Local mobile services - saviour for offline stores ?

Consumer buying behaviour change, driven by digitalisation, is inexorably advancing. This challenges consumer product companies to take advantage of new models to utilise the change. For traditional retailers, having physical stores, e-commerce growth means a serious threat. But after years of false promises, local mobile services based on wireless proximity technologies are wakening up. At best, they could get modern, digitally informed consumers to use their money in brick and mortar shops also in future.

Local services not-so-successful history

When computer-like features started to gradually appear in mobile phones in the 1990s, there was also a wave of interest in local services supporting retail merchants. In 1999, I was involved to establish a startup with a mission to use only recently published Bluetooth (BT) technology to send marketing messages to phones that were taken to shops. After that, I developed similar type of businesses at a large Finnish mobile phone company: in 2002, for example, we created patents for applications in local services context and for shopping experience improvement tools. Neither the startup nor the big company case turned out to be a success.

A number of other projects came up, both in local mobile marketing and in local payments. In addition to Bluetooth, for example Wi-Fi, RFID (or its offspring, NFC, widely used in mobile phones) and IrDA technologies were in use. For example, in the United States Wideray IrDA solution offered local data services for offline businesses. A little later, Wideray landed also in Finland, where Sonera's also Bluetooth-enabled iJack service was used, among other things, by individual stores, shopping malls and restaurants.

Wireless local marketing of brick and mortar stores has not really taken off in the last ten years. Today, it is easier, however, to analyse the reasons. The main obstacles were the factors related to retailers, ecosystem and mobile devices, for example:

• E-commerce has only gradually disrupted retail business, its global value in 2005 was about $ 150 billion - the forecast for 2013 is already $ 1.2 trillion
• Digital marketing has only recently established its position as a major tool for retailers and consumer product manufacturers
• Mobile marketing formats and business models were underdeveloped for a long time; ten years ago, the global market size was only around 100 million dollars, the 2013 forecast is close to $ 15 billion
• The number of mobile phones suitable for local marketing, i.e. smartphones, had a sharp increase only after 2007, after Apple launched iPhone; iPad tablets first came on the market only in 2010
• Usability of smartphones has not been very good; easy to use applications enabled by app stores and other usability improvements have gradually changed the situation

The great promise

Next we shall discuss factors which, if successful, could make local mobile services a significant marketing channel - or, if this is not the case, delay realisation of the great promise till not foreseeable future.

Retailers and digital change

Consumers' growing willingness to use digital channels has resulted in a huge increase in e-commerce and fierce price competition, which affects both online and offline merchants. Price competition also lowers margins, which creates pressure on consumer product manufacturers, too. In addition, digital channels have become key information and communication tools between brands, retailers and consumers.

In this context, both traditional brick and mortar merchants and their vendors are looking for new success factors by creating new, digital in-store experiences. By approaching customers when they are presumably ready to buy, i.e. when they are already in-store or in the immediate vicinity, marketing messages can be targeted much more precisely than when using only standard user profile and behaviour based models. The potential value of these messages, both to consumers and marketers, is therefore very high.

Mobile payments, as well as access to product information through reading QR codes or barcodes have been the main drivers of mobile device utilisation in stores. In addition, also local digital in-store marketing will benefit from wider and wider use of mobile technology. Marketing tools provide consumers, among other things, with information about new products or promotions, coupons, store maps, shopping lists, recipes, and other additional services that support products or purchasing. Identification of consumer location is the prerequisite of the service provision, and there has been various technologies available for that for a quite a long time.

Although the benefits of local digital marketing for merchant business are very concrete, the ultimate question is, however, consumer willingness to receive marketing messages and use related services. On the basis of recent studies, consumers seem to increasingly want local digital marketing, but it is not yet clear whether this is enough for large-scale deployment. It is also fair to assume that consumers must be able to determine who and when can approach them.

Ecosystem and development of mobile devices

Perhaps the most important event in the development of the ecosystem was Apple's recent iBeacons concept release. iBeacons enables low-cost Bluetooth Low Energy (BLE, or BT Smart or BT 4.0) beacons. They emit signals that Apple smart phones or tablets automatically react to when they come within range of the beacon - maximum distance of up to a few tens of meters. Offline retailers can use the concept, for example, to allow payment anywhere in the store, for coupons and other local advertising.


A number of BLE beacon manufacturers have already entered the market. For example, Estimote offers three beacons for $ 99, Sonic Notify ten pieces for $ 300 and Roximity service costs $ 10 per month for one beacon. Adomaly is an advertising network to reach consumers in-store using beacons.

