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The news are finally out — Apple is buying Beats for 3 Billion Dollars. Headphone sales? Music streaming service? Wearables? Music label deals? None of the current Beats products look as a credible reason for a deal of that size. Something much bigger is going on. It is not about what Beats is today, but about what Beats can become in the future. To understand what Beats can become we need to understand Lady Gaga first. Lady-Gaga-the-business-model. Lady Gaga broke in with her August 2008 debut album, “The Fame”, and became an international megastar in a few short years. Gaga won Billboard magazine’s Artists of the Year title 2010, is ranked fourth in VH1’s list of 100 Greatest Women in Music, is the fourth best selling digital singles artist in US according to RIAA, is on Forbes magazine The World’s 100 Most Powerful Women list from 2010 to 2013, and was named one of the most influential people in the world by Time magazine. Lady Gaga was the subject of numerous business case studies, including one by Harvard Business Review (Anita Elberse, Michael Christensen) and Business Strategy Review (Jamie Anderson, Jörg Reckhenrich and Martin Kupp). What makes Lady Gaga special is her pioneering use of social media to build a loyal community of fans to “sell the artist” in what the music industry calls a “360 deal”. The “360 deal” is reminiscent of a VC investment model, where a label invests more money up front in exchange for a piece of merchandise sales, touring revenue and other earnings that artists had long kept for themselves. The HBR Lady Gaga (B) case study notes that as early as 2009 and 2010 Lady Gaga already had multiple consumer brand partnerships, including: Beats by Dr. Dre selling branded Heart Beats model of the $100 in-ear headphones as “undeniably unique” and likely to “attract fashionistas far and wide.” (The story is much bigger here than this specific deal.) Virgin Mobile sponsoring the U.S. tour dates of the Monster Ball tour. Polaroid, which appointed Lady Gaga as creative director for a special line of products that would be released in the coming years. MAC Cosmetics for which Lady Gaga joined 1980s pop legend Cyndi Lauper as the latest celebrities to feature in MAC Cosmetics’ Viva Glam advertising campaign. In 2011, Amazon launched a promotional campaign selling at a loss Lady Gaga’s album “Born This Way”, essentially subsidizing distribution of the new album. In an interview with The Wall Street Journal, Gaga was asked whether she believed that “Born This Way” was worth more than 99 cents. The answer is very telling: “No. I absolutely do not, especially for MP3s and digital music. It’s invisible. It’s in space. If anything, I applaud a company like Amazon for equating the value of digital versus the physical copy, and giving the opportunity to everyone to buy music,” she said. “It also wasn’t really 99 cents, because Amazon paid the difference on all of those purchases as part of their promotional campaign for one of their new services. I think it’s amazing and it was a really nice surprise and I felt honored that they chose my record to be part of it.” Troy Carter, who discovered Gaga and was her manager till November 2013 being widely credited for much of her business strategy sums it up nicely in his interview to FastCompany: “It was more about building a platform on top of music—because music, we realized, sells everything but music.” Gaga-the-business-model is a poster child of the new economics of digital era. Mike Masnik of TechDirt calls it the economics of abundance brilliantly explaining it in just minute and a half video here: http://www.techdirt.com/articles/20091020/1519476609.shtml. (Note that Mike accurately predicted the rise of the new business models in music well before Gaga’s business success became known.) Digital music is abundant (“It’s invisible. It’s in space” as Gaga puts it) and music industry whose business models were rooted in scarcity of vinyl records and later CDs were turned upside down by the need to deal with abundance of digital music. The good news, Mike says, is that for every abundance new scarcity is created. Gaga-the-business-model is an excellent example of how to benefit from these new scarcities created by the transition to digital. The business people behind Gaga also saw the missing link in the digital music value chain. This missing link is also a huge opportunity to fill the void going much further that “selling the artist” to the loyal fan base. In February 2013 Jimmy Iovine, Chairman of Interscope Records (Lady Gaga’s record company) and at the same time co-founder and CEO of Beats, gave very revealing interview to D:Dive Into Media. The most interesting bit comes in the Q&A section where Jimmy divulges his vision for BeatsMusic.com 35 min 15 sec in the interview (and it’s not about curation): “But there something else going on our service that doesn’t go on anywhere. We have to make it user-friendly to the artist. They have to be able to build businesses on it. They have to be able to have the information who is using their music, where they are… That has to become a business for the artist as much as communicating with their fans. Right now, they (music services) have all the information and the artist have no information. No one knows… I don’t know. I own a record company. I would die to know who bought my records on iTunes or bought my tickets on TicketMaster.” Jimmy Iovine sees the opportunity in changing the game and “building a communication between a fan and an artist.” In other words Beats Music is not yet another streaming service designed to sell music, but a platform for artists to build businesses and “sell everything but music” as Troy Carter says. That brings us all the way from Gaga to Uber, where Troy is an investor. Steve Schlafman from RRE ventures says in “Uberification of the US Service Economy”: “On-Demand Mobile Services (like Uber) deliver a “closed loop” experience by collapsing the value chain including discovery, order, payment, fulfillment (offline but within owned network) and confirmation.” In essence, Beats aims to become Uber of music by aggregating demand, connecting listeners to artists and empowering the artists to build thriving business on top of the platform. Much like Uber, which promises to end the