Making Money in Mobile: Chapter 14 - Mobile Design and Developmentby Brian Fling
This excerpt is from Mobile Design and Development.
Mobile devices outnumber desktop and laptop computers three to one worldwide, yet little information is available for designing and developing mobile applications. Mobile Design and Development fills that void with practical guidelines, standards, techniques, and best practices for building mobile products from start to finish. With this book, you'll learn basic design and development principles for all mobile devices and platforms. You'll also explore the more advanced capabilities of the mobile web, including markup, advanced styling techniques, and mobile Ajax.
The mobile industry is worth an estimated one trillion dollars. Trillion-dollar figures get thrown around quite a bit these days, especially after the worldwide economic crisis of 2008 and 2009. But we forget how extremely large a trillion dollars is. To put it into perspective, a trillion dollars is 1,000×$1,000,000,000 (a billion) or 1,000,000×$1,000,000; certainly, it’s not chump change.
[The] books business is part of a bigger industry sector called print, which also includes newspapers, magazines, etc. A very big industry indeed. Employing millions on the planet. But is it a trillion dollar industry? No. Only about half that. How about television? Television broadcasts in every country. It’s a media giant. Actually, combined with radio, the broadcasting industry is still nowhere near a trillion, only about half that. How about advertising? Surely that is a giant global industry. Yes, it’s big, but also advertising is worth roughly half a trillion dollars, in very round terms. Well then the IT industry? No, another half trillion there.
Let’s move beyond the tech and media industries—let’s think big. How about bottled water? Drinks, milk, beverages. Let’s make this big. Pepsi, Coca Cola, Red Bull. Tropicana orange juice. Heineken, Budweiser, all the wines from France to Australia. Hard liquor, the vodka martini, shaken not stirred. A good Spyside single-malt whisky like a Glenlivet or Cragganmore or Tomintoul. Coffee. Tea. The worldwide beverages industry. Ok, it’s big. Yet, it’s not worth a trillion dollars in size.
The world total GDP—the total Gross Domestic Product for the planet—is about 55 trillion dollars. Our economy does not have room for more than a handful of trillion-dollar industries. Look at the countries. Russia, Spain, Canada, Brazil, India, Switzerland—most big countries on the planet—their total national output per year—do not hit one trillion dollars. Italy, France, and Britain are countries whose total domestic output exceeds a trillion dollars. That is the size we’re looking at. All of Japan is 4.5 trillion dollars. All of the USA is 14 trillion dollars.
But with all this money flowing into mobile, where does it all go? In Figure 14.1, “Where the money goes in the mobile industry”, you can see that voice makes up the majority of the market, taking in nearly $600 billion a year. Hardware is a distant second, with $200 billion a year, messaging $130 billion, and data—which accounts for basically everything I’ve discussed in this book—takes in about $70 billion a year.
Although the data market is certainly a much smaller piece of the pie, it isn’t chump change, either. So the question you might be asking is “How can I get in on the action?” How can you make a mobile product and make money from it?
Because we are not operators and we cannot charge users directly for data charges they incur, we have different six basic ways to make money from mobile data, that $70-billion-a-year-and-growing market. These are:
Sell downloadable native applications
Sell subscription content
The problem is that for all of its benefits, the only way you can make money from the mobile web itself is the last option: add advertising. Mobile advertising works, but it requires lots of views in order to be profitable. If you have a brand that can produce those views on mobile devices, then you can probably earn a decent return. For everyone else, it will hardly make the effort worthwhile.
Technically, you could sell subscription mobile web content as well, but it is problematic and often impractical for all but a few companies. Entering payment information on devices is difficult for the user to do, and the security capabilities on most devices are sketchy at best.
For the only ubiquitous and the most cost-efficient mobile platform, having no means of making money doesn’t help justify an investment. It is no wonder that most companies stick to the tried-and-true moneymakers: mobile content such as ringtones, games, and applications.
But what I don’t understand is why. Why aren’t more people making money from the mobile web? We’ve learned how to make money from web services and web applications. Users are more than willing to pay the appropriate fees for a useful service, and there is no better medium to provide useful services than mobile. So why haven’t we been able to apply this knowledge and experience to the mobile space?
Companies try to support too many devices too quickly. They underestimate the costs of adaptation, testing, and support (a topic I will discuss at length in Chapter 15, Supporting Devices).