NFC technology use, again, is widely supported by mobile phone vendors, mobile operators and payment service providers, but it is already widely predicted that its growth will be stalled. The problem is that key stakeholders are often competing with each other, which has led that NFC software package is not widely enough available in phones. In addition, Apple has not been favourable to NFC, and it looks that BLE will be positioned as a direct competitor to NFC in local mobile payments.

Amount of smartphones and tablets, as well as their usability are already at good enough level to boost local services mass market. Although all the major software platforms have their own application stores, processes and models to bring also store related applications available for consumers are already sufficiently developed. Notably, Android platform is the most fragmented one, in Apple and Windows Phone environments there are less problems.

BLE is already supported by most iPhone models, 4S, 5 and the newer ones, as well as by Apple´s tablets. In many high-end Android devices manufacturers have already implemented BLE support, and the support on Android platform level is coming in the near future. By the end of this year all the Nokia Lumia WP models will also support BLE.

In summary, local mobile marketing is still a great promise for retailers and consumer brands - but realisation of the promise still faces significant stumbling blocks that need to be avoided:

• There needs to be a common mode and format of communications between consumers, retailers and brands, and this needs to be supported by a sufficiently wide range of mobile device manufacturers and other ecosystem players 
• Offline merchants need to be willing to build the necessary local infrastructure in their stores, and use it effectively for marketing and other customer relationship activities
• Consumers need to be willing to adopt a new, mobile device based way to get information about products, access promotions, pay for purchases, etc.

Quo vadis, Sports Tracker ?

Sports Tracker application is like an old friend. I have used the fitness application from the time it came to market in 2005. I have no closer relationship with Sports Tracking Technologies, the company that is currently responsible for the business.

I was amazed when I read that a Sports Tracker competitor, Endomondo application (which I have also used), is used five times more when counting sport use kilometers. This aroused my curiosity. Are Sports Tracker really trailing Endomondo so badly? What factors have contributed to the development? What is Sports Tracker´s future and how could they improve the business? I did a little bit detective work. By using only public and free sources and tools, the picture became considerably clearer. This research trip is also a good example of how companies can analyse businesses and competitive situation, and thus develop more successful strategies.

Sports Tracker vs. Endomondo

Sports Tracking Technologies (hereinafter referred to simply as Sports Tracker) are a Finnish company with Nokia Corp. roots. A Nokia project launched the first version of the fitness application in May 2005. Endomondo are a good benchmark, because they are coming from another small European country, Denmark, where they were founded in November 2007. Apart from these two, a number of other competitors have emerged, such as Nomad, Skimble, Strava and Runtastic. They are not discussed in detail here.

Number of users

The Sports Tracker application has been used for 230 million sports kilometers, and the Endomondo one for about 1600 million. Various sports kilometers do not match, so this does not clarify the situation. If the number of users would be available that would help a lot. But only Endomondo have published the information that they have cumulatively 20 million registered users. AppAnnie give estimates on application downloads and they provide, inter alia, the following information:

• In Apple App Store´s health and wellness category the free Endomondo application was in top five in eight countries and in top ten in 23 countries
• Correspondingly, Sports Tracker were in top five in three countries and in top ten in 13 countries
• In Google Play´s health and wellness category Sports Tracker were in top five in two countries (Endomondo in eight) and in top ten in six countries (Endomondo in eighteen)

Although AppAnnie do not evaluate Sports Tracker´s traditional area of ​​strength, Symbian, currently Endomondo seem to have a clear lead in download volumes.

Product features

We shall not make any product reviews or comparisons, they are already readily available from multiple sources. Instead, we shall first focus on expert views that are affecting potential customers and also on how users are seeing the two companies´ products.

In various expert reviews Endomondo would appear to get generally higher marks than Sports Tracker. The former have an extensive feature set and well-functioning web services, the latter have a praised mobile application. Sentiment analysis of user tweets is one way of measuring user perceptions, see also the picture below. Product usage experiences are likely to be the most important factor affecting the sentiment of messages. The companies´ products seems on a par till autumn 2011, after which Endomondo reputation is a little bit better.