era of poorly paid cab drivers. Or like Apple App Store, which connects users with app developers allowing them to build business on top of the platform. Pandora, Spotify, Play Music and Amazon that are all designed to sell music, will have very hard time to compete against a platform for building businesses on top of music. As Marshall Van Alstyne said in slightly underestimated way (pun intended): “There is a strong argument that platforms beat products every time.” The acquisition makes very good sense for both Apple and Beats. Beats gets the opportunity to kickstart network effects of the platform by bringing huge base of Apple users together with their credit cards to artists. Apple at the same time will benefit by bundling the music platform with its idevices, where the company makes most of its profits and badly needs to rejuvenate growth. (I don’t think Apple will prevent BeatsMusic service from being available on Android devices. Having best experience with most fresh music reserved for Apple users will do just fine. “Apple-first” strategy works very well for both most mobile app developers and Apple.) Interesting times ahead — As Troy Carter says in his interview to Guardian: “Hollywood, record labels and tech giants such as Apple, Google and Samsung face immense risks and opportunities. Everybody should be afraid right now. We saw what happened to Nokia and BlackBerry and Motorola. Nobody saw Android coming. Nobody saw the iPhone coming. Nobody saw Samsung coming. No one is safe right now. Everything is moving so quickly.” The music industry needs to brace for a deep and painful disruption, much like legacy taxi cartels and unions across the globe. Samsung needs to find a new source of differentiation after acknowledging defeat with its home-grown music service. Will health and wearables fill this void? Google will probably scramble to build a competitor to Apple/Beats refocusing YouTube Music from labels to artists. Amazon will need to find a solution if the company wants to stay relevant in the music distribution on which it relies for promotion. Of course we haven’t heard much of it from Apple or Beats, but Jimmy Iovine said to Re/Code following the announcement of the acquisition: “Obviously, we can’t talk about that, as you know. See, in the record business, you can show someone your song, and they don’t copy it. In the tech business, you show somebody your idea, and they steal it.” The strategy lesson from Apple and Beats is this: Look for opportunities to build platforms connecting consumers with value-adding complementors. (Think a “connect-ing business”, and not a “connected business”.) Capture value through bundling with the platform that will buy you hyper-growth driven by network effects and insurmountable competitive advantage. (And of course don’t tell anybody what’s you are up to before it’s ready.) #Apple #Beats #businessmodels

Samsung unveiled its vision on mobile health. The company wants to provide the “voice of your body” with two new intiatives: a sensor-packed Simband device for protoyping next-gen wearables, and the SAMI cloud platform that enables developers to generate insights from health data. The vision is spot-on when it comes to making software entrepreneurs the new heroes of health. Analyst Stijn Schuermans asks the question: what’s next for mHealth? It used to be that the coach on the field or in the gym had all the wisdom to make you fitter and healthier. Ever since Moneyball, coaches have had a serious competitor: data. This trend has started to snowball in recent years with the advent of smartphones, wearable fitness trackers and connected devices (from scales and heart rate monitors to blood glucose meters). Health IoT has moved from being a blue ocean market to red ocean status as competition increases. Fitness trackers, connected weight scales, sensorized running shoes… Already we see dozens of similar devices on the market. For example, Amazon.com shows 1,000+ results in the pedometer category; it lists products from Fitbit, Jawbone, Nike, Basis, Omron, iHeart, Striiv, Misfit and about 50 other known and less known brands. Even if many of these are not yet connected, they will be soon. [tweetable]The current wave of health and fitness related IoT devices is just the beginning.[/tweetable] Once these devices become commonplace, what’s next? From coder to coach: the role of software entrepreneurs in mHealth It is well understood that the trend to approach fitness with devices and data will have far-reaching consequences for sports coaches, dietologists and medical professionals alike. If those professions want to remain the heroes of health in the future, they’ll need to partner up with new players in the game: software developers and data scientists. [tweetable]The wheels are already in motion when it comes to making sense of health data.[/tweetable] There are already over 50K health apps on iOS and Android that help people to get fitter, increase their wellness or manage their disease. Insurance players like Aetna are working actively to get a full health picture. Their Carepass initiative helps their customers to get a full picture of all their app and device data in one place, and to set and track health goals. Propeller Health is combining IoT with environmental data to help patients to better manage asthma. What’s being done for the developers who make all those apps? Programmable Web lists 100+ health APIs. Most of them are between 1 and 3 years old and will have matured quite a bit already. Companies like Human API and Validic provide middleware for health data, making it easier for software entrepreneurs to build interesting applications. Another company that has clearly understood the message is Samsung. Their “voice of the body” concept is spot on. With today’s announcement of the SAMI platform they’ve taken a big step in enabling developers to make sense of data. SAMI, an unwieldy acronym that stands for Samsung Architecture Multimodal Interactions, is described as an open cloud-based sensor data platform that helps developers to go “from big data to contextual insight”. [tweetable]IoT and wearable will win by communities of software entrepreneurs that will make sense of all the data they generate[/tweetable] and help you improve your health, no matter what your current level of fitness is. The smartest