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Posts Tagged ‘iPod Touch

Premium App Store Could Multiply App Store Revenue Opportunity

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One knock on the App Store for the iPhone and iPod Touch is that consumers’ price-demand elasticity has driven down prices to the point where most games and apps are $.99 or $1.99.  While volume is so high that there’s a big economic reward for a hit app, it’s a lot less than if games and apps were priced in the $10-20 range.  Some large gaming companies have said they won’t conduct large scale game development projects for the iPhone/iPod Touch as long as the pricing is so low.  This must be bothering Apple, which has to realize that attracting more development resources to its platform is the key to winning the smartphone platform land grab.

It’s not surprising that there have been rumors that Apple might release a Premium App Store with $19.99 games.  This would be a huge boon for the entire ecosystem–developers could make more money so would put more resources into the platform, consumers would have access to better quality games and apps, and Apple would sell more devices.

If Apple can create status around premium apps–in the same way the Mac, iPod, and, now, the iPhone, have high status brands–and get people to want the world to see how many premium apps they have, the App Store market could explode.

Written by sandykory

February 19, 2009 at 9:30 am

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App Store, SEO, and Revenue Optimization

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It’s early days for the App Store on the iPhone and iPod Touch.  The one man fart machine (literally) behind the iPhone Fart App has been making 10k/day.

It’s similar to the early days of search, when gaming search engines to artificially create SEO (search engine optimization) was common.  Just as Yahoo, an early search leader, had a largely human-driven selection process, Apple has a largely human-driven process to give placement to new apps.  Is it possible to ‘game’ the Apple placement process?  Given the huge economic rewards, I’m sure many are trying to figure that out.   I’ve heard from multiple sources that the reviews on apps are often bogus.  Worse, the default setting for a review is one star (out of five), so that if someone writes a review but doesn’t explicitly assign a star rating, the review will be for one star–regardless of the review’s true sentiment.

One thing is clear–making the list of most popular apps is a huge boon to sales.  Success is self-reinforcing.  On the other hand, if you can’t crack the most popular list, it’s difficult to get signficant volume.

Another thing that’s clear is that Apple could make a lot more money for itself and everyone else if it would take a Google mindset to optimizing its most popular list in the App Store.  If the rankings were based on revenue generated (volume * price) instead of just volume, it would move more higher-priced games to the top of the list and drive their sales accordingly.

Written by sandykory

February 19, 2009 at 9:16 am

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Missing the Story on the iPhone and iPod Touch

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Comscore has a press release out on a recent study with the headline, “Smartphones Provide Extra Mana for Mobile Games Industry as Audience for Downloaded Games Grows 17 Percent.”

In an article covering the study, Ars Technica headlines, “Study: iPhone leading the pack in mobile phone gaming.  A new study has revealed that smartphone gaming is exploding, and the iPhone is at ground zero.”

Neither the study nor Ars’ article mentions the iPod Touch. Yet the iPod Touch is selling at 5x the rate of the iPhone, so obviously it is driving this trend.  It’s the reason why competing platforms like the Blackberry have no chance to keep up with the quality of games and other apps available on the iPhone.

As I’ve noted before, the killer edge Apple has with the iPhone and iPod Touch is that they are economic complements, like peanut butter and jelly.  More sales of each attract more developer resources to the platform.   This means better apps will be available for each device, driving more sales, attracting development, and so forth.

The study found that iPhone users are 9x as likely to download games to their phones as users of other smartphones. I would bet that they are also downloading many more games on average than non iPhone users, meaning the volume of games downloaded by iPhone users dwarfs that of non-users.   That doesn’t even include downloads on the iPod Touch, and it also doesn’t include downloads of non-gaming apps–another area where Apple is blowing the competition away.

Written by sandykory

February 3, 2009 at 7:15 am

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Mobile Web Obsolete?

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For a long time, I assumed that the mobile Internet was going to become the Next Big Thing as smartphones with 3g Internet connectivity proliferated.  On my Blackberry, I used to spend a fair amount of time on ugly, WAP-enabled sites that had spartan functionality.  Eventually, I thought, whether using the WAP protocol or not, mobile Internet browsing would be as ubiquitous as desktop browsing.