Downloadable applications are easy one-time wins but become distractions. They can make good money for a short time, but are hardly good long-term investments. Companies divert resources to create a revolving door of downloadable apps to sustain revenue, but end up oversaturating the market instead.
Companies try to work with operators to put their content in front of a massive number of users. But the operators add too much cost and complexity and give little back in return.
Companies are unable to produce enough traffic for mobile advertising to earn a profit.
There are numerous benefits to the user in a mobile web strategy, beyond financial gain. Having helpful information and services available to consumers in the mobile context can be used to boost foot traffic to a physical location, increase sales leads, boost brand awareness, and the list goes on. But for the sake of argument, let’s say that you want to make a return on your mobile investment—what do you do?
In this chapter, I discuss three approaches to making money in mobile technology—specifically, on the mobile web. However, I should warn you first that there is no perfect formula. In fact, if I had a foolproof answer here, I would most likely be sitting on a beach someplace and not writing a book. How to make money in mobile is an age-old question and one that the entire mobile community has struggled with for over a decade.
Obviously, there are several models that work; otherwise, mobile data wouldn’t be that $70-billion piece of the trillion-dollar pie. It is about finding the right model for your business and for your users. And in my experience, it has taken a little luck and good timing.
As discussed in Chapter 2, The Mobile Ecosystem, the operator is at the center of the entire mobile ecosystem. For better or worse, everyone—even the device makers—have to play by the operator’s rules. Every aspect of the industry is guided by its influence. If you are lucky, you will never need to work with an operator at all, but in the right situations, the operator can be an ally and a mutually beneficial friend.
Operators can publish your content to their portal, promote it to their users, and provide a variety of billing and technical services that are often needed. The mobile content trifecta—ringtones, wallpapers, and games—makes up the majority of revenue in this area. For all other content, it can be a struggle to get a new site into the portal. But if you can show how your site can improve their bottom line, it is certainly possible.
Working with operators is easily the most common means of making money in mobile. Let’s start by understanding some of the key terms and concepts that come up when talking to an operator.
For nonsmartphone devices, it all starts with the operator portal, also referred to as the deck, which is the default site that is loaded when a mobile web browser is started (see Figure 14.2, “The Vodafone deck”). It is analogous to the start page or home page that you see when you launch a web browser, but it is provided by your operator. The origin of this term comes from Hypercard and from the later WML development used to create mobile portals. Both languages use the “card” metaphor to denote different pages within a “deck” or site.
The deck is often positioned by the operator as a “walled garden,” meaning that you have everything you could possibly need, but you can’t leave. On most mobile web browsers, you can, in fact, leave by just entering a URL into your browser, but some operators intentionally hide that function in mobile web browsers provisioned to their network to try to keep the user in their deck.
The deck is the core of the mobile content business; the majority of users browse and purchase mobile content such as ringtones, videos, applications, or games on their device. In addition to their premium content, operators usually include news and information services to attract customers to their deck.
There can be enormous benefits to working “on deck,” as it’s known, or being linked to from the operator-provided device portal. Trying to develop and promote a mobile website, application, or piece of content is hard work. Although the mobile market itself is vast, building exposure and turning that into a measurable metric of success is quite difficult.
Getting your content onto the deck is your basic “stronger together than we are apart” strategy. By pooling resources and providing consumers a storefront of variety that suits their needs and tastes, the deck becomes an easy place to start getting content for your device.
Any website that is listed on the operator deck goes through a rigorous feedback and approval process, most often for downloadable content sites for ringtones, images, or games. Starting with the first site maps and wireframes, the operator reviews your work and provides feedback about how to optimize the experience.
Although it can be extremely frustrating to jump through these hoops, the operator does this for the benefit of your mutual customers. The operator’s goal is to reduce problems that lead to support requests, refunds, and lost sales, which is also your goal.
The greatest benefit of the deck is the increased exposure that a promoted central marketplace provides. Remember that nearly every nonsmartphone device that opens a web browser is taken to the operator deck. It is where they start an Internet session. A well-placed item on the operator deck will see millions of views per day. Generating the amount of traffic a deck item receives in a single hour might otherwise take you months or even years to achieve. Most businesses will likely never be able to promote their mobile products on a bigger stage than the operator deck.