of these entrepreneurs will combine data from many sources to arrive at the best possible recommendation or diagnosis. Platforms like Human API or Samsung’s SAMI will make that possible. Incidentally, Samsung has signaled clearly today that developers and entrepreneurs are crucial to the future of mHealth. Developers being involved long before a consumer-ready device is available – the same developer-first strategy that Google followed with Android or, say, Google Glass. The Korean electronics giant is also putting its money where its mouth is: it will invest a handsome $50M in a Digital Health Challenge to stimulate innovation within the global developer ecosystem. Next stop: users Samsung’s Voice Of The Body announcements illustrate the evolution in IoT maturity nicely. First come sensors and devices, represented today by the Simband “investigational device”. (Simband is a wristband packed with novel sensors to measure your body. It’s more of a reference design rather than a commercial product.) Then, empower hardware makers, developers and entrepreneurs to experiment with the new technology (via Simband) and with the data it generates (via SAMI). Samsung obviously hopes that this will result in more component sales. But before that will happen, a final piece in the puzzle needs to fall into place. Simband and SAMI, despite all the talk about developer-entrepreneurs, are still very much focused on solving technology challenges. The aim is to reduce the cost and complexity of building valuable applications. What’s missing is a vision on how to connect these developers and their apps to the users who needs them. Where will the demand for wearable health sensors and health apps come from? We can draw an analogy with smartphone platforms. The Android ecosystem consist of a software platform (the Android Open Source Project, or AOSP), plus the Google Play app marketplace and a set of critical apps and APIs (more in our Naked Android article). AOSP is open, the Play store and Services are tightly controlled by Google, as they represent the connection with users. Demand for Android phones is driven by Android apps, which are built with Play APIs and available on the Play store. [tweetable]The SAMI platform represents the AOSP of wearables.[/tweetable] The equivalent of the Play services is nowhere to be seen (yet). The crucial question for Samsung and other players in the space is this. Will they stop at technology? Or will they continue to evolve into a full-fledged computing platform and ecosystem that connects users with a community of software and hardware entrepreneurs? Interestingly, more so than almost any of its competitors, Samsung has a large amount of existing users that could be connected to valuable health solutions. If Samsung pulls this off, they have an opportunity to start the network effects that will eventually lead to a winner-takes-all outcome. [tweetable]Will Samsung seize the day in IoT and create the next dominant computing platform?[/tweetable] What do you think? #developers #mobiledeveloper #samsung #wearables

When Facebook was first listed on the stock exchange in 2012, investors were concerned. Had the company missed the mobile wave? 5 years after the launch of the iPhone, most of Facebook’s revenues still came from desktop. Zuckerberg’s team recovered. Today mobile already represents 60% of revenues, and Facebook is about to double down. Apps will become a central part of the social network’s monetisation of mobile. Stijn Schuermans shines a light on Facebook’s new mobile developer strategy. Two years ago we wrote that Facebook was a prime candidate to become the leader of the mobile web; the one who would take care of the missing platform ingredients (reach, discovery, monetization). It should come as no surprise then that over the past year Facebook has shown a renewed focus on helping developers to build – grow – monetize their apps across all mobile platforms. Zuckerberg himself called it the cross-platform platform in his keynote speech on f8. We couldn’t have said it better ourselves. The mobile platforms of Apple and Google became so successful because of the large amount of apps that they drew in. For developers, however, this meant heavy competition, few opportunities to stick out and a difficult environment to build a business on. [tweetable]Facebook now positions itself as the developer’s partner that helps to de-commoditize apps.[/tweetable] Facebook can lure mobile apps to its own camp by enabling developers to compete better. Apps will depend on Android and iOS to become available on the majority of handsets, and on Facebook to reach users, get discovered and make money. Three aspects of Facebook’s strategy warrant a closer look. Facebook builds a Mega-SDK Facebook knows developers very well – hacker culture is deeply embedded in the company’s DNA. [tweetable]Facebook is now extending that developer DNA beyond company boundaries[/tweetable], just like Amazon has expanded its cloud operations DNA outside of the company by commercializing its Amazon Web Services (AWS). “Unlike their past developer efforts, which were all about pulling content onto Facebook, this year was about pushing Facebook’s infrastructure out into all kinds of mobile apps”, as Ben Thompson put it. It is a very natural way to empathise and connect with the developers who will build complements to Facebook and Amazon’s core businesses. How is Facebook going to entice mobile developers? By building one of the first true Mega SDKs. [tweetable]As we predicted last July, Facebook’s Mega SDK will be built around app marketing services[/tweetable]: analytics (relevant acquisitions include Parse, Monoidics, Little Eye Labs, Airlock) promotion (more than 350 million app downloads through mobile app ads to date) re-engagement (Engagement Ads were announced at f8) monetization (the new Audience Network) Half a dozen acquisitions in the past year, new products and a new developer incentive program (FbStart) all say that mobile developers are becoming incredibly important to Facebook. Although we have to stay careful of course: Mike Mace correctly points out that Facebook in the past has shown predatory behavior (incorporating 3rd party apps into the core product) and neglect for developers. Digital identity is Facebook’s essence Facebook’s new anonymous login and