case, we believe so. [There is] lots of room to expand (other states, other platforms), but important to learn first.”
Developing a partnership can also help, states Ben Kazez, founder of Mobiata, which has created a number of travel apps. ”With our travel partners, we’re able to offer much shorter times till profitability (for companies looking to make revenue through mobile), since the mobile travel platform we’ve built and field-tested enables us to develop apps at a fraction the cost of internal IT teams,” he states. Kazez says the most important thing when creating an app is quality.
An app can’t be poorly designed or badly engineered. “We’ve seen some general digital creative shops getting their feet wet with app development, sometimes for very large clients. Their work hasn’t been tested the way ours has - not just by quality assurance engineers but by real users actually traveling - and we’ve seen several of these apps fall flat during updates from one version to another, or even just during regular use,” he says.
Edwards also says apps can be done for niche audiences, so long as the rate of return isn’t expected to come quickly. “We are looking at the revenue as a long-term investment in the company and our clients, as we design apps for a specialized segment of the professional marketplace and we do not expect big nor quick returns on our investment,” he says.
“The time to invest in mobile is now,” Kazez says, “but the case for particular apps really depends on the financials of the companies in question.”
Apple vs. Adobe: Flash Developers Getting Impatient
By Lee Simmons
By now, the debate between Adobe and Apple over incorporating Flash on the iPhone is well known in technology circles. Apple has blocked Adobe from the device, with reasons ranging from Flash’s memory intensiveness and battery draining potential. For its own part, Adobe has addressed most claims and created a product that is just about market ready for launch on the iPhone.
While the debate may rage on, mobile Flash developers aren’t willing to wait much longer for the clouds to clear. Adobe’s Creative Suite 5 (CS5) promises to translate Flash apps to iPhone-compatible apps. That could be a potential boon to the estimated 2 million mobile Flash developers working today (compared to 125,000 iPhone developers).
Mobile Flash developers offer differing views on the Adobe-Apple fracas, but most agree on at least one thing: the debate won’t stop Flash from revolutionizing mobile apps.
“I’d rather be active than passively waiting for something that may never happen,” says Dave Yang, founder of Toronto-based Quantumwave Interactive, a mobile and new media development firm. “For a lot of developers, the iPhone market is potentially a great income source. But with the tight control by Apple, there are pros and cons developing for it.”
Control, Performance Issues
Launched in 1993, Quantumwave develops a variety of Flash apps for mobile, including weather, news, photo galleries and shopping apps. The proliferation of smartphones made mobile a logical target market for Yang’s business. Yang points to a couple of main drivers behind the latest disagreement between Adobe and Apple: revenue control and performance issues.
“It’s a combination of who has control over app revenue, and potential performance issues of the previous generation of the Flash Lite player,” Yang says. “The Apple App Store is the only official method to get applications, and Apple has full control over it. If they allow Flash to run on the iPhone or iPad, users can get a lot of content - games, video, applications, etc. - without paying Apple anything.”
The theory that Flash apps create performance issues on mobile devices - particularly that Flash Lite is slow, CPU intensive and drains battery life - is a common misconception, Yang adds. He has noticed no significant issues in his own development.
Meanwhile, Adobe has made a lot of improvements in its next generation of Flash Player for mobile devices, including hardware acceleration. The advances are promising for mobile app development, Yang says, and he hopes Adobe and Apple can reach some agreement in the near future.
“As much as Apple likes to say their devices provide the best Web experience, a lot of Web content uses Flash for not just video or games, but enterprise applications as well,” he says. “Without Flash, the Web experience on the iPhone or iPad is frustrating to say the least.”
Mariam Dholkawala, founder of Mumbai-based IGameStudio, a mobile game developer, likewise sees Apple’s restrictions against Adobe as more of a strategic decision than a performance one.
“I would argue and say that if other OEMs combat CPU usage on their handsets, why single out the iPhone?” Dholkawala says. “Flash content, if made open on the Web, might threaten the content on the App Store. Eighty percent of Web games are Flash-based and over 75 percent of the Web is video.”
Beyond the Debate
Mobile Flash developers like Yang and Dholkawala aren’t content to take the wait-and-see approach with Apple. The easiest solution is CS5, which translates Flash content into native Objective C iPhone apps.
