Marketing Mobile Applications Analysis & Theory. Exploratory Research by Alex Mendelson

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1 Marketing Mobile Applications Analysis & Theory Exploratory Research by Alex Mendelson

2 Background & Introduction In 1993 Paget Press Inc. released a software distribution called Electronic AppWrapper. This software was essentially the first application market offering digital products through electronic distribution. Over the time several other software distributions that were similar in nature were developed and implemented into a variety of electronic devices. However, while these distribution methods worked and were implemented, these electronic distributions offered very few applications due to the high cost and low payout for third party application developers. This was the general trend until Apple Computers introduced their iphone 2.0 Operating System which featured Apple s new Electronic Distribution for applications which they named simply as the App Store. Unlike other similar software Apple made it much easier for third party developers to create and release applications as well as give these developers 70% of their application s revenue. This quickly reinvented the application development industry with the App Store going from a couple thousand applications available in 2008 to having over 1.4 million applications in This growth of applications has created a massive digital hypermarket comparable to an electronic Walmart where shelving space in Walmart is now by the most popular list and recommended by Apple application listings found on the first screen when opening the App Store. This is where we discover a problem for all application developers. How do you market in such a competitive digital hypermarket?

3 CASE STUDY ONE: FOR SHAZAM ENTERTAINMENT S SMARTPHONE APP SHAZAM

4 DESCRIPTION: The Shazam app launched in 2008 for the iphone 2.0 by Shazam Entertainment, initially a small four person team established in 1999 who developed software for music identification, and would move to other smartphone digital stores soon after. Shazam quickly became one of the most popular apps on Apple s App Store ranking number four on the most downloaded apps within one year. 1 The app description given by Wikipedia states 2: Shazam uses a smartphone or Mac's built-in microphone to gather a brief sample of audio being played. It creates an acoustic fingerprint based on the sample, and compares it against a central database for a match. If it finds a match, it sends information such as the artist, song title, and album back to the user. BUSINESS MODEL: The business model for Shazam is relatively more complex than most apps. Essentially consumers purchase Shazam Encore or download the free Shazam app. While users use the app various entertainment ads are broadcasted within the app. Finally, when the user purchases a song through the app s referral the app makers receive a small portion of the song purchase. 3 REVENUE STREAM: While Shazam was completely free initially they now charge $7.00 for a full and unlimited app version of the Shazam app called Shazam Encore. 4 They also offer their original free version which now has a limit on how many times you can use the music identification feature for a certain period of time unless you pay for an in-app lifetime use purchase on the app s usage. In addition to the price of download for Shazam Encore and in-app purchases on Shazam they also make a substantial amount of revenue through advertisements within the app for music and television as well as receiving revenue through referrals when users buy a song from a store that is linked within the app after identifying a song. CHANGES OVER TIME: While Shazam began as music identification it has branched into television identification which allows the producers of the various shows and movies to run promotions through the app and also allows for marketing research to be conducted for the producers of the music and television the app is identifying for users. In addition to Shazam s broadening of content and uses with other digital mediums it also began to charge for the app itself, and limiting the usage of the app in it s free version, due to the rise in it s popularity over time. MARKET SEGMENTATION: Due to Shazam being an app available the day of launch for the app store there were no clear indicators of who would be the main consumers due to having a completely new and unknown market place. However, there are several factors that can be examined to determine a general idea of what the new market would consist of in terms of market segmentation. To put it simply the people who downloaded the Shazam app were the same people who bought the iphone. Three days after the app store launch there were only 800 applications available for download 5 and in 2008 apple sold around 11.5 million

