The face of the global smartphone market is
changing. According to research by eMarketer, the number of worldwide smartphone users passed the 1 billion
milestone in 2012. By the end of this year, that number will nearly double.
Yet the dynamics involved with this second billion
are far different that those of the first. If app developers and marketers wish to profit from the next gigantic
customer base, they need to understand how these consumers select, pay for and
use apps.
Differences in emerging markets. Affordability and usage
patterns are not homogenous throughout the economic strata. What works among
more affluent “early adopters” in developed nations does not translate to the
experience of less wealthy -- yet still very enthusiastic -- consumers in
less-developed countries.
While smartphone ownership is increasingly common
in developing nations like the BRIC countries (Brazil, Russia, India and
China), usage characteristics are far different than what's found in North
America and Europe. Outside of certain Western nations, cellular contracts are
virtually nonexistent. It’s not unusual to find people carrying the latest
Android devices but without voice or data service lasting more than a few days.
That’s because most consumers around the world prepay in cash for mobile
services.
In much of the developing world and for the vast majority
of its smartphone owners, credit-card penetration is very low. These mobile users are on prepaidplans, buying minutes just
before using them, in a stark contrast to the plans popular in the developed
world (whereby billing occurs after usage according to acontract). The typical prepaid
scenario is for a user to stop by a drugstore or newsstand, give a cashier
money and “top off” a wireless account with credit to pay in advance for calls
in the next few days or week or two.
Other dynamics are at play in BRIC and other
countries. In the modest Android devices that predominate by a wide margin over
Apple iPhones, available onboard memory is very limited. Moreover, users
download a lot of free apps but seldom pay for premium digital content or make
in-app purchases.
App Annie Indexstatistics for this
year's first quarter bear this out: The United States was the only country to
outperform Brazil, Russia, South Korea and India in the number of apps
downloaded on Google Play. Yet in terms of app revenue on Google Play for the
same period, the top five countries are Japan, United States, South Korea,
Germany and the United Kingdom. Brazil, Russia and India didn't even make the
list.
So how does an app company penetrate this huge new
market? App developers and marketers may be very successful but adaptations in
monetization strategies are required. Here are six suggestions:
1. Shrink the download size. In developing countries, connectivity is still expensive. Most
users rely on free Wi-Fi or low-speed 2G and scarce 3G coverage. Consider
creating smaller versions of titles or incremental downloads. Many game
developers, for example, make their Levels 1 and 2 available first and offer
the opportunity to download higher levels later.
2. Seek out app stores without data-usage fees. Some carriers preload onto phones app stores that provide
downloads with no data- usage fees.
Since most emerging countries' smartphone users
have limited access to 3G or 4G data packages due to the high costs
and their limited available income, being able to distribute apps without
users having an active data package improves the chance of an app being
downloaded and therefore benefits a developer.
3. Localize. While the idea of translating text into a local language may seem
obvious, additional steps can be taken. In China, a co-production model is not
uncommon, whereby a local distribution partner will change the look and feel of
an app so it has localized themes and music.
4. Offer subscription bundling. For marketers of premium apps, listing in a subscription-based
store (such as what my company Bemobi offers) can increase the number of
trials and overcome the initial cost barrier, since users perceive that they
are receiving much greater value for their money.
5. Think about granting a low-ticket price. Keep in mind the “pay-as-you-go” mind-set that most users in developing
countries are comfortable with. A low subscription fee, based on shorter daily
or weekly cycles (in contrast to a costly monthly fee), will work better in
regions where end users are used to topping off their accounts.
6. Look at local carriers. Since the majority of these users have no access to electronic
payment, carriers are increasingly finding it valuable to partner with
specialized local app stores that want to leverage their distribution and
prepaid billing capabilities. More than 75 percent of app revenue in China
comes from carrier billing and carrier-branded app stores. Developers of
premium apps can realize recurring revenue through a usage-based formula.
Changing distribution models. While the Apple App Store and Google Play dominate app distribution in
the States, it's different in other countries where the credit-card payment
model simply doesn’t work. China has in excess of 200 app stores, although a
consolidation is under way. Qihoo 360, Wandoujia, 91 Mobile, UCWeb, Baidu and
carrier China Mobile’s app store are emerging as the leading players.
Wandoujia, with more than 300 million users, has
attracted major Western app titles like Line, Flipboard, Evernote and Path.
China Mobile, as well as China Telecom and China Unicom, account for the vast
majority of carrier billing that benefits the Chinese app developer market,
valued last year at $1.3 billion by app developer CocoaChina.
Brazilian smartphone users currently look to Google
Play for app downloads. Nearly all these apps, however, are free. Developers
wishing to adapt their revenue models to make money are embracing a prepaid
model achieved through Brazil’s mobile carriers. Initially focusing on
Brazil (which has 250 million mobile subscribers), my company Bemobi is
partnering with local mobile carriers such as Oi to offer apps from Electronic
Arts and others.
Aside from mobile app developers, any business
trying to reach users globally needs to understand the potential of the large
swath of customers who will have soon have their first personal connected
device. This new set of users may be using smartphones as their first personal
device to connect to the Internet. And they will be connected through prepaid
mobile services, most likely won't have credit cards and will have different
expectations about prices. Therefore, variances in distribution, pricing and
billing strategies will be key.
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