privacy features are not just about soothing the privacy pundits and the company’s most vocal users. They point to a deeper reality: digital identity is at the core of everything Facebook does. [tweetable]Facebooks needs developers to make the Facebook digital identity ubiquitous across web and mobile[/tweetable]. The social network giant does that by reducing sign-up friction on the user side (hopefully also making developers more comfortable with integrating Facebook login). Social login was also a main feature of Parse. Several other highlights at the f8 conference (Send to Mobile, the mobile Like button, even Applinks) make most sense when viewing them as ways to increase the value of a Facebook login relative to a proprietary identity, another social login provider, or no identity at all. [tweetable]Why this focus on identity? Because it’s crucial for Facebook’s survival[/tweetable]. A study from early 2014 claims that Facebook is about to lose 80% of its users, drawing a parallel with infectious diseases that spread, then flare out. Whether or not that comparison holds water, identity is a powerful antidote to this scenario. If users don’t just use Facebook as their social network, but also to access scores of unrelated services, then it will be hard for users to drop Facebook entirely. The company will still have to work hard to keep users active and engaged, but it will have an opportunity to try. And, not to forget, Facebook gains a treasure trove of user behavior data that will reach far beyond its own services. It was no accident that identity was the first item on the “cross-platform platform” list in the graph above, before social. On the web, Facebook also accounts for more than half of all social logins. It fully intends to achieve the same in mobile. The company’s future depends on it. Facebook wants to become “Google for mobile” Facebook and Google are mortal enemies, because they have the exact same business model. Create value for users by developing a score of valuable services (most of them free to use), and enlist developers to create thousands more. Deliver that value across all digital devices; on the web and on mobile. Capture value by selling user reach, engagement and hyper-targeting to advertisers. It is no wonder then that there are many similarities between both companies. Facebook is taking that similarity to the next level with its new products. The Audience Network is the AdMob of Facebook. It aims to become the key competitor for Google in mobile advertising. But the boldest move is Applinks. [tweetable]In the most optimistic case, Applinks will allow Facebook to build the PageRank of mobile[/tweetable], a head-on attack on its arch rival. (Facebook has already kindly offered to host an index of all applinks.) At worst, Applinks can substantially boost Facebook’s app install business (CPI) through affiliate marketing schemes, earning revenue on each referral. That supports the Mega SDK for developers as well as Facebook’s own income statement. #crossplatform #facebook #mobiledeveloper #developers #appeconomy

We’re happy to announce the winners of the prize draw from our April/May developer survey! A big thanks to everyone who took the survey – results will be out in July, available for download from DeveloperEconomics.com, as usual. Here are the prize draw winners: – Galaxy S5: Emil Izgin (@ocjdev), Russia – Lumia 930: Marius Hergel, Norway – BlackBerry Z30: Luke A. (@lukeja) – Sphero: Harry M. – Lego MindStorm: Cristiano Sarti (@CristianoSarti) – Raspberry Pi Starter Kit: Stratos Botsaris (@polydefkis12), Greece – Das Keyboard: Daniel Midi (@danielmidi), USA

We’ve just published our latest research report. App Economy Profits examines how choices in the app economy affect profitability and the profile characteristics of the profitable vs. the loss-making app businesses. Find out more: https://www.visionmobile.com/product/app-economy-profits/

The app stores contain a range of apps from hobbyist creations built for fun to the carefully crafted output of venture backed startups and mega-corporations that have had millions of dollars spent on their development. Even though the market is maturing and exceptionally well-funded developers have taken over the store charts, the occasional small independently developed app that goes viral can still break through and achieve a decent level of success. The question is, how likely is a small budget developer to succeed? What platforms give them the best chance of success? Where should the budget be spent? With all the competition out there, how much does a bigger budget improve your chances of turning a profit? What are the odds? In order to look at how budget can impact profitability it’s worth calibrating by the average chances of making a profit on each platform. The figures in this chart are probably more positive than most industry observers would expect. Looking at the data it seems likely that many solo developers have valued their time at zero when reporting costs. For hobbyists and explorers, working in their spare time this might make rational sense. They don’t expect to be paid for the time anyway and their small app profits more than cover their other development costs. This is reflected in the slightly lower level of Android developers losing money versus iOS (there are far more hobbyists on Android than iOS). Leading platforms On the most popular platforms – iOS, Android and HTML5 – there’s a general correlation between spending more on an app and making more revenue. However, not all spending produces equal results. Spending more on development only slightly increases the chances of making a profit, while increased spending on design and marketing are strongly correlated with higher probability of making significant profits. Higher spending on customer service is almost always associated with greater profit probability but here the causation is almost certainly in the other direction; successful apps incur greater customer service costs because they have a lot of customers! These platforms show very similar patterns but they aren’t identical. The biggest difference between them is that spending more on design for HTML5 apps seems to produce much less of a boost to profit probability than for either of the leading native app platforms. The second tier BlackBerry 10 and