Characteristics of company products do not explain differences in popularity, so we need to have a look at the reach of potential customers. The most important factor affecting it is the range of operating systems supported. Sports Tracker support extends to the following: Symbian, iOS (Apple), Android, and MeeGo (Nokia N9). Endomondo again support all the previous except Meego, plus they support also RIM (Blackberry). In addition, it is important to understand when the most important operating systems got the support, see the picture below. The picture also shows smartphone sales per Symbian, iOS and Android.

It is clear that Sports Tracker were too long stuck with Nokia and Symbian, and as a consequence, came too late on the tremendously crucial iOS and Android markets. It is difficult to assess whether this was due to not understanding the markets, long-standing links with Nokia, lack of resources or something else.

Marketing

Use of the Internet and social media have certainly been the key of both companies´ marketing efforts.

Google search statistics dramatically reveal how Sports Tracker have not been able to improve after the year 2009. Endomondo overtook them in the beginning of 2011 and have since then continuously been able to increase their attractiveness. The picture on the left shows also projected searches with dashed line. The number of searches correlates well with overall marketing efficiency and thereby also with interest in company's products.

Web service is an essential part of the overall service offering as perceived by a user. Company website is also an important part of digital marketing assets. Hubspot tool gives Sports Tracker website a score of 54 (scale 0 - 100) and Endomondo get a much better grade of 81. The main problems of Sports Tracker are blogging, mobile use of the website, lead generation and optimising pages for search engines.

Endomondo also have a clear advantage when measuring website visits, see the pictures on the left, Endomondo at the bottom. The pictures illustrate companies´ global ranking of website visits. Again, the Endomondo trend is positive, whereas the Sports Tracker position has not really improved over the years.

Popularity of company's websites is also greatly affected by the number of incoming links. The picture below shows that till the summer of 2011, the companies were equal; but after that, especially since summer 2012, Endomondo have improved much more. This can be partly explained by product features and partly by website attractiveness and success in content marketing.

Problems with Sports Tracker website content become also visible when looking at search results (SERP) of keywords that are important for fitness applications. The two companies occupy the top positions when searching the respective company names with Google. But for example, when searching  'GPS sports tracker', Sports Tracker occupy only the position 3, whereas Endomondo get positions 2, 4, and 5.  'Social Sports Computer' is the central Sports Tracker website tag line, but the positions are not better than 5 and 6.

The most worrying thing is that even when Sports Tracker are able to attract visitors to its website, these visitors do not find the pages interesting enough, see the Alexa picture below.

More than half of the visitors only visit one page, and others do not find a lot of compelling content.

Also in social media utilisation, Endomondo seem to be more skillful. For example, already in 2010 they were more popular than Sports Tracker in Twitter messages, and after that differences are even more remarkable, see the picture below. As regards to Twitter followers, the two companies are almost on a par: Sports Tracker are followed by almost 18000 and Endomondo by almost 21000 persons. This indicates that Sports Tracker still have, however, loyal core group of followers, which are constantly interested in their products.

Business Model

Product development and marketing are of course closely linked to the resources available. Resource availability, on the other hand, is greatly affected by the business model and especially revenue streams.

After Nokia years, Sports Tracker became an independent company in May 2009. The company's turnover in 2012 was 702 000 euros, it was making heavy losses and the equity was negative. The fitness application is downloadable free of charge, and there are no fees related to usage of supporting web service. The company seem to be receiving their income by selling heart rate measurement belts, iPhone bike mounting accessories, headware and socks. Long Nokia connection seems to have affected on the company mindset and implemented business models - when the company was a part of Nokia, the role of their service offering was mainly to support primary equipment business.

Endomondo have been able to take advantage of the emerging business opportunities. When Apple launched App Store in July 2008, and Google store opened in September 2008, they were able to rapidly grow their user base. Alongside the free application, a paid PRO version was launched in December 2010. App Store made it possible to make in-app purchases, i.e. to buy extra features for free apps, in August 2009, and Google Play store started to offer the same option in February 2011. Endomondo began to take advantage of these opportunities in 2011. The company also began to show advertising in connection with its applications and website services in September 2012. In addition, the company have partnered with another company to sell a variety of sports-related products. Endomondo revenues are already sufficient to cover operational costs.

Financing

In order to build operations and products as well as to acquire users, both companies have needed to seek external funding.

Sports Tracker financing was handled by Nokia for a long time, but after the establishment of the new company, they have been funded at least by Nokia-Technopolis Innovation Mill, Tekes and the City of Helsinki. Amounts of money have not been published.

Endomondo have received undisclosed amount of seed funding in December 2010, $ 800,000 in March 2011 and $ 2.3 million in September 2011. The company claim that they do not need any external money to continue operations.

