Thursday, July 15, 2010

a 10X change in mobile app revenue model

About a month ago, I cited a study showing that on average revenues from iPod/iPad applications don't cover development expenses. But it appears that a certain type of applications emerged to solve this problem. The key to revenue seems to be in-application purchases:

Apple turned on the in-app purchase feature for the iPhone last fall. That enabled game developers to embrace the same “free to play” business model that has made companies such as Zynga so successful on Facebook. In that model, companies offer their games for free, but they charge real money for virtual goods such as better weapons or online multiplayer play. The in-app purchase feature allows gamers to purchase their goods without leaving their games at all.

The results are surprisingly good. In January, Flurry said that the games that it tracked generated revenue of $9 per user per year, on average. In June, that number had risen to $14.66 per user per year. Previously, these games were generating around 99 cents to $1.99 per user per year.


I think this approach can work for all kinds of digital content, including books. Essentially, we need to create a new product placement technology where the product is sold, rather than advertised, within the context of the story.

A 10X diagram note for my students: by increasing the frequency of transactions, we are moving to the left along the time axis of the diagram.

tags: 10x, content, commerce, money, business, games, mobile, apple, market, book, virtual, problem, solution, course

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