Competing With Free: Mobile Apps & Games

9 06 2010

I attended another really good session from comScore.  This one was about The State of Mobile: A Fragmented Reality?  There was much to much useful content to cover in this blog, but what jumped out at me was the business model implications for mobile.

First, some big trends in the mobile market

  • Mobile is the next big business battleground.
  • Fragmentation.  There is huge and increasing fragmentation in devices, platforms, carriers, publishing, apps, and ads.
  • Mobile Internet users will pass PC users by 2014.  (Mary Meeker.  Morgan Stanley)
  • Smartphones are already leading PC usage in several key categories.
  • The leaders in mobile phones (Samsung, HG, Motorola) are not the leaders in smartphones (Apple, Android, RIM)

The business model for apps and games

  • The use of Search is much lower on mobile devices than on PCs.
  • The reason that search is lower on mobile devices is that apps are replacing search in many instances by offering a much richer experience.
  • Apps, and especially games, are increasingly offered for free.  Game revenue on mobile is declining while free games are showing huge growth.
  • Because many apps and games are free, the business model is shifting to in-app advertising.  For mobile this will be mobile advertising services such as Apple iAd and Google AddMob.
  • comScore research is finding that in-app brand advertising is effective.

Interesting Conclusions for Marketers

  • Marketers already know a lot about the demographics of mobile and smartphone users.
  • Marketers know even more about their target audience since the know which apps the users are using (and the marketers are advertising in).
  • Marketers may even know their target customers geographic location.
  • The net result is a very targeted customer audience than traditional marketing and advertising methods have ever made possible before – and at less cost.

In the final analysis this is good for all concerned.  Users will benefit from more targeted and presumably more useful advertising that is helpful rather than disruptive.  Advertisers will benefit from being able to very narrowly focus their marketing on a specific audience.

The business model implication is that this is that yet another market is moving to the free model.  The growth trends clearly favor smartphones over PCs or other feature phones.  The only thing on the horizon that might slow this trend down would be if other carriers follow AT&Ts lead and eliminate unlimited data plans.

I highly recommend these comScore webinars if you are interested in the mobile market.

ComScore mobile market share numbers

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