Good placement on a deck can equal massive exposure to a product. Top or featured titles, referred to as “deck placement,” can see views an order of magnitude higher than the product right beneath it. In other words, if the top application is viewed or downloaded 10,000 times a day, then the application listed 10 down might be downloaded only 100 times a day. Another 10 down and it might have only 10 or fewer views. Top deck placement is determined one of two ways: through sales or through negotiation with the operator. If you are able to negotiate a good deck placement deal, then you may be featured, or temporarily placed at the top of the deck to help build exposure. Think of it like your search engine ranking, but based on sales and not relevance.
For an individual publisher, the notion of publishing content to a marketplace and the high exposure that comes with it can be quite compelling. Given that smaller mobile device screens can usually display only 10–12 deck items per screen, there is always the risk that if you have poor deck placement, you might not be seen at all, but if you have a well-thought-out product with a good design that addresses the mobile context, you have a good chance of earning a return on your investment.
Average revenue per user (ARPU, pronounced “are-poo”) is the key performance indicator for all things mobile. As voice ARPU becomes more commoditized, operators look to data ARPU for positive quarterly growth needed to impress shareholders. For example, for users on a post-paid, monthly plan, the more content and services the users access, the higher the data ARPU the operator earns.
For many years, data ARPU has been the highest growth area in mobile content subscriptions, where users typically pay a high price per kilobyte downloaded to their device. For example, when a user purchases a ringtone, the operator gets a percentage of the purchase price, and also is able to charge the subscriber for the cost to download the file to her device. Ever wonder why streaming mobile video is so highly touted and heavily marketed by operators? It seems fairly silly that users will want to watch television on their phones. By its nature, it has extremely high data ARPU potential, sending considerable amounts of data to the device that cannot be saved or cached.
Of course, users are wary of having an out-of-control bill. They like to know how much their bills will be every month, or in the case of prepaid, want to make sure that their account credits are prioritized for voice and messaging.
ARPU is the key metric that operators look at in mobile data. Showing you have a plan to boost ARPU typically gets you invited into the club.
BoBo means Billing on Behalf of, which allows the operator to bill the consumer on your behalf. With mobile devices, paying for goods or services can be a bit tricky. By the very nature of being mobile, there are common security concerns with transmitting payment information over the air. Although mostly unfounded in newer, more advanced devices, this can certainly be an issue with older devices.
However, the real problem is the awkward task of trying to input credit card information into the device. If you are like me, you might not be able to recall the 16-digit number to enter from memory, so you need to hold up the card and the device and go back and forth between them. Even if you have a better memory than I do, there is the security issue of being out and about where people nearby can look at your mobile screen or which fingers you press.
With BoBo, the user either stores payment information with the vendor, or in the instance of the operator, bills it on your behalf, adds it to your monthly bill, or deducts it from your account balance, in the case of prepaid accounts. Although you lose a percentage of the transaction to the operator, you don’t carry the risk of having to manage those transactions, issue refunds, or other accounting hassles. Plus, the consumers have a simple and seamless experience in which they can easily purchase goods and services through their mobile devices.
BoBo is what enables revenue from mobile products. The only other option is to ask the user for credit card information. To use a BoBo strategy, you have to negotiate a deal with each operator you plan to support.
Originally, if you wanted to sell something to a mobile user, the only option was to work with the operator, but as smartphones become more popular, we see the emergence of the platform-based app store (see Figure 14.3, “The Apple App Store”). The clearest example of this is the Apple App Store, where users can purchase and download games and applications for their iPhones or iPod touches. But we are also seeing app stores like Nokia’s Ovi Store; Android Market; and stores for BlackBerry, Palm, and many more devices.
App stores work essentially the same way as the deck model that operators use. Items must be submitted by the developer and then certified by the app store before they can be placed in the store. Users can then purchase items using the BoBo model, with the app store taking a percentage of each transaction. Then the app store delivers the purchased item to the device.
The top-selling items receive more promotion in the store, and therefore see dramatically more sales. In fact, even though the modern app store experience is delivered in the much bigger screens of smartphones, or even through a desktop app like iTunes, the bulk of the sales goes to the top 10–25 items in the store.
However, there are a few important differences compared to working with operators:
The app store model requires no negotiation with the app store provider in order to be submitted. If items pass certification, they are entered into the catalog.
Item placement is purely based on sales, not on negotiation with the app store provider.
The user can see full screenshots and ratings, and users can read comments before they make a purchase.
Free content is also available to download.