It is noteworthy that Endomondo´s external funding has always been linked with company's reported product improvements, measurable improvements of market position and business model enhancements - see also the facts presented earlier. There is no detailed information available about Sports Tracker´s financing projects, but the presented facts tend to imply that attracting new money is much more challenging than in the case of their competitor.

Conclusions

Sports Tracker seem to have a lot of work to further develop their product and marketing as well as to improve the business model. It is most likely that unless the company is able to get external funding, it is not possible to make sufficient investments.

There are, however, substantial and growing markets for the company's expertise and products: fitness and well-being are increasingly important future trends. And the markets have certainly not been shared, yet. According to Alexa statistics, both Sports Tracker (below left) and Endomondo (right) site visits are dominated by small or medium-sized markets; it is still possible to significantly change competitive positions both on current target markets and on many of the biggest markets, not deeply penetrated today.

It is vital, however, that Sports Tracker are able to find again an agile way-of-working, where new emerging business opportunities are boldly and rapidly utilised. This will create constantly renewing competitive advantages upon which to build a successful business.

Big business is outside of stand-alone applications

Applications have initiated significant development efforts and business activity. Besides very successful game and other application companies there are also other, even more significant opportunities, closely related to applications: Improvement or expansion of existing businesses or creation of completely new ones. This will also have major positive impact on national economies.

Application economy

Application (or app) economy refers to economic activity that relates to mobile applications, industy practically born only after 2007.

It is estimated to be a major economic contributor. In the United States it last year directly employed 466000 persons and in Canada 41300. According to another study, North America employs this year 525000 persons and Europe 531000. Growth forecasts are also very upbeat, in Canada + 51 % by year 2016.  The EU has also woken up to measure economic impact of applications and ways to better harness their potential to support economic development.

Application economy size and business models

Applications are brought to market with wide range of business models, such as paid downloads (incl. subscriptions) , in-application purchases and advertising. In addition, they can be used to make physical product or service purchases or one can purchase different types of media content (such as music, videos, books).

Recently published appNation study evaluated that the size of app economy is 59.8 billion USD in 2013, expected to grow to 151 billion USD in 2017, see the illustration below.

These figures are reasonably in line - but not completely matching - with other market research. Not counting sales of physical goods and services, Portio estimates for 2013 20.4 billion USD, ABI Research 27 billion USD. 2017 figure of Portio predicts 63.5 billion USD, and ABI Research for 2018 92 billion USD.

Portia has also assessed sales according to monetisation methods, see the picture on the right. Consistently with appNation, they predict that relative importance of in-app purchases increases significantly, and accordingly paid downloads will loose. Distimo sees even more dramatic change, they say that in-app purchases are now already three times bigger in the United States and nine times bigger in Asia than paid downloads. 

Also estimates of the role of application advertising vary, for example Strategy Analytics estimated 2.9 billion USD in 2012.

Games bring most of the revenues in application stores, in the second quarter of 2013 they accounted for 80 % in Google Play 80% and around 75 % in Apple App Store. 

Applications in physical product and service business

The most noteworthy element in the AppNation prediction above is revenues from sales of physical products and services - much bigger than that generated by other business models. Vision Mobile research strongly supports this conclusion, too. Estimation of sales figures accurately is very challenging, because definitions of included sales vary and because statistics may not be planned to produce results on this.

Amazon and Ebay are examples of companies selling primarily physical products and Hilton an example of a service company: All have created applications for the most popular smartphones and tablets, targeting to create a handy and convenient buying experience.

Besides using applications for commerce, businesses are using them as business model cornerstones, to improve user experience and to build stronger relationships with their customers. While these activities are absolutely essential, there are no consistent methodologies, how to include them in market estimates. Thus when evaluating importance and size of the application economy, reliability of results is often very low.

Inter alia, Siemens utilises applications to improve their business. For example, their hearing aids unit has developed an application that provides information about hearing problems and allows users to test their hearing by themselves - a great way to increase company's credibility and gain customers.

Planmeca again, for example, extends its teeth imaging tool with an application that allows images to be viewed outside of imaging sessions.

Implications for businesses

It is clear that the greatest potential for applications is linking them to company business, either to sell its products or services, to generate better business models and products or to assist in creating and strengthening customer relationships.