“As the product evolves over time, I’m certain that we’ll see a lot of developers using Flash to create content for the iPhone/iPad market. However, there will always be a need for Objective C when these solutions cannot provide the adequate result of performance,” Yang says. “I’m open to all possible solutions and potential markets to achieve the best balance between ease of development and performance. It’ll be interesting to see how Apple reacts to more complaints that their most popular devices cannot play Flash content.”
Dholkawala similarly sees opportunities in CS5. “This tool would help us compile our Flash Actionscript into native iPhone code for application distribution on the App Store,” she says. “I would like to get my hands a little dirty with the tool and see what Flash is capable of with the iPhone OS on mobiles. Besides that, I feel that Apple and Adobe should work out their differences and have a real plug-in running on the phone.”
Lee Simmons is a writer in Austin, Texas.
Is Kindle Lighting a Fire Under iPad?
By Sarah Jaferi
For the past two years, Amazon has welcomed authors and publishers to directly upload and sell content in the Kindle Store through the self-service Kindle publishing platform. Recently, Amazon announced that it is inviting software developers to build and upload active content that will be available in the Kindle Store later this year. The new Kindle Development Kit gives developers access to programming interfaces, tools and documentation to build active content for Kindle. Developers can learn more about the Kindle Development Kit and sign up to be notified when the limited beta starts in March.
In an interview with DMB, Apple spokesperson Colin Smith refused to comment when asked if Apple is worried that the Kindle Development Kit and other technologies will be competition for the iPad.
“We’ve heard from lots of developers over the past two years who are excited to build on top of Kindle,” says Ian Freed, vice President, Amazon Kindle. “The Kindle Development Kit opens many possibilities - we look forward to being surprised by what developers invent.”
The Kindle Development Kit enables developers to build active content that leverages Kindle’s unique combination of seamless and invisible 3G wireless delivery over Amazon Whispernet, high-resolution electronic paper display that looks and reads like real paper, and long battery life of seven days with wireless activated. For example, Handmark is building an active Zagat guide featuring its trusted ratings, reviews and more for restaurants in cities around the world, and Sonic Boom is building word games and puzzles.
“As the leading worldwide publisher of mobile games, EA Mobile has had the privilege of collaborating with many dynamic and innovative companies in bringing exciting gaming experiences to new platforms,” says Adam Sussman, vice president of Worldwide Publishing, EA Mobile. “Working with Amazon, we look forward to bringing some of the world’s most popular and fun games to Kindle and their users.”
Starting next month, participants in the limited beta will be able to download the Kindle Development Kit, access developer support, test content on Kindle, and submit finished content. Those wait listed will be invited to participate as space becomes available. The Kindle Development Kit includes sample code, documentation and the Kindle Simulator, which helps developers build and test their content by simulating the 6-inch Kindle and 9.7-inch Kindle DX on Mac, PC and Linux desktops.
Sarah Jaferi is a newspaper reporter with more than 15 years experience in journalism. She currently writes for The Times of Trenton in New Jersey.
Google Exec: We’re Here to Help Newspapers
By: adage.com
NEW YORK (AdAge.com) — Devices like Apple’s iPad may help newspapers and traditional publishers, but only significant evolution will save them, Google’s chief economist, Hal Varian, said in a talk with journalism students at UC Berkeley.
Is the IPad Publishing’s Savior? Pro and Con
By: adage.com
This week’s iPad launch brought publishing’s future back to many media minds; we asked two agency thinkers to argue the pros and cons of the device’s potential for reviving a sagging industry. Arguing pro is Hill Holiday’s Greg Winter; con is Hill Holiday’s Ilya Vedrashko.
Battle of the Brands: Apple and Google Rivalry Muscles Into Mobile Market
Images courtesy of Apple and Google
By Craig McGuire
It may not be Coke vs. Pepsi. But, what was a budding rivalry between Apple and Google bubbling up for more than a year is now boiling over in a battle in the mobile market.
Prior to relatively recent skirmishes, the relationship between Apple and Google could not even be accurately characterized as dueling fremenies. Competitively ambivalent toward each other for years, the two technology leviathans were content to lumber around in their own respective market spheres.
During roughly the last 12 months, however, both companies are venturing into new business lines that stretch into the other’s market sphere.
For instance Apple is setting its sights on advertising, as Google launches a music service and smartphone business, while developing an operating system dubbed Chrome for light PCs and netbooks to compete with Apple’s Macintosh machines.
