Opening Up Mobile Monetization

Interesting post at Mobiletech : Mobile Web vs. Native Apps. Revisited. Obviously, working at Chomp to help prop up the discovery end of the app ecosystem and funneling ourselves some of that sweet sweet app store revenue via affiliate programs, I do a whole bunch of speculating about web apps vs native apps. Particularly wondering if we’re painting ourselves into a corner working through the app stores. What I’ve ended up doing is just assuming that the browser will be a good enough delivery mechanism for applications, and it frees you to think about the really important issues. Will it be with HTML5 that we see native equivalent feel for web apps? Or with HTML6? Or HTML14.8? Ultimately I’ve decided it doesn’t matter. It’s a technical problem, and technical problems have a way of disappearing over time. And disappearing almost immediately when the right motivations are in place.

So what are the real underlying issues? I think John Arne is right to call out business models as the big issue standing in the way. I want to dig a bit deeper on that one however. Why aren’t the monetization models on mobile as diverse and rich as they are out on the web in general? It’s because generally the only thing people buy on their mobile phone is stuff for their mobile phone. If I take a look at what I’ve purchased with my iPhone over the last month, it’s an app here and there, maybe a song or two (okay, I didn’t buy any music last month – so it’s a bad example month.. but you get the idea). On the other hand, what did I pay for online in the last month? A couple of books, bits of furniture for the new apartment, hotel reservations, more electronics that I should probably admit to.

I would argue that’s the actual significant shift which put the web smack in the middle of much of the interesting change we’ve seen over the last 15 years. If all I could get via the web was information and software I think the web would have had a lot less impact. However, once I could get stuff, real life things shipped or waiting for me as a result of activity online, that opened up a whole new world of monetization methods. Why? Cause without the real world stuff the only people willing to advertise are folks selling software or subscriptions. With real world stuff the pool of advertising and promotional dollars skyrockets, and the associated ceiling for earning via indirect monetization gets lifted.

So instead of tracking if it’s going to be technically feasible to develop a native-feeling-enough HTML5 app and using that to determine if mobile development is going to tip to the web, I’ve been watching folks looking to push the business models out. Bringing offline commerce to mobile handsets is probably the reason folks like Gowalla and FourSquare are viewed as hot tickets by the investment community, and not just fads. And I don’t think it’s an accident that lots of folks who have had positive experiences with the app store, such as Flixster, have a component of their app that’s based on in-app purchases of offline goods (movie tickets in this case).

The two common subcases of the discussion that don’t move things offline (in-app purchases of digital goods, and paid distribution for web apps) are effectively just tweeks to the existing model. They don’t really unlock any new value, they just shift around where the customer decision point is and potentially unlock a larger portion of the same pool of revenue. But they don’t fundamentally shift things in a way that give access to previously untapped pools of money. They’re problems worth addressing, but they’re really the blunt end of the stick.

The promising part is that really there’s no technical barrier in the way of opening up mobile services to offline commerce. Much of the same systems that we have for online commerce work just as well on a handset. But just like with the web, having the technology available doesn’t mean you have a system that works for users. Apple has set the expectation at a certainly level with respect to “purchases on an iPhone”, being able to tie into an existing payment method has left users with an expectation for everything else to operate as smoothly. So yes, there’s definitely some work to be done, hard problems to be solved. And I think that’s really the problem to be tracking here with respect to mobile web or native app development.

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8 Responses to Opening Up Mobile Monetization

  1. Blair says:

    Hey Mike,

    Great post. I couldn’t agree more, but would extend it one step further. What drives PC web/email advertising spend is completing the transaction. Not being able to close the loop and attribute the dollar value in spend attributed to an action by a consumer means there is no value to support a price floor on publisher inventory (native app or mobile web).

    What Apple and Google have the chance to do with their embedded payment capabilities is to tie a purchase to an ad/promotion on the device. But where it gets even more interesting is when a consumer can complete a purchase for a service or item in the real world with a bricks and mortar retailer (think pay per download across physical goods and services). Obviously the point of sale systems are the key technical hurdle here.

