Wednesday, November 26, 2008

How the crisis will affect the mobile application ecosystem

“So, how’s the crisis affecting your business?” has become sort of a “Hello” recently. If not for everyone, then at least for all professionals you meet in daily business life – from customers to lawyers and the bankers (yes, especially these guys). Very soon, you start questioning yourself “so…how’s the crisis affecting or will affect MY business?”. After thinking a little and arriving at some conclusions, I thought it might be interesting to share the opinion with the others in the mobile industry.

Before speculating on what will change, I’ll briefly state where we are now, just to identify the starting point of the coming changes. In mobile application ecosystem I’d say we currently are in a highly speculative, expectations driven, risky but potentially very rewarding environment. In 2006-2007, lot of money was invested into mobile apps and services. Conditionally, I’d call this a “get the product” period, during which lot of money was spent to create innovative mobile products (thought truly innovative services were only a few, the vast majority went to recreate internet-proven models, from social networking to blogging to video sharing and the rest).

Following the “product” period, a “get the user” era arrived (mid 2007 to current). Mobile gold rushers, already having product in place, went to into battle with their marketing budgets in an attempt to win the most eyeballs. The logic behind is very simple. On the already established internet, an individual user may be worth all the way to $50 (check out the investments into Facebook in 2007 to get a sense of how much one user of the free service can be valued at). Such “individual user valuations” are based on the established internet business models capable of drawing value from users. Universal advertising solutions and multitude of affiliation opportunities make it simple to monetize your user base. With the level of liquidity already existing on the internet, users become a kind of a commodity, with the present value of the future earnings from the available business models being their current “worth”. Not the case with mobile. Although there do already exist some “Mobile 1.0 business models” that allow drawing some value from users (eg affiliation with ringtone, wallpaper and other “old crap” sellers), these are nothing compared to what will come (big brands move to advertise into mobile space, global mobile billing enables whole mobile virtual economies and so on).

Naturally, if someone believes a mobile user in 5 years may be worth at least as much as a web user is worth now (ie all the way to $50), then it makes sense to buy mobile users for your product now when they’re cheap, and accumulate them until mobile gets mature and places “the right price tag” on a user. Then, sell this user base with the product and the company, or run the already available robust business models on your user base. Let’s call this era “get the cash”. Being in their vast majority in the transitional (ie “get the user”) phase now, developers haven’t yet looked into long term monetization models.

So what the crisis is definitely going to bring is a massive shift from “get the user” to “get the cash” position. And we definitely see the process starting to happen, as many mobile companies accelerate their research and adoption of various monetization models. Of course it is unlikely that mobile companies will find in the very short term a “magic solution” that will immediately bring them into mega profits. The market and the user are still immature and have a long way to go. But those companies able to find working, efficient and scalable monetization models are definitely going to be in a much better shape.

At GetJar, being committed to providing a full range of mobile developer services, we’ve been working on mobile monetization solutions since day one.

One technology we’re launching publicly now after a very successful 6 months pilot with several mobile developer partners is called MADI (Mobile AD Injection), click here for details. MADI (currently available for J2ME with other platforms coming soon) is a simple API that enables ads inside a mobile application. On the back end, the API connects to GetJar’s ad server, which in turn is connected to GetJar’s own mobile ads database and several third party mobile advertising networks.

Pilot developers using MADI reported highly attractive $2 to $50 CPM rates (earnings vary much depending on user demographics, level of ad visibility and so on). One unique aspect of GetJar MADI is that it is a complete solution. Developers simply insert MADI code into his application and GetJar provides both the supply of ads into the application AND application distribution.

Besides advertising, other technologies enabling various monetization models are being developed by GetJar in partnership with carriers, phone manufacturers and mobile platform developers and are planned for launch as early as 2009.

2 comments:

Enfis The Paladin said...

Hello, I'm one of the developers who benefited from the GetJar MADI project: without MADI our company was intended to close (for lack of funds).

IMHO, madi is definitively the best solution of the whole world, there is only one drawbacks: small business like ours, can earn money only from big/medium companies. This means that if these companies, due to crisis, starts to save advertising money, we are totally lost!

Again IMHO, madi could be used by the software during the "try before buy" period, then you should "invent" a payment system, directly injected into the application, that allow the user to buy a license of the software/content within a click; for example taking the money directly from the phone billing. Transforming the mobile phone billing to a credit card, as current VISA experiments does, is so vital for the future of mobile generation...

Keep up the good works!

Bill said...

Hey Enfis, this is great! We're happy that GetJar could help your company. We'll analyze your suggestions for technical improvements to MADI. But don't worry, there are a lot of advertisers using MADI to advertise, so the money won't run out anytime soon!