Beware the Mobile-First Strategy
Fred Wilson started the meme of the month about way venture capitalists are much more rigourous about pure consumer plays in mobile offerings. The smart money--in fact, probably the only money--sits with products that don't lead with a free mobile service.
A lot of the failings in mobile-generated revenues lies with the low monetisation a company can make purely from advertising. People want free apps and they want free content and they depend upon free web services. But these same people don't click and purchase from the free advertising running alongside the content and services.
The internet is not free. Most mobile phone owners know that as they try to remain within the data limits of their operator-subsidised handsets. The revenues of app service providers show those mobile phone owners don't want to pay by clicking on advertisements that clutter up their screens.
I see a lot of poor targeting with the advertisement on the games, search screens and free apps I use. According to Vibhu Norby, "the ad-based services target lower-income and lower-education audiences because that’s where they make all of their money. To take the largest example, Google makes $30.00 ARPU (Average Revenue Per User) per year and charges about $1/click on average to advertisers. That’s 30 ads clicked per user per year".
In Europe, there's a lot of blowback against advertisers aggregating personal information. If my information was intelligently aggregated, my phone would prompt me when I was in the neighbourhood for bread-making machines, Homeland boxsets, and touchscreens. If ad-supported companies expect to grow, they need to harvest and leverage that data. And there's no way a start-up can aggregate that mountain of data. Without clever data aggregation, an ad-based start-up will never raise a second round from a VC.
The numbers are startling from Norby's mobile-first startup.
-- Out of 300,000+ downloads and 250,000 unique website visitors, 200,000 people have signed up. This means 60% of the audience are just window-shopping.
-- Because of the clutter in app stores, it's difficult to discover an app you need to buy.
-- "I have heard privately from an app maker with a 100m+ downloads that 50% of people don’t even open their app after downloading".
-- People who buy apps are hesitant to input additional details inside the app once they've established a user name and password. Even putting in an email address so they might connect with friends scares people away when trying to get new people on board.
-- "At best, we retain 5% of users through the entire onboarding process. Attempts to fix it have raised it only nominally".
-- I was one of the 10m people who downloaded Path, but Path has retained less than 200,000/users a day according to AppData. Its download rank in the Social category and see that it has dropped from 5 to 94. That’s anywhere between 2 and 4% retention and a couple hundred downloads a day.
-- Acquisition Costs. If you paid Google’s $1 CPC for people to enter your funnel, you’re really paying $20 per user and you will never recoup that cost. Norby's experience is very enlightening.
"Simply redesigning or reengineering mobile signup/onboarding is not enough because on mobile, you can’t deploy or react to user behavior fast enough to test a lot of things. Non-active users tend to only download big updates and those updates take a ton of development time. You can’t ship bugs because your rating will hurt. You also have already lost a potential user because there is no great way to tell a user that got lost in your funnel to come back and try your new funnel. The press is not going to write another article championing your new funnel. Company emails have tiny conversion rates to mobile no matter how sophisticated your emailing marketing tricks are. The user has already calculated in their mind how long it takes to go to the app store, find your app, download it, enter their password, open the app, and go through onboarding, and because it will take so long they simply won’t do it".
But when you switch the operating environment to the web, you get a different set of numbers. You also attract a tablet crowd running every operating system on the planet. We train HTML 5 web developers who can ramp up their code revisions quickly and cheaply. They can test and deploy changes fast enough to respond to community feedback. They aren't constrained by gatekeepers in the App Stores. They also go directly to your online presence by simply clicking on a link in an email or text message that you disseminate.
Things get really interesting when you put parameters on a download link. You can immediately see consumer demographics through Google Analytics and Statcounter when people act on the link. Plus it's easier to use the larger surface on a tablet or a laptop to interact with the download (i.e., bigger keys, easy tabbint, auto-fills operate elegantly).
Vibhu Norby has attracted a massive amount of comments about the dangers of mobile-first from developers and customers alike. I recommend reading his post and its comments. He makes the case for why "web companies can retain and acquire users easier, and the way to do that is through testing and the web’s ability to provide quick and perceivable value to a user". He explains how successful advertising-based companies must "innovate and iterate to approach zero set-up time, zero friction user actions, and a maximum viral factor."
And Vibhu also future-proofs his company with the coming regulation to online privacy. Those privacy concerns encourage him to bet on the web (and the mobile web) over a mobile app first in a company's strategy. His bet can be measured in revenue flows and in a smaller but incrementally growing audience share.
I believe he is on the right strategy. I don't think anybody will reject their favourite apps. I don't think people will return to the wired desktop environments of the last century. But I do think people will find greater utility in using a responsive web browsing experience on their mobile devices.
And you don't need an app for that.
Vibhu Norby -- Why We're Pivoting from Mobile First to Web First" on the Philosophically blog, November 27, 2012.with 1,530KUDOS
Bernie Goldbach teaches in a Honours Degree in Creative Multimedia that includes responsive web design.