This does not in any way rule out a possibility of creating new and thriving business around applications - such as Rovio and Supercell have built in game industry. Besides games, there are also other industries, where successful business, utilising digitalisation, can be established - either by existing companies or startups. And, as Rovio has shown, after sufficient initial success,  it is then possible to extend business model - even in a way that leaves an original monetisation model only a minor role. 

Companies, selling physical products or services, need to develop capabilities to understand opportunities and restrictions of the application world. These insights are then linked to new business model and product development and their go-to-market, marketing and sales support and to activities to tighten customer relationships. Everything need not to be made in-house, but adequate understanding is necessary to create genuine competitive advantages and to partner successfully. For example, detailed application specification and development can well be outsourced.

Anticipated growth of application economy creates new opportunities for application development companies, but in order to be a credible and desirable partner for a wider range of companies, developers have to increase expertise in their customers´ business pain points, business models and customer engagement.

And, finally. Applications, especially together with other products and services, are a great tool for both established companies and startups to radically disrupt existing businesses.

E-books boost short story business

E-books create opportunities for emergence of short prose and non-fiction that is not sold in collections but one by one. This phenomenon is also one of the tools that helps literature to fight on consumer´s time consumption. The main drivers of this phenomenon are changed consumption habits enabled by new technologies, as well as other changes introduced by digitalisation of book industry's value chain.

Emerging business

The book world is going through the same digital revolution that has already had a strong influence e.g. in music and video business. In both of them, consumer needs, technology enablers and newly formed value chains have led to strong growth in supply and demand of short form works. In digital music stores it became possible to download individual tracks, in parallel with collections. In videos affordability and easy access to creation tools, as well as readily available distribution (such as YouTube) have completely transformed earlier short film scene. A similar type of development is about to swipe across written word.

Short stories usually comprise of 1,000 to 8,000 words and novella of 7500 up to 30,000 words. Size limits are vague, and therefore, we use the term short story very liberally to cover the whole field of short prose. Also non-fiction texts are part of the phenomenon: Texts that are too short to form a whole book but too long for a magazine article. Special types of short form literature are also looming, such as the one visible in fan fiction.

Three major players, particularly active in the United States, are pushing short e-book formats: Amazon has Kindle Singles program, Quick Reads of Apple's iBookstore and Barnes & Noble Snap. Thin Reads site reports that in 2013, by the end of July, a total of 211 new short titles were published, the number of publications increasing quarter by quarter. The business is still modest, although Kindle Singles has sold 5 million copies since beginning of 2011 until April 2013. 28% of titles have sold more than 10,000 copies, and sales prices are typically between 0.99 USD and 2.99 USD. The catalogue available is already quite versatile, but according to Thin Reads, fiction best seller list is led by Debbie Macomber with her newest romance short story, and non-fiction list by a murder case study.

There are a lot of differing opinions on the case of short form E-books: Critics often refer to negligible sales figures or claim that no changes in readers' habits and needs are taking taking place. In the following, we examine key value chain changes, to better understand opportunities and challenges related to short form.

Value chain changes

Short stories and other short texts have been read for a very long time, either being part of a larger collection (a book consisting of multiple short stories) or published as an individual story in a magazine. Traditional masters include such names as Hemingway, Steinbeck, Kerouac, and Vargas Llosa, Stephen King is one of the more recent ones. In Finland, e.g. Veijo Meri, Maria Jotuni and Tove Jansson have created popular short stories.

Digitalisation of media and always accessible personal devices, such as smartphones and tablets, are changing reading context. First of all, reading is competing for consumer's use of time against other media and communications applications available through a personal device, as well as social media and other Internet content and applications. On the other hand, one can carry as much reading as ever needed in her pocket, and especially short form is ideally suited for fragmenting media use, where consumption takes place more rapidly and more frequently.

E-books can be read on dedicated reader devices or on computer, tablet or smartphone having a reading software. In particular, younger readers seem to prefer general-purpose devices: Pew Research Center found in a study in Autumn 2012 that in 16 to 29 year age group, 41% use smart phone, 55% PC, 23% dedicated reading devices and 19% tablet to read e-books.

When short stories are sold in physical form, cost of a one single item is not significantly lower than that of a short story collection. When selling a product in digital format, this kind of constraints do not exist - thus there is no pressure to sell short stories in collections in one package. Short stories can then be sold one by one, in much the same way, as when publishing in literary or other magazines. Due to very low marginal costs, setting price of a digital form short story is much more flexible.