Windows Phone show similar patterns of spending versus profit probability that are very different from the leading platforms. For small amounts of spending, there are similar patterns to the leading platforms. More investment, greater chance of a profit, with better returns from design and marketing spend. However, before reaching a level that would sustain a full-time designer or developer, the trend reverses; investing large amounts in any aspect of apps for these platforms reduces the probability of a profit and increases the chances of making a loss. This suggests that these platforms have not yet reached sufficient scale in terms of app revenues to sustain many highly complex or polished apps. Opportunities everywhere On the leading platforms, developers with budgets in the multiple thousands of dollars a month have roughly twice the chance of turning a profit on their apps as those spending minimal amounts. Even at lower spending levels, the probability of breaking even or better is reasonably high across all platforms, particularly for those investing in design and marketing. While it’s clear that only some of the platforms discussed above are likely to support scalable app businesses at the moment, there are plenty of opportunities to build profitable apps on any these top 5 platforms. Want to know more? I’ve only scratched the surface of our data here. What scale of profit or loss can be expected on different platforms with different levels of investment? Are there optimal investment levels to maximize the chances of success? Which app categories are most likely to product a profit. What do successful app development companies look like at different sizes? All this and more is covered in our App Economics report. #revenues #mobileplatforms #apprevenues #profits #developersegmentation

[In the first part of this two-part blog post, we introduced a second tidal wave of mobile ecosystems (after Android/iOS), mobile-first and twice over-the-top (OTT²): messaging apps. OTT² ecosystems drive engagement by commoditizing hardware, apps and services. In part 2, Stijn Schuermans explores the unexpected way in which the engagement from messaging apps is monetized. (Hint: it’s not advertising.)] In the first part of this two-part blog post, I introduced a second tidal wave of mobile ecosystems (after Android/iOS), mobile-first and twice over-the-top (OTT²): messaging apps. Messaging apps are proving to be so much more powerful than just chat. While most apps are just value-adds for iOS and Android, messaging apps are the first that can create a substantially new mobile landscape. They are important not just because of their market momentum of 100s of millions of users, but because they build on asymmetric business models, the same economics that brought Apple and Android to their dominance. By definition, a company with an asymmetric business model creates (and sometimes destroys) value in one vertical, in order to capture value in its core market. For example, Google commoditized handsets by providing the Android OS for free in order to defend its advertising business. So what is the core business of messaging apps that is being boosted? The surprising core business of second-wave mobile ecosystems [tweetable]The dominant business model for OTT² messaging apps is – perhaps unexpectedly – not advertising, but m-commerce[/tweetable]. With messaging apps, the business model focus shifts from selling the app (up-front or using in-app payments) or selling the audience (via ads) to selling goods through the app. The business model entails the promotion and sale of virtual goods (stickers, mobile games, apps), physical goods and services (like taxi rides, as explained in part 1 of this post). Mark Watts-Jones offers this handy overview of how messaging apps make money: Let’s take a closer look at some examples. WeChat’s revenue About 85% of the $1.1B that Tencent’s WeChat app will earn this year will come from online gaming, estimates The Economist. The rest will come from stickers, services like sponsored accounts, and the fast-growing area of m-commerce. Already merchants are selling goods via WeChat as diverse as fruits, smartphones (150K Xiaomi phone in 10 minutes), movie tickets, taxi rides and insurance against malignant tumors. You can pay at vending machines with the app. Entire books have been written about how to do marketing on WeChat. Line’s revenue Games accounted for 60% of the $338M that Line made in 2013. Another 20% comes from sticker purchases and the rest from business services like official accounts and branded stickers. Line has been actively testing the e-commerce waters with flash sales, hot deals and the Line Mall marketplace. Messaging and e-commerce in investments Investment activity gives another view on how crucial m-commerce is as a revenue model for messaging. Viber was acquired by Japan’s e-commerce champion Rakuten. Alibaba, China’s king of online sales, invested $215M in Tango. In the other direction, Tencent has invested in JD.com, another large Chinese e-commerce player. Also somewhat surprisingly, the innovations in this business models don’t come from US entrepreneurial hotspots like Silicon Valley or Boston. It is Asian companies that lead the way. The subscription model of WhatsApp (prior to its acquisition, at least) is the exception, not the rule. The dominance of m-commerce makes sense While advertising is certainly a popular and straightforward choice when monetizing user attention, the prevalence of m-commerce in messaging apps should actually come as no surprise. First, consumers are increasingly comfortable with buying on their mobile devices. Mobile now accounts for a quarter of e-commerce traffic, a fast-growing category by itself. On the web, e-commerce is a trillion-dollar industry, an order of magnitude larger than advertising (which broke the $100B barrier in 2012) and dwarfing other revenue models like gaming, gambling, SaaS or media streaming. We can expect the same to happen in mobile. In fact, many retailers see a substantial amount of their online audience coming from mobile devices. Counterintuitively, this growth of mobile retail might accelerate as more people in emerging economies come online. Connie Chan from Andreessen Horowitz says that in third and fourth-tier cities in China, for example, traditional