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In 2012, developers using Google Play have pulled in more revenue from in-app purchases than from the sales of the apps themselves, a validation of the “freemium” model and digital purchases.
Google Play engineering director Brad Yerga disclosed the news in an afternoon session here at Google I/O, where Google announced it had surpassed 20 billion app downloads in total at its morning keynote. All told, there are more than 600,000 apps on the Play Store, with more than 1.5 billion downloads per month. Those figures still lag Apple, which claims that of the 650,000 separate apps included in its own app store, users have downloaded 30 billion.
Google announced the Google Play brand last year, which encompasses both its app store, e-books, music, and movies. Google’s Android platform is also the world’s largest in terms of smartphone market share, giving Play a proportionally large share of the world’s consumers.
Although the United States still represents the largest market for Google Play app downloads, more and more overseas customers are downloading apps as Android aggressively expands overseas. About 67 percent of Google Play revenue comes from overseas markets, Yerga said; besides the United States, the largest Play markets are Japan, Korea, Germany, than France, he said.
From April 2011 through April 2012, app revenue from Japan and Korea increased fourteen-fold, he said. To drive this further, Google announced a new version of its app development console, which taps into Google Translate to automatically translate the description and name of an app into a foreign language, like Korean.
Part of the reason for Google Play’s international success has been embracing foreign purchasing customs. For example, customers in Japan and Korea virtually demand the ability to purchase real-world items from their phones, Yerga said.
But the real moneymaker, Yerga said, has been the “almost magic combination of carrier billing and in-app billing,” Yerga said, that has appealed on an international level.
“This has baen a huge breakout for Google Play, for developers, but users have embraced it as well,” Yerga said of the in-app purchase option.
Simply adding in-app purchases to the API has allowed developers to develop creative ways of monetizing their games, Yerga said, allowing so-called “freemium” and “paymium” models to succeed. For example, developer TinyCo., developer of “Tiny Village,” said that Android delivered the most revenue per user of any app store, as users downloaded the free app, then purchased virtual items.
Another developer has begun offering a one-time, discounted upgrade to the full version of the app after the user plays a demonstration version for 30 minutes or so. And developers like FarSight Studios have released “DLC packs” of new pinball tables for their app, Pinball Arcade.
The next chapter of Google Play’s app monetization story will be subscriptions, allowing users to automatically charge their credit card for additional or supplemental content. ”No matter what the game, you can still get the benefits of a subscription,” Yerga said,
Apple has offered in-app subscriptions since February 2011.
After its disappointing IPO last month cast doubts on the company’s ability to monetize its vast user base, Facebook today announced a subsciption pricing model – potentially adding a recurring source of revenue for itself – and for developers of Facebook apps.
The new service, announced on Facebook’s Developer Blog this afternoon, will launch in July.
Subscriptions will bring Facebook app producers a recurring revenue stream that will ideally normalize an app’s overall revenue stream, instead of depending on the spiky ups and downs of one-time payments for virtual items. The new system will be launched on both the Web and mobile versions of Facebook.
Altimeter Group analyst Chris Silva sees subscription-based pricing as a real value for app developers to offer to users. “A subscription that buys me access to specialized content rather than a virtual item with maybe a more fungible value is a more successful way for developers to bring in revenue,” Silva said today. Specialized content is more of a value-add to users, he believes.
Subscriptions have already been tested by popular game producer Zynga for its FarmVille and Pioneer Trail games. Kixeye, a smaller game developer, will sell exclusive items in its Backyard Monsters game for a $9.95 monthly fee – with Facebook picking up 30% of every subscription.
Local Currency Pricing
At the same time, Facebook is also moving away from its Credits payment system to pricing that supports local currencies.
“By supporting pricing in local currency, we hope to simplify the purchase experience, give you more flexibility, and make it easier to reach a global audience of Facebook users who want a way to pay for your apps and games in their local currency. With local pricing, you will be able to set more granular and consistent prices for non-US users and price the same item differently on a market-by-market basis,” Facebook Product Management Director Prashant Fuloria told developers in today’s blog.
That last point contains the real gem in the move: setting market-to-market pricing will let app developers maximize their revenue by lowering prices in markets where their items might be too expensive, or charge more if the market can bear it.
The new subscription program will support local currencies, and apps that use the Credits system will be flipped over to local currencies automatically.
“We hope new features like subscriptions and local currency pricing help you monetize more effectively and reach more users globally,” Fuloria added.
Generating alternate and optimized revenue streams is pretty much Job #1 for Facebook after the lukewarm reception investors gave its IPO this month. And for Fuloria, it’s personal – this is why he was hired away from Google in 2009.
The Mobile Conundrum
On the mobile version of Facebook, there are no ads and Facebook is seeing phenomenal growth. A recent report revealed that nearly a third of Facebook’s users in India access Facebook exclusively through mobile devices. The local currency and subscription changes will make it much easier for developers obtain revenue from mobile customers in developing countries.