Low manufacturing costs and ease of distribution, enabled by digitalisation and the Internet, have already attracted amateur and other hopeful writers: Short stories provided in electronic form are a great way for writers to convince consumers of their skills at an affordable price, and thus create greater demand for their writings and stimulate interest among publishers. More famous writers can also count on short stories to produce significant returns.

E-books have a special advantage, because various multimedia elements can be layered on top of text. For creation of such experimental media formats, there is also is also some special software available.

On the Internet anybody can sell anything, and this also applies to short stories. In practise, however, consumers' ability and willingness to find offered texts favour large vendors, such as the previously mentioned Amazon, Apple and Barnes & Noble. All of them have their own editorial teams, who closely watch over quality and level of originality of offered texts. For an author, of course, this is an additional barrier, but worth a try for potential big marketing support.

Due to low working capital needs in production, distribution and sales, it can be expected that number of short format sellers is going to increase and the market will begin to follow long tail concept. In this case, the challenge will be, how to improve your chances to be found in a shop that is selling short form e-books.

The Internet and social media offer excellent and affordable tools for short story marketing. An author is no longer at the mercy of publishers and booksellers in increasing her popularity, and even though these are willing to promote her book, an author is able to further increase efficiency of marketing by herself. Single short stories are also used to promote collections of short stories or novels, publishing often taking place before actual works will be launched.

Who benefits 

Short form text market is estimated to be 25 to 40 million USD this year. The same industry expert predicts rapid growth with billion USD market in next five years. Although you would not fully believe in these figures, short form will be an important marketing tool and demand driver, so competition in the area will be strong.

The top three retailers have built their businesses from different starting points, and each have their own distinctive strengths. Amazon revolutionised physical book e-commerce, has since expanded to large number of other product categories and taken a leading role in both normal and short e-books. Apple´s stronghold is in its devices, well-suited also for reading (e.g. iPhone and iPad with reading application) and in successful sales of digital content and applications. Barnes & Noble is in turn a traditional bookseller, which has gradually expanded its range and harnessed also the Internet to their sales efforts. In future, each of these will probably continue to invest in short texts in order to maintain and improve their positions. Google is one of the other major players worth following, with already other activities with books.

Startup publishers are challenging large and well-established ones with their greater willingness and ability to approach the market in a new way. The most notable ones are, among others, Thought Catalog, Atavist, Byliner, Think Piece and New Word City. It is to be expected that more newcomers will enter the market with new combinations of content focus, multimedia use, business models and marketing innovations.

As we have seen, for example in establishment of digital music ecosystem, key players are often very conservative, and this will also significantly affect development of short form text. Many self-confident writers might value novels over shorter forms, and though they would be writing short stories, collections would be preferred to single stories. On the other hand, there are writers like Stephen King, who have been quick to spot new opportunities. Those forerunners have an opportunity to expand demand for their products and gain a larger share of sales revenues by becoming a self-publisher and by effectively marketing their own texts. As regards to short form text publishing and sales, it is interesting to see, how quickly we shall see new operating models that will support supply of a much broader selection, according to long tail concept.

Situation in Finland

In Finland, e-book market is at a very early stage: In 2012, e-books accounted for only 0.36% of total general literature sales. In the US the corresponding figure was 22% and in the UK 13%.

None of the biggest local e-book suppliers is actively driving increase of short form sales. Adlibris, with presence in Nordic countries, as well as Finnish eLibris and Suomalainen Kirjakauppa are offering some collections of short stories, but no single digital texts are available in their shops. On the other hand, Ellibs provides at least investigative journalism texts of Long Play and Elisa Kirja has also some short stories available.

There are, however, numerous sites with varying focus available for short text writers. It is quite easy to get at least some visibility, but getting paid and other promotional and commercial benefits are limited.

Well-established writers have not yet found market of short story singles, nor have used singles to market larger literary entities.

The question is, who will act first, who will reap the benefits?

Where are Windows Phone users coming from ?

On June 26, Microsoft revealed some interesting information about users of Windows Phone devices: 42 % of WP users were upgrading from feature phones and 23 % were moving from Android.

Is this good or bad result for Microsoft and companies using its mobile platform ?

There are no explicitly right data available to give exactly right numbers, but rough and correct enough figures can be derived by using statistics from e.g. Gartner and Tomi Ahonen.