brick-and-mortar retail infrastructure like shopping malls might not exist, leaving m-commerce as the more convenient option. For app developers, m-commerce is a good choice, too. e-Commerce and affiliate programs are among the highest-grossing revenue models for mobile developers, dwarfing the median revenues that developers can expect from ads or even in-app purchases. It’s no wonder then to see significant investments in mobile commerce. David Marcus, Paypal’s CEO since 2 years, has made mobile a strategic priority for the company and (as a former founder of mobile payment company Zong) has in fact been selected by eBay’s executives to do exactly that. Tencent, being of the protagonists of this story as the company behind WeChat, has recently made investments worth hundreds of millions of dollars in e-commerce companies like JD.com, Dianping (often referred to as China’s Yelp) and E-house (real-estate). m-Commerce has been hailed as the next big thing for many years – these investments indicate that things are finally starting to move in a significant way. Developers are catching on The m-commerce megatrend, especially in OTT² ecosystems, has not escaped the attention of mobile developers. [tweetable]Messaging ecosystems are fast becoming a major channel for the discovery and promotion of apps[/tweetable], a long-standing pain point in iOS and even more so Android. Look at the recent move by Tencent to enable app downloads from WeChat. It capitalizes on the trust inherent to social referrals (in earlier editions of Developer Economics, Facebook was highlighted as a main app promotion channels for the same reason). It might also tip the balance to Tencent’s own app store in a country where Google Play is mostly absent and a plethora of app stores compete for attention. The high earnings potential of m-commerce for developers is also translating in fast-growing adoption. In our Developer Economics research, we found that e-commerce sales grew significantly in popularity as a revenue model from 5% in Q3 2013 to 8% in Q1 2014. The role of app makers is changing from Developer-as-a-Programmer to Developer-as-a-Salesperson. The mobile success recipe In summary, a clear recipe is emerging for the next giant tech companies in the age of mobile. First, use ecosystem economics to create value for your users, and don’t be afraid to subsidize or undercut adjacent market arenas if that helps to boost traction. The network effects in your ecosystem will help to solidify your competitive position and make it difficult for others to attack you, including the carriers and operating systems on which your platform is built. Next, use the highest-earning revenue model on both the web an in mobile to monetize: e-commerce. Any app that succeeds in doing this, messaging or not, will have a bright future ahead. #mau #weixin #line #overthetop #viber #mcommerce #wechat #mobiletrends #kakaotalk #Tango #whatsapp #asymmetricbusinessmodels #messagingapps

[What if cars were like mobile phones? There are some eerie similarities between the approaches of car makers in 2014, and operators and handset makers in 2008. Will car makers be disrupted in the same way that the mobile industry was? Senior analyst Stijn Schuermans shares his feeling of deja-vu.] “Cars are the biggest and oldest mobile devices. We are the face of mobility. We’ve been around for over a century. But we welcome the competition from newcomers like Apple and Samsung.” — paraphrasing John Ellis (Head of Ford’s developer program) at CES 2013 Let’s entertain that thought for a moment. What if cars were like mobile phones? At the moment, they would be like the feature phones of yesteryear. Today’s mainstream cars have 4 “apps”: driving from A to B (obviously), climate control, music (AM/FM radio, CDs, and more recently internet radio) and GPS navigation.Feature phones in 2008Cars in 2014TelephonyDrivingTextingClimate controlContactsGPS navigationCameraMusic In fact, this is not the only parallel we can draw between these two industries, as car makers are betting heavily on the concept of apps in the car. There are some eerie similarities between the approaches of car makers in 2014, and operators and handset makers in 2008. We’ve listed some in our latest report: “Apps for connected cars? Your mileage may vary”. QNX is the new Symbian. Genivi is the new LiMo. Windows Embedded Automotive is the new Windows Mobile. Just like mobile operators in 2008, car makers are very hopeful that apps under their control will bring significant new revenue streams from value-added services. Developers are named “partners”, but it is clear that car makers (as were telcos) are mostly see them as suppliers of content and treat them accordingly. (For the full list, take a look inside the report.) How mobile was disrupted Can we use this insight – car apps are just like mobile, shifted in time – to predict the future of the car app market? In our report “The Telco Innovation Toolbox” (2 years old, but still highly relevant), we showed what has happened in the mobile industry. From the 4 “most wanted” apps of the feature phone days (according to market research acquired at great expense, no doubt), we went to smartphones with now over a million apps, encompassing every imaginable user need. Service distribution and industry power shifted from telcos to mobile platforms: Android and iOS. Fundamentally, the basis of competition in the mobile industry shifted from reliability and scale (which network has the most bars) to choice and flexibility (which handset has the most apps). This wealth of applications unlocked a user demand that far exceeds that of a selection of “best” or “most important” features in a product designed by a single organisation. The same shift in cars? Can the same shift happen for car apps? Will the basis of competition for car makers change from reliability and scale in the production of cars and infotainment systems, to choice and flexibility of in-vehicle and out-of-vehicle services that will unlock new user demand? We believe it can, and it will. Already car makers like Ford and General Motors and over-the-dashboard players like Mirrorlink, Apple, Google and most recently, Microsoft are working towards app platforms for cars. The introduction of Apple’s CarPlay, Google’s Open Automotive Alliance and Microsoft’s Windows in the Car