The Chrome Web browser this month surpassed Apple’s Safari, which is not such an earth-shattering development, as Safari enjoys just 4.46 percent usage, because it is used almost exclusively by Mac users, while Chrome is used by the much larger PC community.
However, it is in the mobile phone space where the two juggernauts are really mixing it up.
Apple’s wildly successful iPhone is firmly ensconced atop the market, with a fourth generation “iPhone 4″ slated for this summer (to include a five-megapixel camera).
Eyeing the bulging mobile-phone market, Google launched its first-ever consumer device, with the debut of its “Nexus One” smartphone, running its Android OS, while huddling up with phone makers to incorporate more Google apps and develop handsets with more prominent Google branding.
The battle is on.
Rivalry heats up
The rivalry really started to escalate in mid-2009, when Apple rejected the Google Voice application for the iPhone, a precursor to the heightening battle in the mobile market.
“There are a variety growth mediums available, but the showdown seems to be concentrating on the mobile market, both in terms of phones, iPhone vs. Android, and the mobile search market,” says Ron Trenka, CIO of Ai Media Group, an online advertising company based in New York.
Surveying the landscape, Trenka says Google appears to be setting itself up to do the same thing for the mobile search market that the company has for the Web while Apple appears to doing the same thing for mobile as it did for the music industry.
“Blackberry is trying to keep up, but they are limited to Windows Mobile, which is generations behind what Google and Apple are putting out there,” Trenka says. “Palm made a good push with the Palm Pre, but being limited to the Sprint network is hurting their overall adoption. Same thing with Apple and AT&T. Users have been adopting the iPhone faster than AT&T’s network can keep up with the load, which is going to hurt Apple in the long run because it’s going to be seen as an iPhone issue more than an AT&T issue.”
Battle of the Brands
Brand loyalty is one of the battle fronts between Google and Apple, and it’s a critical reason for why they are able to go head-to-head.
And Google is in the lead: according to BusinessWeek’s Best Global Brands report for 2009, Google is #7 and Apple is #20.
Meanwhile, the escalating rivalry between Apple and Google is drawing so much attention, it prompted interactive marketing agency BGT Partners to actually develop a proprietary Google vs. Apple scoring system that measures software/hardware adoption rates and market capitalization, as well as a FaceBook page (see sidebar at bottom of article).
“Based on scoring results, Apple is the clear leader at the moment,” says David Clarke, BGT Partners founder and managing partner. “However, because Apple has so many adversaries across industries, Google has tremendous support in the technology industry and will steadily gain a competitive advantage, especially in smartphones.
“Overall, Apple will maintain its identity as a premium brand that gets top dollar for its products due to their top-of-the-line quality,” Clarke adds. “Google will continue to promote its search and ad business, which will subsidize the costs for their software and hardware.”
Clarke cites specific examples, including:
- Google’s smartphones will soon be free with a service activation. This will mean that the iPhone will have to come down in price, but not by much.
- Google will be the first company to sell unlocked phones for GSM networks, which will help to further advance its market share internationally.
- Apple tablets will be premium-priced while Google tablets will be accessible to everyday users.
Apple, though, has an advantage. “The reason Apple has done so well is because it manufactures both software and hardware, and produces products of high quality,” Clarke says. “With a superior product you will achieve brand loyalty and customer retention. Most of Apple’s competitors only produce software or hardware, but not both, thus giving Apple a large competitive advantage. This will be Google’s biggest challenge: to produce a superior product that will enable it to dethrone Apple.
“Brand loyalty is a very large factor with Apple,” Ai Media Group’s Trenka agrees. “Apple customers are very loyal and tend to be the type of people that want the latest and the greatest and are prepared to pay a premium for it. Google doesn’t have that same fanatic loyalty, but they have name recognition and a reputation for pushing the envelope when it comes to technology.”
Delicate Dance vs. Market Brawl
For the most part, both sides have not resorted to nasty tactics.
“I think both will tread lightly around each other for a time while taking assorted snipes at each other’s technology,” Trenka says. “Apple has a very strong user loyalty index, whereas Google is being seen as having its fingers into more and more of people’s daily lives. Both Google and Apple are strong on R&D, although Google tends to be more open about its projects with Google Labs. Apple likes to play it close to the vest until the idea is fully developed and ready for the consumer market. They can then take advantage of the ‘wow’ factor, as can be seen with the highly anticipated announcement of the Apple Tablet.