Let´s look at the table above, where relevant global mobile device statistics have been gathered from sources mentioned earlier. We try to evaluate Microsoft announcement by using installed base at the end of fourth quarter 2012 and end of first quarter 2013. Also available first quarter 2013 total sales numbers will be used. On rows 4 to 7 there are total feature phone and smartphone statistics, and an estimate, how many feature phone users worldwide have upgraded to smartphone. The latter rough figure is derived just by assuming that all feature phone buyers that do not show up in installed base move to smartphones.

Rows 9 to 11 are about Android, with Android retainers derived simply through subtracting from total 1Q sales the growth in installed base during the same period.

On WP rows, 13 to 15, transition numbers are directly taken from the Microsoft announcement.

Number of Symbian detainees is calculated in the same manner as is case of Android.

Then comes the story, how to interpret this ?

Microsoft was happily beating the drum for the 42 % of WP users coming from feature phone, but, according to 1Q 2013 statistics, this means only about 1 % market share of all upgraders (see row 20). By no means this can be considered good or even acceptable. Taking Nokia´s earlier and also current position in the feature phone market, WP should be able to lure many more of the 4 billion users.

Though there might by some dissatisfaction among Android users, as Microsoft says, it does not seem to be walk in the park for WP - only about 3 % of Android users purchasing a new device select a Windows Phone (row 21). This is on a par or only slightly better than current WP market share. Exact Android retention level is not known, but here an estimate from US is extrapolated to global markets.

And finally, as row 22 shows, Symbian users seem to strongly avoid the Microsoft platform, less than 6,6 % - most probably much less - select that. Taking Nokia´s dominating role in Symbian, it looks that loyalty towards both the company and the smartphone platform it is using have close to disappeared.

The bottom line is that although there are some imprecision in numbers presented, it is clear that there is nothing that Microsoft and its licensees could be very proud of.  This does not say that there would not be possibilities to improve market positions, but there is still long way to go.

Application store discovery - business model and marketing are vital

Getting found in application store space is becoming increasingly difficult, your application is like a needle in a haystack. This post discusses how to improve your chances to succeed in your application business.

Application stores give you visibility - or not

Today, Apple App Store has over 900000 applications and 850 new ones are released every day. Google Play for Android devices can show similar figures, and following these two, there are several other stores expanding their footprint. At least seemingly similar type of applications are fighting to get your attention. As as example, there are over 2400 racing games and over 850 notes & todo applications in App Store.

Application stores seem to be good examples of the long tail concept, and store revenues are very heavily accumulating to the most popular items, see also the picture below. This has intensified the race for top positions and launching of an application has become more expensive, even millions of dollars has been put to market one single item.

When you aim to succeed with your application business, the target is thus to get plenty of attention or secure monetising by some other means.

In doing that, you cannot escape the basic premises of the business, i.e. you need to well understand, what customer job you try to solve, how your solution does the job, and then create an application with great implementation, user experience and usability. We shall discuss, how to improve your odds to succeed in application world from three interlinked perspectives: What options and opportunities are business model choices, effective marketing activities and application store optimisation giving to you.

Business models and applications

Finetuning a business model or creating a totally new innovative one is probably the best way 

to save time, money and other resources in boosting your application business performance. User purchasing an application is a baseline, but here are some examples of other options.

Sharper focus on needs to be served and consequently on customer segments to be targeted may be a good option, because product functionality will probably be more limited and thus also development costs lower. It also helps in targeting marketing messages to right, more receptive audience and makes it easier to optimise store presence for increased attention and conversion in selected niches.

You may select to let a publisher to take care of most of launch and marketing related activities, in return of possible revenues. Publisher business model resembles that of a venture capitalist: he bets on multiple cases and hopes that at least some of them will hit the home run and bring in significant returns to cover losses caused by majority of the cases. For an application developer, publisher can contribute its connections to customer base, money for promotional activities and generic expertize in launching applications.

It is difficult to compete against something free - like 56.2 % of all Apple store applications are.

Freemium model that allows users for free download an application and to experience capabilities and features, removes a barrier to pay for something not tried and tested before. Customers will be charged for being able to unlock new features, remove use constraints or advertisements (in-application purchasing). In games extra game levels or virtual game content need to be purchased. Games have been leading the pack in freemium utilisation, but it is becoming more and more popular in other areas, such as utility and business applications, too.

Bait and hook model is a variation of freemium model, where something is given for free or very lower price in anticipation to get future purchases. Beyond freemium model above, it can be used by giving a customer some digital content or service (or even low-cost physical product) as a bait, hoping that this would generate future revenues to cover the costs.  Or this could be turned around, an application could be a bait to get customers hooked to something a company actually wants to sell.