seems to herald a tipping point in the industry. Here are players that have a deep expertise in fostering vibrant ecosystems, in building developer communities and in enabling developers to add value. There is now a realistic and acute possibility that these new entrants will sweep away the existing car app platforms with a dominant, over-the-top solution, just as they did in the smartphone world. In short, car makers should take the following statement as a heads-up: I want to buy Carplay. I don't really care that much about the vehicle around it. — Dave Pell (@davepell) March 16, 2014 Now you know what’s at stake. Find out how the car industry is changing and what to do about it. Our full report on automotive developer programs is available as a free download. #ecosystems #disruption #WindowsEmbeddedAutomotive #GeneralMotors #qnx #developerprograms #google #Apple #platforms #automotive #carapps #connectedcar #CarPlay #MirrorLink #WindowsintheCar #microsoft #Genivi #OpenAutomotiveAlliance #devices #Ford

We just launched our new Developer Economics survey! If you’re an app developer, take the survey and help shape the opinions of Microsoft, Intel, Nokia, Amazon, and many others reading the reports from this survey – and win some cool prizes while you’re at it! The findings will be released as a free report in July. The 7th edition survey explores some key trends: How are challenger platforms moving up? Is HTML5 in decline? Who is making most money? What language do most devs use? What are the trending tools of the trade? Participants will enter a draw for some cool handset prizes: an iPhone 5s, a Galaxy S5, a Lumia 930 and more. If you’re also a VisionMobile panelist (or join the panel), you’ll get the chance to win a Lego Mindstorm robot, a Raspberry Pi Ultimate Starter Kit, a Das Keyboard or a Sphero! Take the survey

[Andreas Pappas shares our latest findings, from our Business & Productivity Apps report which takes a look at developer opportunities created by emerging trends in enterprise mobility (such as bring-your-own policies and mobile SaaS) and professional and vertical app markets (e.g. healthcare apps). This market was worth $28 billion in 2013 and is set to grow to $58 billion by 2016.] [Want to help us with data for our reports? We’ve just launched our latest Developer Economic survey – take the survey and have your say on the latest trends] [tweetable]Apps are changing the way people communicate, work and play[/tweetable]. App development has grown into a huge industry, that we estimate to be worth $67 billion in 2013. We expect the app economy to more than double in size by 2016. Most of the publicity and media spotlights currently fall on superstar consumer apps like Angry Birds or Candy Crush Saga and communication apps like WhatsApp. These success stories have certainly highlighted the massive scale and revenue potential of mobile apps, reaching from zero to tens of millions of users in record-breaking time. At the same time, a growing audience of prosumer and business users depend on Box, Evernote and Trello to help them be more productive in their work. Enterprises are now allowing employees to use the apps they love at work, inside the corporate Intranet. Organisations of all shapes and sizes are integrating mobile apps within their business processes. This mobilisation creates a demand for off-the-shelf or custom mobile apps and services, translating into new and bigger opportunities for mobile app developers. Most app developers currently target consumer app markets (think games and lifestyle apps) but they could be missing out on opportunities in the enterprise (aka business & productivity) market. Our research indicates that the business & productivity app market, is not only growing at approximately the same rate as the consumer app market but is also less congested, and offers better revenue potential, for more developers. Read the report to find out more. Consumer vs. Enterprise & Productivity apps: how do revenues compare App publishers that target business and productivity markets have a much better chance of generating sustainable revenue than those targeting consumer markets, with just 32% of them below the “app poverty line” ($500 per app per month) compared to just under half of consumer-focused publishers (48%). At the same time, [tweetable]publishers that target businesses or professional users have a much higher chance to generate very high-revenues[/tweetable]: 16% of those targeting the business & productivity market generate revenues exceeding $500,000 per app per month, compared to just 6% among consumer-focused publishers. While consumer apps and particularly games (e.g. Angry Birds, Candy Crush Saga) can generate extraordinary revenues, it is quite clear that this is not the case for the vast majority of developers that target consumer markets. Business & Productivity apps allow developers to build a sustainable business around more solid business models with recurring revenues from a loyal customer base. As bring-your-own policies and enterprise app stores become increasingly popular among businesses, the market and the opportunity for developers is likely is set to expand in the next three years. Which platform should you prioritise if you build business and productivity apps? While Android is dominating the consumer market in terms of market share, iOS maintains a healthy lead among professional and business users. Data provided by enterprise cloud content platform Box, indicates that 94% of their tablet users are on iPads, while enterprise mobility management services provider Good Technology indicates that 54% of enterprise smartphone activations came through iPhone devices in Q4 2013. It is clear that Apple has an edge in the business device market and this is also reflected in revenues generated via iDevices: VisionMobile estimates that revenue generated via iOS devices accounts for at least 60% of the total revenue in the business and productivity market. For developers that target the business & productivity sector it makes sense to prioritise iOS for development over the other platforms they develop for. However, there are several considerations to take into account such as integration with existing enterprise services, which may call for an HTML approach or the specific market that you target. Where are