Business Industry and Outlook
ROI on average app devleopment
how many downloads?
Average app price
how many apps
areas for growth
who has the money
Critical Success Needs
Growth through acquisition
The new media landscape is very competitive and highly fragmented.
There are predicted to be a billion smartphones, and 400 million
tablets on the market in 2016 with 650,00 apps in the app store that
is growing at 15,000 apps a month. Consumers are hard to reach and
for the most part frugal, with only 30% regularly paying for apps, and
then the average price paid for an app has dropped from about $1.99
But this isn’t all bad news, there are opportunities for growth,
especially for American Greetings Properties. The tablet app market
is ripe for growth as the number of devices grows and consumers
are willing to pay premium prices for premium content. Furthermore
there is a prediction that the app economy may subside in favor of
the creation of cheaper and more universal web applications, as well
as the creation of content platforms that can provide an experience to
consumers across multiple platforms.
Business Industry and Outlook
High Threat of
•Low Barriers To Entry
No Switching or Sunk Costs
Low Capital Requirements
No Customer Loyalty
High Threat of
Low Price Differential
No Buyer Switching Costs
Limited Product Differentiation
High Number of Substitutes
High Power of
High Firm Concentration
High Available Information
High Price Sensitivity
High Power of
High Supplier Switching Costs
Low Differentiation of Inputs
Limited, Strong Distribution Channels
Low Supplier Concentration
VC investment in apps
VC financing in 1st
6 months of 2012 for mobile
Different mobile start ups invested in
3,500,000Average vc investment amount
960,000,000Investment in media & applications
ROI for Average app developer
cost to develop a very basic aPp ($
Average app revenue + $
Average return on investment ($
How big is the market
The future of mobile and digital is an increase in 360
nies that provide an experience, whether utilities, entertainment or games
that can provide value and engage anywhere digitally on web applications,
In apps, on the tablet, in video games and on smart TVs are the companies
that will win in the digital future. Furthermore in the future, new technolo-
gies like HTML will render the app ecosystem superfluous as companies
can go directly to consumers.
INDIVIDUAL APPS Platforms & Ecosystems
How Many Downloads
Monthly apple app downloads
Monthly android app downloads
Average Price For Apps
The average price of apps
has dropped from $2 in
2009 to $1.50 in 2011
How many apps are there?
In App Store
IN Android Store
Best way to monetize
FREEFree apps are popular because they provide the consumer with a low barrier of entry and can be
monetized via ads, although the revenue per ad has been dropping over time.
PREMIUMSimply an app that one has to pay to download, can also contain in-app purchases.
FREEMIUMFreemium apps are free apps with some functionality with additional features or a premium experience
unlocked through in-app purchases.
SUBSCRIPTIONSubscription apps are free or low cost apps that derive a lot of their revenue through recurring monthly
payments that unlock content, generally used by companies that create and distribute media.
Freemium titles are
68% of revenue
Areas for growth
E-BooksE-Books, especially for the tablet are predicted to be a growing business, especially those that include
innovative interactivity, have strong brands, and have marketing to spend. Consumers are willing to pay
$9.99 to $15.99 for a quality interactive e-book and there is still room for players to establish brands. And
become best-sellers with less work.
TabletsSimilar to e-books, tablets are growing product area that is predicted to grow by 400% in the next four
years. Currently the tablet market is underserved by quality apps that are made just for the tablet and
not just smartphone imports. Furthermore, tablets are seen as a premium platform, where consumers are
willing to spend more on tablet specific apps.
Web Apps/PlatformsA near future case is developing products that live on the web. These are cheaper to produce since they
are device agnostic and don’t need to live within one of the 2 major app ecosystems, few develop for this
market as the HTML5 protocol hasn’t been 100% adopted by all major browsers, but this should change
within the next 2 years. Related to this is that the brands that will succeed in next few years will be those
that have developed platforms that deliver experiences to consumers across diverse devices, including
tablets, smartphones, smart televisions, in location based services, etc, and could involve physical objects
like gaming pieces.
who are the major players?
