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If you're trying to make money, dump your iPhone strategy – page 2

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So getting back to the publishers again, the ones who are actually trying to make money at this, the ones I sell services to and who need to make enough money to actually pay me. Let me explain what's happened to them in iPhone-land. First of all, they all dove in immediately because their investors wanted them to, and for a while, they actually believed they were making money. Development cost is a fraction of supporting any other mobile platform, you don't need to "pitch" your product, there's no porting, everyone gets a direct deal, there are no certification fees, and you make 70% of retail--what's not to like? Dare I say, they started trashing the carriers publicly and heralding the iPhone as the savior from cellular phone tyranny. The walled garden had finally tumbled and they were partying in the streets.

They all knew that unless pricing was in the sweet spot, the big download numbers wouldn't come. So they priced their products at half what they would sell them for on the carrier decks and held their breath. (What sells on Verizon for $2.99 per month with eight month retention is termed a "rip off" when presented on the iPhone at a one-time download price of $1.99.) They slotted into new releases and made money hand-over-fist, for about seven days. They extrapolated those sales onto their Excel spreadsheets and went racing back to their investors with the good news. Just in time to fund the next title.

Because they knew they were gonna get rich (because everyone was getting rich selling iPhone apps, right?) they jumped right in again. Since they didn't make money the first time but everyone else was (right??), they assumed they just had a bit of bad luck or bad timing, so they tried again. After all, it only costs $5,000--OK, maybe $15,000 to build something nice.

But there's a problem. The bar is set too low. Anybody can play in the iPhone space. All it takes is an idea and few thousand dollars to pay someone to build it. The entire process, from idea to launch, takes only six weeks.

In my world--the Sprint, T-Mobile, Verizon, AT&T world--a game costs $50,000 to build and $100,000 to port. And you still haven't made the BlackBerry versions, or the Windows Mobile versions, the touchscreen variants, etc. Nor have you paid for QA or certification. Now you're up to $250,000. Sidekick version? Android version? You want to take it to Vodafone? Latin America? There are only a handful of companies that can actually do all that and none of them are profitable. You can see why publishers don't mind throwing $50,000 to get four or five apps up on the iPhone, even just to test the waters. But frankly, it's not working.

Which brings me back to my point. The iPhone is not going to save mid-tier publishers. I know that the largest game publishers are doing reasonably well with branded titles and excellent placement, but that's only a dozen players, and it's not huge money, especially when you factor in the number of users and reported number of overall downloads. So what about everybody else?

In the short term, the most lucrative play is back with the carriers. With the economy and iPhone distraction, much less product is flowing into the carrier system than a year ago. So there's less competition on deck and a warmer reception from the content buyers.

That's not enough, unfortunately. The carriers do need to change the fundamental business model to make themselves more attractive to the publishers. They need to increase the user penetration rate and decrease costs to launch titles. They desperately need to change some outdated rules and re-approach their management of the content business. I'll lay all of that out in my next article, but for now, I again proclaim that profit-seeking, consumer-oriented mobile publishers need to focus on the broader market of mobile devices and operating systems in order to succeed. Don't dumpster your J2ME handset library just yet.

Konny Zsigo is a 20-year veteran of the wireless data industry. His company, the WirelessDeveloper Agency, creates and executes mobile Web marketing campaigns to directly increase content sales and drive users to action. WDA also supports mobile publishers with North American distribution, licensing and production of mobile content (video, games, apps, ringtones, wallpapers, themes and more).

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Comments (17) | Post a comment
More stories about Verizon Wireless   iPhone   Walled Garden   konny zsigo   Publishers  

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I lived through this market (on- and off-deck of j2me & brew games) and have to say it is broken big time. Half (if not more) of wireless publishers have died during the past 2-3 years as handset & channel fragmentation creates MASSIVE waste... you mentioned yourself that 2/3 of the project goes to porting, not counting carrier certification.... There is no other platform which creates similar amount of waste... Creative budgets are getting cut to pay for stupid QA on 500 handsets... But hold on - your world of AT&T, Sprint, T-Mobile and Verizon means managing relationships (DECK PLACEMENT DECK PLACEMENT!!!!) with 4 carriers, while if you want to go to Europe & Asia you have do that for 250 channels. How sweet!! ;) How about launching your app in 50 countries with one NDA? And receive 70% of the end-user revenues? Paid and not only accrued... Sounds unbelievable? Try developing for iphone ;)

I know few publishers which dumped their J2me/brew projects because those are trash - applications are not being placed, revenue share is just rediculous.... Even if you place your app you get cash in 4-5 months.... mmmmm....

