Apps: Friends or Foes?

Agenda

• Why apps matter• Apps are your friend• Apps are your foe• Making money with apps

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3

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Friend: Apps are everywhere!

5

0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013

Dow

nloa

ds (B

)

Source: App Ecosystems Opportunities; Apps Forecast 2008-2013; Virtual Goods Drive Real Revenue

Apps are your Friend

1. Apps offer an unrivaled direct consumer relationship

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Popular App Categories - iPhone

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Games Entertainment Utilities Photography & Video Social Networks

Asia Pacific Central & Eastern Europe Central & Latin America Middle East & Africa North America Western Europe

Popular Categories - iPad

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0%

10%

20%

30%

40%

50%

60%

Games Entertainment Utilities Productivity Education

Asia Pacific Central & Eastern Europe Central & Latin America Middle East & Africa

North America Western Europe Grand Total

Tablet – More Popular on iPad than iPhone

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-6%

-4%

-2%

0%

2%

4%

6%

Asia Pacific Central & Eastern Europe

Central & Latin America

Middle East & Africa

North America Western Europe Grand Total

Productivity Education Books & Reference Business Games

Lifestyle Utilities Healthcare & Fitness Photography & Video Entertainment

Apps are your Friend

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1. Apps offer an unrivaled direct consumer relationship

2. Apps offer a controlled second screen environment

Friend: Apps drive engagement

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Friend: They Drive Engagement?

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0

10

20

30

40

50

60

0

20

40

60

80

100

120

140

160

180

Netflix HBO GO Twitter ABC’s Grey’s

Anatomy Sync

Hulu Plus Fandango Movies –Times & Tickets

Bones Shazam for iPad

IntoNow The Walking Dead

Average of Rank Number of Appearances

Apps are your Friend

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1. Apps offer an unrivaled direct consumer relationship

2. Apps offer a controlled second screen environment

3. Apps offer increased revenue opportunities

Four Main Business Models

• Paid Download• Advertising• Virtual Goods• Subscription• Unforeseen revenue uplift• More coming

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Q. Which business models do you plan to use to generate revenue next year?

0%

10%

20%

30%

40%

50%

60%

70%

A la carte (users pay per download)

Advertising In-App Virtual Good sales

Subscription Not generating revenue

Last Year Today Next YearCopyright, Strategy Analytics, Inc. 15n=1,298

Increased Revenue Opportunities

$0

$5

$10

$15

$20

$25

$30

2008 2009 2010 2011 2012 2013

Reve

nue

($B)

Download Revenue Advertising Revenue Virtual Good Revenue

Source: App Ecosystems Opportunities; Apps Forecast 2008-2013; Virtual Goods Drive Real Revenue

Apps are your Friend

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1. Apps offer an unrivaled direct consumer relationship

2. Apps offer a controlled second screen environment

3. Apps offer increased revenue opportunities

4. Apps enable global distribution without partners

5. Apps provide leverage for content owners

Apps are your Foe

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1. Apps flatten the competitive landscape

Apps are your Foe

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1. Apps flatten the competitive landscape

2. Ecosystem and device fragmentation make apps costly to maintain

There are too many devices needing apps…

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Fragmentation is bad

Android Fragmentation

1.1, 1%1.5, 15%

1.6, 27%

2.0, 3%2.0.1, 3%

2.1, 30%

2.2, 17%2.3, 0%

2.3.3, 4%

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Apps are your Foe

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1. Apps flatten the competitive landscape

2. Ecosystem and device fragmentation make apps costly to maintain

3. Difficult to quantify ROI

Apps are your Foe

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1. Apps flatten the competitive landscape

2. Ecosystem and device fragmentation make apps costly to maintain

3. Difficult to quantify ROI

4. Create unreasonable consumer expectation

5. Create friction with MSOs

Quantifying ROI

How does a company quantify the ROI for an app?– Paid apps are easy– Ad supported apps are easy– Purely mobile subscription apps are easy– Social network initiatives become trickier– Hybrid mobile-PC become more difficult– Brand extensions are increasingly difficult

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Driving revenue from apps

1. Do not expect HTML5 to be your savior

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Pure HTML5 is not your savior

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1. HTML5 does not secure your video content

2. HTML5 does not allow for audio

3. HTML5 apps are less capable than native apps

4. HTML5 apps will need to be tweaked per device

5. Finding HTML5 apps will be difficult

Driving revenue from apps

1. Do not expect HTML5 to be your savior2. Invest in new business models

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Top Grossing iPhone Apps that were Free (US)

30

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Top 100Top 10

Source: App Ecosystems Opportunities; AppTRAX

Driving revenue from apps

1. Do not expect HTML5 to be your savior2. Invest in new business models3. Leverage your brand to offset broken discovery

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33

34

250’

160’

40,000 ft2

A big box store

80,842

Floor Space Needed

35

10’

1 copy of each app

2 copies of each app

5 copies of each app

10 copies of each app

Conclusions

1. If not utilized properly apps will be a foe by flattening the competition and reducing available viewer attention

2. …however if utilized properly apps can extend a brand to screens/locations once thought inaccessible

3. Set quantifiable objectives when developing apps and create internal metrics to gauge success

4. Leverage new technology to make engaging apps5. Utilize well known brands to drive users to your apps

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