5 iphones 6 making the app store market substantially easier to compete in due to less competition. While these numbers appear large the iphone was not nearly as popular as it is now. According to several news sources at the time the RIM Blackberry BOLD 7 was more popular and was the premier smartphone prior to the app store s release. This means by looking at the initial market segment that purchased the iphone we can determine a general idea of the market segment that would download the Shazam app due to the market being substantially less broad and diverse as it is now. IPHONE CONSUMERS: The iphone s target market were consumers seeking style, a multifunctional ipod, easy web access, and camera, according to news sources at the time, and they found the segments iphone appealed to were middle to high class professionals whom were technologically savvy and placed high value in communication which the iphone offered. 8 In addition to this segment, the iphone also attracted the College and High school segments, both of which contained technologically savvy and enthused consumers. These users also placed a high value on the style of the device and it was found in 2008 that 50% of iphone users were 30 years old or younger which reinforces these ideas even more. MARKET SEGMENTATION - PRODUCT DESIGN: Keeping these things in consideration, while looking at the success of Shazam, we find that Shazam and the iphone share many characteristics as a product and are appealing to the same market. Refer to the table on the below to see these shared characteristics: Characteristics iphone Shazam Style and Design Ease of Use Uniqueness of Product Sleek and clean look. Bright colors and graphical user interface. Simple and creative product name. All of the product s functions are laid out and avoids text navigation. The product is one of the first of its kind and there is only one iphone versus Droid where there are several different models. Sleek and clean look. Bright fun colors. Graphical interface. Different and creative product name. The product has one button when first opened to use the products function in a clear simple way. The product is one of the only products that can do what it does versus other apps such as a To Do List app where there are several thousands.

6 FIGURE 1 Shazam app compared to iphone s Operating system FIGURE 1: From looking at an iphone screen compared to Shazam s app side by side we see they both follow the same design and style that is very clean and graphically intensive. We also see both are very simple and clear to navigate and use the products. MARKET SEGMENTATION (CONT.): Based on the relatively small market and shared characteristics of the iphone as a phone and the Shazam app we can see that the market segment Shazam appealed to consisted of technologically savvy users that placed value in having an easy, fun, stylistically clean, and unique product. Demographically speaking the market segment is iphone users aging from teens to late twenty year olds whom fall into the middle to high class economic regions.

7 MARKETING MIX AT LAUNCH: PRODUCT- The product is the Shazam application for the iphone. PRICE- The price was initially free to download. PROMOTION- The product was featured in Apple s App Store commercial 9 in 2008 making it a poster child of the app store. It was also featured in various technology publications upon it s release. FIGURE 2 Screenshots from Apple s App Store commercial before launch PLACE/DISTRIBUTION- The product is an intangible good due to it being a digital product. This means it s distribution is directly correlated to the hardware it is on and if the digital marketplace it is on is running correctly and people can access it.

8 CONCLUSION- Over time Shazam has only grown 10 in the digital market due to popularity after it s successful launch in This successful launch is attributed to some key points which are: -Understanding the consumers of the hardware, in this case the iphone, and aligning an app s image and functionality with those users of the hardware. An example of this idea would be selling ice-cream during the cold winter. While you may receive some costumers you will likely have much less due to the product not aligning with the consumers whom would want something such as hot chocolate. This idea is easy to understand when you have tangible goods but when marketing intangible goods you must first look at the consumers of the hardware and market to those users. -Setting the price low or free initially. Due to the nature of a digital market place users will quickly become hesitant to purchase something they know little about and can quickly find a replacement for the product by simply searching for a product alternative within seconds. If you were at the mall to buy a pair of shoes and were unsure of what pair, a cheap or expensive pair, to buy you could try the shoes on without purchasing them and it would help you decide on which pair to get even though one is cheaper than the other. With intangible goods you do not have the luxury of letting people try your product with ease. You can setup a trial product to avoid this issue but you should first ensure consumers that the product is worth the time to even try it rather than seeking alternatives. -Conveying what the app can do in a simple and intriguing way. When people are looking through a digital market they are bombarded with products meaning an intangible good may not receive enough attention to see what it fully is to the consumer unless it is marketed to quickly show users what it is. Take Shazam for example had they put their description as: Shazam allows your smartphone device to listen to music and identify what is being played and once it has identified a match within it s database the app can take you to a digital music store or video streaming website on your smartphone s browser to purchase the identified song Compared to their current description which is: Identify music instantly and share in the thrill of music discovery with the artists you love. They would struggle much more to reach out to consumers in clear and appealing way with the first description versus their actual description which gives you a basic idea of what the product can do but still leaves the consumer wanting to learn more due to the ambiguous short nature.