Not anymore.  With my iPhone, I get my news via apps from Bloomberg and NY Times.  The apps provide a dramatically better experience of consuming digital media on a smartphone.  I still think within a few years most people will have a smartphone with high-speed Internet.  But apps crush the mobile Internet browser.  I think apps from the iPhone and iPod Touch will end up dominating, but even if market share is dispersed between multiple smartphone platforms, I’m convinced apps will rule the day.

There are many things to figure out in this emerging ecosystem.  Do apps lose allure since they aren’t hyperlinked to the World Wide Web?  A little, but I’m sure smart engineers will figure out ways to have rich apps that integrate with other apps.  How will apps make money?  Like anyone else, I would say through a combination of pay-per-download, subscription, and ads.  But I don’t know enough at this point to get more specific than that.

It’s early days in apps monetization, but I’d wager many fortunes will be made as the platform matures.

Written by sandykory

February 2, 2009 at 9:46 am

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iPod Touch Widens iPhone’s Lead

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Apple announced their Q4 earnings today, and the stock is up 9% after hours.   Their iPod sales (iPod Touch sales aren’t separately broken out, but clearly are a large component) were 22.7m units, up 3% y-o-y, which was almost 20% above consensus.  iPhone sales were 4.4m, below consensus of 5m.

Some think the iPod Touch is cannabilizing iPhone sales.   While there’s inevitably some of that in the short run, in the long run it’s the other way around.  The iPod Touch’s success will continue to attract more developers who will make to better apps for the App Store.  Those improved apps will be available on the iPhone.  That will enhance the user experience of the iPhone’s most important differentiator, widening its lead over competitors as the most functional smartphone on the market.

Written by sandykory

January 22, 2009 at 7:03 am

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A Disruptive Innovation in Video Games

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I’ve been scouring press releases covering the recent NPD data on December video game sales to confirm this, but it appears that this data doesn’t include video game sales related to the iPhone or iPod Touch.  If you did include iPhone/iPod game revenue, then the video game market actually looks even stronger.  Ironically, the success of the iPhone/iPod is actually a major threat to the rest of the industry.  It’s the most important trend in video games today:  the disruptive innovation represented by the iPhone and iPod Touch as a gaming platform.

Here is a good primer on disruptive innovation, an idea first articulated by Clayton Christensen:

Sustaining vs. Disruptive Innovation

The central theory of Christensen’s work is the dichotomy of sustaining and disruptive innovation. A sustaining innovation hardly results in the downfall of established companies because it improves the performance of existing products along the dimensions that mainstream customers value.

Disruptive innovation, on the other hand, will often have characteristics that traditional customer segments may not want, at least initially. Such innovations will appear as cheaper, simpler and even with inferior quality if compared to existing products, but some marginal or new segment will value it.

Games on the iPhone and iPod Touch, all bought via the App Store, are dramatically cheaper and much simpler than console and PC-based games.

For this platform to be truly disruptive, it will have to cannabalize console and/or PC-based games.  Will that happen? Based on the recent data, it’s clearly not happening now.  The sophistication and performance of legacy systems are so impressive that it’s hard to imagine the iPhone/iPod Touch platform as a replacement.  But I think this will  happen in coming years because:

  • The iPhone/iPod Touch will rapidly improve their computing power, enabling better game play.
  • The growth of the gaming market for the iPhone/iPod will attract more development resources, producing better games.
  • The increasingly social nature of games.  As the iPhone and iPod sell tens of millions of units, the number of potential game players on the iPhone/iPod will dwarf that of other platforms, creating a richer social experience.
  • While PC and console-based games will also continue to improve, the marginal value of that improvement will pale in comparison to the improvement of iPhone/iPod as a gaming platform.

I’m not predicting the end of PC or console-based games and I do think the video game market will continue to grow.  But I also think the iPhone/iPod will rapidly gain video game market share in coming years, eventually becoming the dominant gaming platform.

Written by sandykory

January 16, 2009 at 7:34 am

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