Apart from the previous list, the app store model isn’t that different from the traditional model that came before it (the deck). But this model has one significant drawback: it supports only native applications and not mobile web apps. This means that to deploy your product to each app store, you need to port your application to multiple platforms.
Surely we can build a mobile web app and deploy and sell it through an app store? Yes, you can. In Chapter 12, iPhone Web Apps, I mentioned the PhoneGap project, which enables you to take a mobile web app and deploy it as a native app for iPhone, Android, and BlackBerry. As it is an open source project, there are also active ports for Nokia and Windows Mobile platforms.
This is possible because many of the smartphone platforms enable you to embed web content into a native application container. PhoneGap provides a quick start, but how to do this from scratch is well documented by each of the major smartphone platforms.
This means you can create a mobile web app that supports multiple mobile devices and distribute and sell it through each of the major app stores. Although it isn’t the perfect solution—ideally, you could charge the user in a more direct fashion and not have to go through the app stores at all—but it works.
The third strategy is to add advertising to your content. Using this model on the mobile web, you are fully in control with no outside dependencies: no negotiation with operators, no app store certification, and no application containers. As mentioned before, the revenue earned from mobile advertising completely depends on the amount of traffic you are able to get to your mobile site or web app. Mobile advertising can effectively work in any mobile product, not just a mobile web app. Many free iPhone apps, for example, use mobile advertising to monetize their use.
The common concern is the impact that advertising can have on the user experience. With such limited and therefore precious screen real estate, placing an ad on the screen can be obtrusive to the user. Good use of mobile ads means placing the appropriate number on the right pages or screens. Find a balance between usability and revenue.
To include these into your products, you simply sign up with one of the major mobile advertising platforms and then add the provided code to your product. The platform then renders ads into your content that are properly formatted for your device.
AdMob is a mobile advertising platform that supports PHP and JSP mobile products for mobile web products and provides an SDK specifically for native iPhone applications. The service provides useful reporting and metrics about the performance of your ads.
AdMob supports a number of different-sized ad units, and will dynamically serve the appropriate-size ad for the requesting device.
AdMob also provides a useful and free mobile metric report on a monthly basis at http://metrics.admob.com.
Google provides a mobile version of its AdSense advertising product. Like AdMob, AdSense provides code to include in your product and will render the appropriate ad unit to the device.
In 2007, Russell Beattie, a well-known mobile blogger, published some of the advertising revenue he was earning from Mowser, a product he built and later sold to dotMobi. He ran Google’s mobile AdSense product and AdMob, and he ran a mobile advertising platform.
Table 14.1, “Russell Beattie’s on AdMob” shows some of the numbers he reported for the AdMob ads that were placed on specific pages.
Table 14.1. Russell Beattie’s on AdMob
At that time, he mentioned that Google AdSense was not receiving the same clickthroughs and began to taper off at $30 a day. He reported that the big reason for the traffic he was receiving was due to placing Google AdSense on his site, which increased his search engine placement. His daily page views went from 5,000 a day to 100,000 a day soon after adding Google AdSense to his product.
The Mobile Marketing Association provides and maintains a number of mobile advertising guidelines, including ad unit sizes as well as code of conduct for mobile marketing, consumer best practices, and other resources for advertisers and publishers. The Mobile Marketing Guidelines are available at http://mmaglobal.com/mobileadvertising.pdf.
For more information on mobile advertising, I highly recommend Mobile Advertising: Supercharge Your Brand in the Exploding Wireless Market by Chetan Sharma, Joe Herzog, and Victor Melfi (Wiley). This book covers mobile advertising concepts and strategies in depth.
Although each of these models have worked for many in the past, I’m not satisfied. I believe there are many opportunities to monetize mobile content—specifically, the mobile web. We just haven’t thought of all the ways to do so yet. As you begin to explore the world of mobile, you will undoubtedly bring new ideass for how to make money in mobile.
Share what you learn, run some tests, and publish some numbers. The more shared justification you can provide to companies, the larger and more innovative the entire space will become, meaning that we all benefit.
Mobile is a trillion-dollar industry. It is massive. However, we are still challenged to make a meaningful profit from the work we produce. With the mobile web, if there aren’t better ways to monetize the medium, it will continue to fall prey to whatever the app store or operator monetization model of the week might be. This will encourage more device fragmentation and add more cost to develop and support multiple devices for everyone else.
If you enjoyed this excerpt, buy a copy of Mobile Design and Development.