“There will be increasing rivalry as they continue to step on each other’s toes, but I don’t think either company is going to burn its bridges,” Trenka adds. “There is still a lot of room collaborations on non-competing products. For example, Google isn’t going to pull Google Maps from the iPhone nor does Apple seem to have any desire to reach into that market.
Technology analyst Rob Enderle of the Enderle Group says while most coverage now centers on Google’s foray into smartphones, going forward, the trajectories diverge. “This will likely look like a mismatched battle as Apple’s strength and focus are directly on the consumer while Google will largely be focusing on carriers and OEMs,” Enderle anticipates. “Apple will likely try to avoid attacking Google directly, because they don’t want to give them the coverage, and Google’s lack of marketing budget will prevent them from going directly after Apple.”
However, Enderle says Google partners will not feel so constrained. “Apple will continue to differentiate on hardware and user experience, while Google will focus more and more on their back-end services,” Enderle forecasts. “Apple will also continue to operate at premium prices while Google devices, with exceptions, will be more value priced.”
Both companies, in effect, will be coming at this battle with a vastly different tool set.
“Apple will be more focused, but Google will have greater leverage through their partners and likely sell more devices while Apple should, in terms of hardware suppliers, have higher margins,” Enderle says. “Thinking about this in a different way, Google will be more of a tool supplier used by Apple competitors to get competing products into the market. Apple’s fighting the fight while Google is building weapons, which allow others to fight with Apple.
Ultimately, though, this is just one battle Google is waging as it faces formidable rivals on multiple fronts.
Google also has a rivalry with Microsoft in basic software and computer operating systems; Yahoo in search; Garmin and the other GPS companies in navigation; the entire print industry in reading and information discovery; and Hollywood in video entertainment. Google and Apple do completely different things, and Google’s plan is far more wide-reaching than Apple’s.
Face-Off on FaceBook?
BGT has even rolled out a clever Facebook site in early January dedicated to the Google vs. Apple battle.
“We expect to have a solid amount of fans by the end of February, billed as providing you with front-row seats to the battle royal between Apple and Google. The site is dedicated to the fun and excitement of these remarkable companies pushing us into the future and competing for our loyalty.”
Sidebar: Skirmishing 2.0
A Blow-by-Blow Account of Key Events in the Past 12 Months
- March 2009 - Google released version 1.1 Android, a software stack for mobile devices, such as the Motorola Droid, which includes an operating system, middleware and key applications running on the Linux kernel.
- May 2009 - Google confirms that the Federal Trade Commission was planning to hold discussions concerning potential conflicts of interest related to Schmidt’s presence on both companies’ boards of directors.
- July 2009 - Apple pulls all Google Voice-enabled applications from the App Store, citing the fact that they “duplicate features that come with the iPhone”. Three days later, Google, Apple, and AT&T, the iPhone’s exclusive carrier in the U.S., received inquiries from the Federal Communications Commission.
- August 2009 - In a move that comes as little surprise, Google CEO Eric Schmidt resigns from Apple’s board.
- October 2009 - Google unveils its new music listening service.
- November 2009 - Google gobbles up Internet-phone providers Gizmo5.
- November 2009 - Google spends $750 million in stock to acquire mobile display ad company AdMob, known for serving display ads on iPhones, but it also recently started a business unit focused on ads for Android phones. (Apple reportedly also tried to buy AdMob earlier.)
- December 2009 - After an earlier failed courtship with Google, Apple snaps up Web-based music startup.
- January 2010 - Confirmation of mobile-ad company Quattro Wireless’ acquisition by Apple announced in blog post by Quattro CEO Andy Miller, identifying himself as Apple vice president of mobile advertising. Price tag = $275 million.
- December 2009 – After an earlier failed courtship with Google, Apple snaps up Web-based music startup
- January 2010 - Google unveils Nexus One phone at a press conference in Mountain View, Calif. It is manufactured by HTC and runs on Android. It marks the search giant’s first foray into selling consumer electronics devices.
- January 2010 - Less than 15 months post-release, Google Chrome surpasses Apple Safari to become No. 3 browser, behind Microsoft Internet Explorer and Mozilla Firefox.
- January 2010 - Apple Inc. is in talks with Microsoft Corp. to replace Google Inc. as the default search engine on the iPhone, Bloomberg reports.
Craig McGuire is a New York City-based journalist who covers business and technology. He can be contacted at Craig@ByCraigMcGuire.com.
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