1.16BZynga generated $
1.16 billion in 2011 from the more than 30 games it has made or acquired. It has 306
million monthly active users and 72 million daily active users. It was founded in 2007 and currently has
100MRovio generated $
100 million in 2011 from a handful of apps. It’s flagship Angry Birds app has been
downloaded over a billion times. It was founded in 2003 and currently has 100 employees
79.2MCapcom Mobile generated $
79.2 million in 2011 from several dozen apps, and was one of the first
companies to sell in game premiums. It currently has more than a thousand employees.
An anonymous app developer gave the following
breakdown of what they spent to build a game that was
able to make it to the top 20 paid app downloads.
What is our earning potential
(P*N*.7)- (1.3*N)+ (N*.25*5)-(P*.25*N)
P= App Price
N= Number oF Apps Sold
P N Earnings
I put together this back of the napkin equation to give a quick
conservative calculation of what a freemium app’s earns could be
taking into the average number of users who buy premiums, the
development costs, the percent the app stores take out and the
average amount it takes to purchase
where is the most Money?
25-34 year olds spend more time in freemium apps and spend the most money on in-app
premiums. With men spending the Most time and more money. Among app downloaders, the
groups most likely to pay for apps are men, adults age 30 and older, college graduates, adults with
household incomes of $50,000 or more, and those living in urban communities
Men & women
Money Spent playing
Time Spent Playing
Freemium Games Out Of
What are the critical needs
to be successful?
MarketingHaving a great product that people talk about, is only half the battle, in order
to really make an app successful, it needs to be marketed, especially early on
in the release to achieve a high download ranking in the app store which helps
perpetuate downloads. The top revenue earners, who earned at least $50,000
with their most successful app, spent the most effort on marketing. On average,
14 percent of their time was dedicated to promoting their app, backed by a
marketing budget of nearly $30,000 on average.
Great productThe first half of a successful app is that the app has to be great. Whether it
is a beautiful design or innovative elements, the app needs to have something
great about it. This is because a large driver of downloads are family and friends
word of mouth, about 50% of mobile gamers said they learn about new games
from acquaintances and 25% learn about apps from social media.
Growth through acquisition?
Acquisition as an avenue for growth has seen mixed
results. One story to watch is Disney’s acquisi-
tion of app developer Tapulous (for an undisclosed
amount after a 33 Million round of funding) and
social game developer Playdom (for $563 Million) in
2010. These acquisitions have led Disney to develop
several long running #1 apps that have had several
million downloads and spun off other merchandise.
The theorized amount of Disney’s spending on digital acquisitions in 2010
The theorized amount of apps that have been downloaded
What are the best
Choose the right app category
Some of the most popular paid categories are Games, Entertainment and Books.
Marketing and PR
This is probably the 2nd most important part of developing an app, after actually designing the app.
Marketing can include advertising, social media campaigns, reviews in app blogs and review sites, and other
general public relations tactics of press kits to media outlets. Marketing and PR gets people’s attention and
creates awareness, which is often all you need for a consumer to consider a downloading an app, And will
quickly cause people to download when app is released, driving up it’s placement to the top 25.
Ask for ratings
App Store Ratings are an important driver for app downloads, since a lot of people base their download
decisions on word of mouth, and ratings act as a kind of anonymous word of mouth and peer promotion
when consumers decide about downloading an app, especially for new apps.
Most developers agree that best launch strategy to create a successful, highly downloaded app, is to get featured
in the top 25 of downloads. Most consumers find most of the apps that they download by looking at the top 25 in
the app stores and take it of a sign of quality and worthiness that others have downloaded the app. Although, this is
kind of a Catch-22, people download the apps in the top 22, but how do you get people to download enough to get
it into the top 22?
Get into the top 25