Social Applications are the talk of the town in Silicon Valley and on Wednesday, hundreds of app developers and entrepreneurs converged on the Concourse at the San Francisco Design Center to discuss strategies and tactics in app creation, monetization, and distribution at the leading consumer apps exposition, Appnation III. Appnation III focuses on social and mobile apps across various platforms, including PCs, smartphones, tablets, internet-enabled television and more. The market size for apps is pegged at $20 billion dollars and expected to triple within 5 years. With 44% of all US mobile subscribers now owning smartphones, it’s easy to see why most techies believe the future of online revenue will rely heavily on the app economy.
Apps aren’t just another way to consume content from the Internet. “Your app goes from something you use to something that is a part of who [you] are”, says Doug Purdy, head of developer relations at Facebook. Apps track the music we listen to, the movies we watch, the games we play, the exercise we do, and then they share this personalized data with the people we know. Apps, unlike traditional web media, have added a second layer of communication – where traditional websites sought to communicate with their users, social apps also seek to communicate with their users’ friends, pulling personalized data from social networks to map friends’ activities. Social proof in the battle for consumer attention is a major challenge and the personalized data collected from social apps is a goldmine for advertisers.
Apps are big business. When Google launched its Android operating system, critics were quick to question how a mobile OS fit into Google’s larger product landscape. Today, Android has the largest smartphone market share at 43% (iOS is far behind at 28%) and it’s no coincidence that four of the top five apps on Android are Google apps (Market, Search, Gmail, Maps, and YouTube, with Facebook rounding out the five.) What’s even scarier is how untapped the Apps economy is. Local advertising, for example, is estimated to be a $144 Billion market, if and when advertisers finally figure out how to crack it.
Though mobile advertising is on the rise, its progress has been slowed by a failure to close the loop on user experience. A recent survey of 300 CMOs and their spending habits indicated only 27% of mobile advertisers have optimized mobile websites. In other words, companies shell out big money to attract mobile users to their site only to present a crummy, awkward user experience that drives potential customers away, all the while complaining that they aren’t seeing the conversion rates to make further mobile investment worthwhile. Even without mobile advertising, apps disrupt traditional business models in every major category - Content distribution (Knook), mobile commerce (Ubercab), and mobile productivity (Dropbox) all hint at new and lucrative cross-platform monetization strategies.
So where do tablets fit into the big picture? Advertisers see tablets as a unique canvas capable of beautiful, engaging ad campaigns. They outdo the rich, immersive experiences that print magazines provide, while maintaining the immediacy and intimacy of a website. It’s the best of both worlds.
Tablets provide a “lean back” consumption experience that often takes place in front of a television. The potential here is enormous – click through rates on tablets are highest during peak TV hours and advertising inventory is mostly sold out. TV advertising is expected to end the year at a record $68 billion and tablets may hold the keys to extracting some of that revenue.Despite rapid progress these last few years, the app economy is in its early stages. Distribution was solved a few years back, but mobile advertising is still in its infancy. There are plenty of problems to be unraveled and some helpful practical advice going around: Build around your users, measure your engagement by collecting as much data as possible, and stay away if you have high blood pressure.
-Andrew Greenstein