    There is $23B in ad spend from B&M retailers that is almost exclusively in old media like radio, newspapers, YPs, etc. because the internet is not a good method for driving local foot traffic. We hear from marketers that they want to be in mobile, but they want measurability on driving foot traffic in local stores and eventually purchases. This is what mobile can truly do, and that PC web advertising/marketing never accomplished.

    Cheers!

    Blair

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  3. Natasha says:

    I agree with Blair up there that completing the transaction is key…there have been a few times when I’ve been on the road and the hurdle of the purchase flow has been too much for my phone (even where I already had an account for that merchant but the site wasn’t designed for mobile). Although I wouldn’t have thought to go to a brick&mortar store to complete a digital purchase…don’t want to wait in line.

    However, I think a key point here is that there’s a class of goods that people just don’t buy on phones b/c they can’t see them well enough (due to small screen size & slow to download pictures/alternate views). Let’s look at Mike’s list of recent web purchases: “A couple of books, bits of furniture for the new apartment, hotel reservations, more electronics…” In each of those cases (& add to them clothes, shoes, household goods, etc.), unless you already know the product well enough (or perhaps you are standing in a brick&mortar store comparison shopping), you won’t buy it from a phone. You have to see it from all angles, flip through some pages, explore the hotel & see some room views & a map location, and comparison shop a few sites (multiple browser windows) to get the best price. It’s too much for some phones to handle, especially if you’re still on a 2.5G network. (BTW, in Japan 3.5G networks are common these days…improved experience but still not good enough for this type of shopping.)

    BTW, the browser does make a huge difference. I recently temporarily switched phones b/c my older batteries started bursting internally (has anyone else had this happen?). The temporary phone is from the same era but its browser can’t handle half of the web sites that I could view on my primary phone. Hope my new batteries arrive soon!

    But certain physical items are good for mobile purchases: movie/concert/train tickets, parking lot fees, CDs if it’s an artist you know or you can hear samples (although do people still buy CDs? Maybe downloading an MP3 album to your phone is also too much, and it’s better to put the MP3 album safely on your PC.). Flowers to be delivered — if the address entry is not difficult.

  4. Hi Mike,
    Do you remember my suggestion that was on your blog in 2006 – “personal advertising screen” for mobile users I mean – my project of a cell PC – http://genetechnics.webs.com/. Really, the situation is changing – today, even Microsoft at last has launched their Kin phones and is going to surprise everyone with Windows 7 phones later this year. Intel is going to launch Moorestown platform at IDF 2010 this week – the platform they have mentioned exactly the same time I started my project after IDF 2006 Fall when they started their transition to Intel Architecture processors for mobile devices – iPhone was the first one as far as they’ve presented it at its launch with iPhone AppStore. What do you think about this?
    Best regards,
    Michael

  5. Michael Molin says:

    UPDATE: Just saw Apple’s presentation of iPhone 4.0 OS – iAd is the first step to a “personal advertising screen”.
    Michael

  6. Good post, Mike. I concur with the commenters as well.

    Yes, monetizing is all about business models regardless of technology. And mobile is no exception. But technology is a great facilitator.

    When it comes to monetizing I truly believe mobile will play a key role on the discovery (via interactions) for the purpose of influencing the potential buyer to complete the transaction. I believed this years ago, and I still believe it (and is why I had started eZee. )

    But what I just wrote relates to what Natasha wrote above, that there are “classes of goods or products” some that work more naturally for mobile than others. I think that will always be the case for mobile *handsets*.

    ceo

  7. David Zeidman says:

    Another major benefit of a native app over mobile web is that your native app is within the arms reach of a mass audience seeking mobile based solutions and you have to been a native in order to be in the club (e.g. Apps for Iphone).

    Are there any underdog (not within the fortune 10,000) success stories regarding mobile web solution that received honorable mobile based traffic flow and the necessary stickiness to be considered a success without going native?

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