Let's get back to this conversation is 2-3 years time ... Unfortunately, by then you guys at WDA may be out of business as carriers may finally make themselves irrelevant....

apatsko@gmail.com

How about not to be featured in App Store and ended up with 1-5 downloads per day?

You forget to mention the exact causes of the high cost of mobile application development. Those not only include all of the middlemen (like yourself) but the carriers themselves and their fragmented device portfolios. Mentioning J2ME/JME is sort of ludicrous, because it's not possible to write once, run anywhere on JME due to the wild variations in the actual implementation of the JVM. That's why everyone is so hot on browser-based apps, not because they are really any better (in fact, they are documentably worse for the mobile network with regards to inflicting undue amounts of data traffic).

The real power of the iPhone is that it is a single target platform. If you write an app for the iPhone, you're not having to target every possible variation of hardware and software that the carriers inflict on these devices. As a developer, you have a somewhat level playing field with the big guys, and the big guys actually have *lower* costs because the app is aimed at a single, consistent set of APIs, not the disastrous mess that Java has become (and that Android has the potential to become). And there's that bit I mentioned earlier about eliminating the middle men in the cost equation.

Sorry to hear that Apple's App Store is having a negative impact on your business. That sort of thing happens when disruptive technologies or business practices are introduced into a static marketplace. Rather than trying to hold back the tide you should be looking for opportunities in the new marketplace because that genie will not be going back in its bottle.

Adapt or perish, it's a Darwinian thing.

I'm not sure I follow.

In the first sentence you claim that nobody you know has ever bought an iphone app. That sounds quite unfortunate for your clients to have a marketing person who does not know any of their potential customers.

But then, in sentence 2, you "only know people who buy a couple games.
In paragraph 7, you tell of purchasing one yourself. It's hard to follow.

A couple economics lessons on the nature of markets and innovation might help you understand what is actually going on here.

In the meantime, I'm sure you could send EA whatever amount you want to add to the "measly $5.99" you paid.

The article presents the argument that the problem is that there are so many apps on the iphone, and they can be produced so cheaply and with poor quality, that a developer making a good app has no pricing power because a industrial quality app can't be distinguished from a home brew.

Isnt the logical solution to this problem then a a portal with a closed reviewing system where the ratings are more professional and the quality apps can be distinguished from the chaff? Why throw the baby out with the bath water.

And if EA's cost of develop their Scrabble game was lower on the iphone why is it such a crying shame that it sells for $5.99?

it's just not enought to put your game into the store, like it's just not enough to put your website in the internet.
sounds like you are in a position in the old market that became more or less redundant.

When I saw the iPhone was open to apps, my reaction was that we were about to see another "Palm Economy", which is to say no economy at all.

Look at the apps written for the Palm. Some were pretty well done for back in the day. But many were free, and the paid ones didn't sell in big numbers. I've never heard of anyone actually making money at it. Some profitable companies wrote for Palm, but the profits came from elsewhere as the Palm delivered no ROI.

Apple strikes me as the same but on a larger scale. It's a brilliant move for Apple: 1,000's of developers trying to make a name for themselves by writing cool apps and giving them away. There's what, 50,000 apps now? Awesome iPhone/Touch selling points---an App for everything, either out now or on the way.

But not much cash for the vast majority of developers. A largely destitute economy. A select few are getting some coin, and with the burgeoning base of iPhones might be able to make out alright. But for most, it's Palm Economy, v2.0. A few living in nice houses while most look up at them from the slums below.

Sooo..now games and apps are more accessible to more people at what is actually a REASONABLE price. How exactly is that bad? More games are sold and greedy folks like you don't get paid. $24.95 is an outrageous price for a standard game like Scrabble, and you're a moron for claiming you want to pay that. This is a bad economy and people either realize they've been paying way too much or will cut back on unnecessary spending. I'll call the waaambulance for you Konny.

Shame on FierceDeveloper for actually giving this dying breed idiot a platform to plug his dead in the water business. Anyone actually considering taking this guy's advice is just as clueless as he is.

Perhaps if you hadn't systematically fired every single employee you had who was capable of coming up with good ideas and actually had some business acumen you might not be in this predicament, hmm? Maybe being surrounded by asskissing sychophants isn't so great for business after all - but it's great for a huge ego! :)

Folks -- I'm not sure I see the point in shooting out a one sentence comment stating that the author is terribly wrong, without backing up that flaming dart with a few facts of your own.