That’s critical for Facebook’s future: Facebook’s mobile platform “must be front and center with the massive growth in mobile users in the US – and more so, abroad,” wrote Silva earlier this year. “Facebook should expect the device, be it feature phone, smartphone or tablet, to be the central interaction point for users. It’s going to have to adjust its monetization model to match if it wants happy investors because mobile matters.”
Today’s announcement is a fulfillment of Silva’s prediction: an adjustment of Facebook’s monetization model to start getting stronger and more predictable revenue streams from mobile users, and those in developing countries. And it won’t hurt the revenue channels from the rest of Facebook’s users, either.
Over the next few weeks, Facebook users can expect to see recommendations for apps based on their activity on the social network. It’s good news for developers and Facebook users, but investors still grumbling about Facebook’s lackluster initial public offering last month shouldn’t expect it to be an immediate panacea.
Facebook launched its App Center on Thursday night, showcasing more than 600 apps. While the product is going to be rolled out incrementally to U.S. users over the next few weeks, there were already reports of it being a big boon for developers; GoodReads, for example, told PCMag.com that it has seen 490% growth since the launch.
At least for now, though, the launch is targeted more at promoting Facebook’s platform apps and the 600-plus partner apps in the App Center and less on generating new sources of revenue. The service, in fact, links out to Google Play and iTunes when a user wants to download an app for mobile, and Facebook won’t see any revenue when users take its recommendation for an app.
“What we’re trying to do is bring people to social apps,” Doug Purdy, who works on the product development team at Facebook, told PCMag.com. “Our monetization, our revenue strategy for this doesn’t change one bit.”
Leveraging Facebook’s Data To Compete In The App Space
By and large, apps are still discovered and sold through word-of-mouth marketing campaigns. In its announcement, however, Facebook hinted that it would be doing more than just cataloging all of the apps it made available, which include Pinterest, Draw Something, Nike+, Path, and Ghost Recon..
“Success through the App Center is tied to the quality of an app,” Facebook’s Aaron Brady wrote on the company’s developers blog. “Well-designed apps that people enjoy will be prominently displayed. Apps that receive poor user ratings or don’t meet the quality guidelines won’t be listed.”
But Facebook also seems intent on using what it knows about you to match you with apps that you’d actually use. The mobile version of the product, which CNET’s Jaymar Cabebe called “significantly pared down,” opens directly to your friends’ social apps. On the Web version, users are greeted with a list of recommended apps as well as their friends’ apps upon login.
First Step Towards Mobile Monetization?
While developers keep any revenue generated through the Facebook App Center, that will likely change. Indeed, this seems to be one of the biggest steps yet that Facebook has taken to address Wall Street concerns about monetizing its mobile platform.
But Purdy’s comments to PC Magazine suggest the company is still largely fixated on boosting advertising revenues, and that is not likely to sit well with investors and Facebook critics.
“We are largely an advertising company, and we continue to make our money that way,” Purdy said. “Now the more applications that people use, that are social, that they share, of course that benefits us. It means that we can sponsor those stories, it means that we’re better in our ads and marketing. And that’s really what that’s about for us.”
Image courtesy of Facebook.
Today at the D10 Conference, star analyst Mary Meeker gave her latest presentation of Internet Trends. You can download the whole presentation here (PDF) and it’s well worth spending time perusing. Here are the main takeaways, along with selected screenshots. Get ready for lots of re-imagining and proof of rapid growth!
Meeker has been obsessed with mobile growth in recent presentations – and that trend continues. The executive summary of her latest report is that mobile technology is being rapidly adopted, but it’s “still in [the] early stages.” Meanwhile, Internet growth in general is described as “robust.”
Mobile devices are, unsurprisingly, the biggest growth area. The standout statistic was this: 29% of USA adults now own a tablet or eReader, up from 2% less than three years ago. That’s been fueled by the rapid growth of devices like the iPad and Kindle.
Mobile adoption is having a big impact on overall Web traffic. Global mobile traffic is “growing rapidly” and is now 10% of Internet Traffic.
The following is a very sobering stat for Facebook. It’s as good an explanation as any for why Facebook spent $1 billion on Instagram. In India, the world’s second largest Internet market behind China, mobile Internet traffic has now surpassed desktop Internet!
Back to the US, the combined growth of mobile devices and mobile traffic has resulted in a big jump in mobile revenue. However, most of it (71%) is revenue from apps. 29% is from mobile advertising.
Overall, Meeker is bullish on mobile monetization. The desktop Internet proved that advertising dollars follow eyeballs, Meeker said, so it’s just a matter of time before mobile attracts dollars. She points to the strong mobile app revenue figures, as well as “rapid growth” (that phrase again) of mobile commerce and associated payment systems￼.
“Re-Imagination” is a new catchphrase that Meeker introduced in this presentation. ￼The first generation of Re-Imagination was the desktop Internet usurping old business models. For example the newspaper industry, where print ad revenue was surpassed by Internet revenue in 2010.
She then presented a slew of examples of how (mostly mobile) technology is “re-imagining nearly everything.” Here are just a few of them:
Lots to digest in this excellent presentation by Mary Meeker, who has more than proven herself to be the standout analyst of this Internet era.