9 CASE STUDY TWO: ROVIO S ANGRY BIRDS

10 DESCRIPTION: In December of 2009 Rovio Entertainment, a Finnish Computer Game Developer, released the Angry Birds game app on Apple s App Store. Within approximately one year after release it was reported the app had been purchased 12 million times. Due to this success Rovio Entertainment expanded into other touchscreen smartphones. The app description provided by Wikipedia is: In the game, players use a slingshot to launch birds at pigs stationed in or around various structures with the goal of destroying all the pigs on the playing field. As players advance through the game new types of birds become available, some with special abilities that can be activated by the player. Rovio Mobile has supported Angry Birds with numerous free updates that add additional game content, and the company has also released stand-alone holiday and promotional versions of the game BUSINESS MODEL: The business Model for Angry Birds when they launched was a very simple model. Consumers would buy the Angry Birds app for one dollar. Later on Angry Birds eventually created a freemium app once more titles were added to the Angry Birds series and the app had become much more popular. In the freemium version users download the app for free and can play a portion of the full app s game but in order to keep playing users must purchase an in-app purchase which unlocks additional content. This version also features advertisements the user must watch. CHANGES OVER TIME: Over time Angry Birds went from a single app to several variations of the game packaged as an entirely different app. Currently there are 12 versions of the game each with it s own theme such as Star Wars and Transformers that offered new content different from the original app and aesthetic changes. In addition to expanding the Angry Birds market reach these apps served to help promote the movies these apps would be themed on. The original Angry Birds app also continued to receive continual updates for a significant amount of time after launch that added new content for users to enjoy. Finally, as stated before, the developers also released a freemium version of the original app which allows users to play some of the game before having to pay the app price. MARKET SEGMENTATION: The market segment that Angry Birds targets and appeals to the most is Children ranging from 4 to 12 years old. This is not a surprising fact due to Children generally being the largest consumers for video game products. However, while Children are the main target market, the parents that download the app for their children to use on their phone are also a target market of the app. According to a survey done by Nielsen, Angry Birds is the 7th most downloaded app for adults ranging from 35 to 50 as well as the 25 to 34 year old range.

11 MARKETING MIX: Product- The Angry Birds app is a simple to learn and play videogame application. Price- The price for Angry Birds on launch was $1; later the developers would release a freemium version of the game. Promotion- Media outlet reviews and word of mouth. Place/Distribution- Upon launch Angry Birds was only available on Apple s App Store. Over time the app would move onto nearly every platform that contains a digital marketplace for content. This includes smartphones, computers, tablets, videogame consoles, and other devices such as Roku boxes. CONCLUSION: Word of Mouth Finding the Early Adopters and Community Efforts: Promoting smartphone applications is an odd task due to the tricky and ambiguous nature of the app store. In order to have an application reach the top chart listing on the app store a snowball effect must take place similar to the one examined in the Angry Birds study. In order to truly promote applications you must focus on Word-of-Mouth and finding the early adopters whom will truly create attention for an application much more effectively than the options presented above.

12 References: https://en.wikipedia.org/wiki/shazam https://itunes.apple.com/app/shazam/id ?mt= https://books.google.com/books?id=ccspawaaqbaj&pg=pt1&lpg=pt1&dq=%22the+apple +iphone:+successes+and+challenges+for+the+mobile+industry, %22&source=bl&ots=BvXbXFd4nJ&sig=CoBJhjZSSzsIYbmvvvP26- GXm0I&hl=en&sa=X&ei=HpqNVZGKH8yq-QHU8ayIAw&ved=0CDUQ6AEwBA#v=onepage&q= %22The%20Apple%20iPhone%3A%20Successes%20and%20Challenges%20for%20the %20Mobile%20Industry%2C%22&f=false 9 10 https://www.youtube.com/watch?v=vg1_hbzxb8e

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