Konny -- You seem to lay out only two "players"... Apple and the carriers. What about the other OEM decks that are popping up like crazy these days? They're all built off the Apple model (and doing it with varying degrees of success). Any thoughts there? Seems to me like lower cost development + faster time to market = better business opportunities.

I do agree that the iPhone user is spoiled. You can't build a business on a 99 cent game that takes months to develop and constantly needs updated. I'm an iPhone user myself and I've bought quite alot off the App Store... but I'm living on borrowed time at these prices.

Thanks for all your comments. Several of you have tried to pinpoint WDA's specific role in the marketplace and how we may need to adapt to iPhone's presence instead of fighting it, and how we may be irrelevant in the future and that we may be bitter about it.

That's all interesting food for thought, but that's not where I was headed with this article. What I'm pointing out is that Apple set the bar so low for developers (yay - no middlemen!) that too many of them rushed into the marketplace, thinking that they were going to get rich quickly. That's created a glut of products and enormous downward pricing pressure. It's also created a lot of copycat products and copyright infringements that carriers would never tolerate, but that seems to happen routinely in the Apple apps store. Unless something changes fast, I don't believe it's a sustainable model for most publishers in search of meaningful profits.

Wow, this conversation is amazing. My favorite idea is the one about only allowing ratings from within the app. Problem is, advocacy posters will still just buy the app and make the bogus posts anyway, won't they? I also like the OEM comment.Yes, other mfgs must and will and are stepping up. Let's see how the Palm Pre gang performs, the first good test case.

I think all of you are wrong.

Konny, in response to your article, you are going the wrong way for sure. It will not end with the iPhone and the Palm Pre is proof of that. What you need to do with WDA is find a new direction that fits with the growing number of iPhone-type handsets that are becoming more readily available. If you don't, then your top clients like Maxim, Sports Illustrated, and Glu will find an aggregator or representation that will take them to that level.

Now, how do you succeed in the iPhone business? It's simple, and Apple gives you a hint if you turn on your television once in a while. The key to launching any product successfully is the ability to market that product. Simply spending $50K to develop and launch an app for the iPhone is not enough. You say your clients spend upwards of $250K to launch a J2ME game? Why not take that same $250K and develop a game for iPhone, but take the remaining $200K and use it for an integrated marketing, advertising and PR campaign. But next you're going to tell me that traditional advertising and PR is not working right? That to make it work, you need to advertise online or on the phone. Bullshit! What you need is to be creative. With $200K at my agency, I can get you on TV in one major and countless outlying markets during primetime. For $200K, I could put your face and your app on hundreds of billboards (you don't think passengers in cars have phones right? Or that no one uses their phone at the airport?). Want to get real creative? Give me that $200K and with $10K of it, I'll put you in front of every man in a hundred bars and give your ad 60 seconds of their undivided attention.

Sure, the iPhone is killing the J2ME and BREW business in terms of games and apps. Did you think it would last forever? You complain about the price of a mere game right now. What's going to happen to your business when the iPhone's contract with AT&T runs out and all the carriers are selling them? Then carriers or companies will be competing on the best deal for for the PHONE, not the apps (think buy one get one free). We all remember the RAZR right. Don't you think this bares some resemblance?

So not only are you stuck in the idea that the mobile app business will do a 180 and go backwards in terms of technology, but it seems like the posters here do as well. One even worked for you and thinks because he/she got let go is the reason that you are doing bad. Not likely. The real reason is that you are not willing to adapt your business model to the future of wireless gaming. So one of the posters were right when they made the comment that your business will ultimately go belly-up or need to be sold off if you continue with this attitude.

I wish you good luck on convincing the whole free world to revert back to not using the iPhone and the App Store that comes PREINSTALLED on it. I applaud your revolution, but this is no Boston Tea Party.

Konny, you're ridiculous.

Your calculations don't add up. And if they do, and you're still having problems with your company, then you don't know what you're doing. You're stuck in an old mentality. Use your money the right way, and you'll evolve along with the market.

Hey, Konny, don't worry, pal. Soon everyone in the industry will know what a 2-faced, scheming, thief you are. When you're posting your comments from behind bars, we'll all have a good laugh about you and the Kon-artist suck-ups you currently employ.

Peace out!

Ahh yes! Capitalism at its best. I think it's called a level playing field and the big guys don't like it. Tough t i t t y said the kitty but the milk is still good

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