Free application based, monetising through advertising is well developed, with conventions and ad networks well in place.

Subscription model can be far-fetched for most of application developers, but at least for digital publishers and content providers subscriptions make a lot of sense.

You can also look for sponsoring companies that would either want to create goodwill among their customers or create some other benefit by offering your application, with very low or no price. 

Linking application to wider offering is a good way to unlock other monetising options. If your company has other products or services that can use an application to create tighter relationships with customers or offer them some new service elements, you do not need to sell the application, you just monetise it through existing offerings. An application developer, missing this kind of internal backing option, can look for companies, whose existing businesses could improve their competitiveness or add value to their customer offerings through your application.

In cases, where application is part of total offering, consisting of also a physical product element, there is a possibility to boost application discovery through visibility and promotion of the physical  part. Customers can be charged via physical product, application, possible service part of the total offering or combination of these. Also freemium can be combined with this monetising model.

Beyond some pre-arranged promotion options, using solutions to build cross-platform mobile applications helps very little in attracting customers. The upside of the solutions is getting wider possible audience with less effort.

If you have a solution that can create hype and desirability, through crowdfunding you can  get publicity, pull in pre-orders and start to generate positive word-of-mouth.

Application marketing

Marketing bridges your offering and business model to user discovery in application store by driving  potential customer awareness and interest in your application. Decisions on business model, and of course, depth of your pockets, will affect what activities will be feasible and possible. Most of the tools have been widely used in other businesses, but for application context there are also some very focused ones.

Most important thing is to start creating attraction towards your application early enough. Social media activities with targeted customer groups are the tool to make this happen, with plenty of relevant forums, review sites and industry influencers available. Inbound marketing activities, where you are using your own web and mobile properties with compelling and useful content, provide a lower-cost alternative to put a strong watermark to selected potential customer communities. And do not forget continuous testing and optimisation of your web presence, that will help you to make a quantum leap in your results.

If you know or are able to connect to someone who has extensive following (emphasise quality more than quantity) in your target groups, consider using him. Send these influencers an early copy of your application and try get them engaged and involved in your other marketing activities. In-application messaging can also be used to identify your possible evangelists. In case that you have more money available, celebrities can be used as lighthouses to give you more publicity and visibility.

Promoting a future game (or widely speaking an application) inside a game that is already widely in the market, is an excellent way to reach people that are definitively interested in these kind of products. If your company has proper games in house, great, for others there is a possibility to use 3rd parties and pay them. 

There are special application promotion companies that are willing to promote you - to what extent depends on your budget.

Events that promote also your application serve you well, assuming that you reach big enough footprint with a potential partner. Selection of partners depends on type of your application, e.g. conference organisers and physical retailers like fast food businesses can be lucrative.  Also look for opportunities to participate in online events.

Creating merchandising around your application, e.g. T-shirts, plush toys or other giveaways, will cost you money, but if you have good ideas, how to use them in connection with other marketing, go ahead. If you are able to gather plenty of following in your application business, you might be able to turn money flows in merchandising around.

Even more money is needed to advertise in mass media, but larger companies have already began to use TV, movie theatres etc. Look also for cross-promotional partnership opportunities with media companies.

Application store optimisation

When you have a great business model in place for your application and you have been able to drive visitors to desire and download your application, you have a good basis for application store optimisation (ASO).

Because application store search is the number one source for people to discover new applications, optimisation process that aims to improve visibility of an application in a store can reward handsomely. Specifically, ASO is targeting to ranking higher in search results and to reach relevant top chart rankings.

From optimisation perspective, all application stores are a little bit different. As an example, in Apple store it is important to find right keywords without spamming with too many variations, in Google Play optimising the name of an application is vital and in Amazon you can apply to be featured on storefront.

ASO relies on many of the same tactics as apply to successful search engine optimisation, too. The starting point is to understand your users, how and when they interact with your application and what competitors´  applications are competing on their attention and time. Mobile analytics tools are rapidly developing to give you actionable information on that.

Based on gathered insights, you need to pick up a good name for your application, keywords describing it and right category for an application. For this, there are also some tools available. Do not forget your icon, first screen shot or application description, either.

Your key success indicators (such as downloads or getting 5-star ratings) make basis for continuous improvement, where you make changes to your in-store presence (your metawords, description, application category etc.), test them e.g. through A/B testing and take best new things into use. Best luck!