the opportunities in the enterprise app market? There is an inherent unpredictability associated with the future use of apps and it is exactly this unpredictability that empowers developers to create innovative apps that continue to redefine whole markets and industries. Nevertheless, we can still identify a number of areas that currently attract considerable attention among businesses and where we see future value being unleashed in the business & productivity market: Vertical apps Specialised industry apps such as healthcare, real estate, finance or automotive. Vertical specialisation provides a great opportunity for differentiation and for building strong brands as the app economy diffuses into every single industry. Existing industry stakeholders can leverage apps as a differentiation strategy against “un-apped” competitors, integrating apps and exposing APIs across their product offerings. For independent developers, specialisation is a means to capture a niche and survive the discoverability labyrinth. Productivity/BYO Apps that cross the boundaries between private-use and work-use, such as storage, lists, calendars, office-type apps are key drivers behind the consumerisation of enterprise IT. Once into an organisation or an enterprise app store, such apps can spread rapidly within organisations. Mobile SaaS Software-as-a-Service, delivering CRM, HR, ERP, BI services to small businesses and large enterprises is a booming sector. Mobile apps extend these capabilities much further by allowing anytime/anyplace access to these core business services. Custom apps/services Bespoke mobile solutions delivered outside of app stores will continue to take the lion’s share of revenues within the business and productivity app market. As we discussed, the dominance of this model will erode during the next few years as app store purchases increase among enterprises. MDM/MAM Apps and services that tackle security and complexity of the decentralised IT department are already essential for any enterprise that adopts BYO policies. More sophisticated app & device management models, that tackle some of the key issues associated with this trend (e.g. managing private/work services, remote deletion of work content) will continue to be hot areas in the next few years, catering to an increasing number of use cases. Download our free “Business and Productivity Apps” report to find out more about the developer opportunity in this market and the reason you should be developing business and productivity apps. Have your say in Developer Economics research Help us continue bringing you great insights about the app economy and app development. Take part in our 7th Developer Economics survey that is launching today! Help us break our earlier world record of 7,000 app developers that took our 6th survey. Take part, spread the word, win prizes and help us do great research ! #appeconomy #businessandproductivityapps #enterpiseapp #marketforecasts

[The mobile space is about to be shaken up again. Get ready for the second tidal wave of mobile ecosystems to reshuffle the market. These powerful new ecosystems are mobile-first and twice over-the-top (OTT²): they are built on top of telco services and on top of app platforms.] It’s 2014. We’re 6 years into the smartphone revolution, and the mobile space is starting to settle down. iOS and Android are clearly in the lead among app platforms – their ecosystem strategy has created a natural duopoly in which competing platforms no longer stand a chance. Smartphone innovation is no longer radical, but mostly incremental. There are signs that smartphone users are becoming overserved by the latest and greatest flagship devices: smartphones are becoming “good enough” as such and undifferentiated for mainstream users. But things are about to be shaken up again. [tweetable]A second tidal wave of mobile ecosystems is gaining strength, ready to thoroughly reshuffle the mobile market once more[/tweetable]. These powerful new ecosystems are mobile-first and twice over-the-top (OTT²): they are built on top of telco services and on top of app platforms. I’m talking about messaging apps of course: WhatsApp, Line, WeChat/Weixin, Viber, Telegram, KakaoTalk, Kik. Gaining momentum [tweetable]Messaging apps are proving to be so much more powerful than just chat[/tweetable]. Even well established social networks and ecommerce giants are getting nervous enough to make high-value surprise acquisitions (we’ll talk about Facebook in a moment). The first indicator of their momentum is the sheer size of their user bases. Tango, considered to be a smaller player, has 200M registered users and 70M monthly active users (MAU). Wechat has passed 350M MAU, WhatsApp has over 450M MAU. Chat apps don’t just get downloaded often, but they are incredibly engaging. A large share of engagement minutes is going to staying connected with friends, family and business partners, and chat apps are increasingly the way to do so. Chat messages overtook SMS in global message volume in April 2013. In essence, the rise of messaging apps relegated telcos as a group to the status of just another communication ecosystem. Investors agree when it comes to their value, if we can believe the recent M&A, IPO and investment activity. WhatsApp was acquired by Facebook for $19B Viber was acquired by Japanese e-commerce player Rakuten for $900M in cash Tango received a $280M series D investment, including $215M from China’s e-commerce king Alibaba Line is rumoured to prepare for a $28B IPO KakaoTalk is also preparing for an IPO, aiming at a $2B valuation Unfair advantage [tweetable]Messaging apps are important because they build on asymmetric business models, the same economics that brought Apple and Android to their dominance[/tweetable]. They are subsidizing or commoditizing hardware, apps and services to grab users and boost their core business. The first examples of this are already evident. Messaging apps are of course commoditizing the quintessential telco services: voice and texting. Whatsapp announced a VoIP play. Even large operators in emerging markets with incomplete mobile penetration like China Mobile are reporting financial performance challenges, citing competition from chat apps as the reason. Tencent (known from the wildly popular instant messenger QQ and chat app WeChat) and Alibaba (China’s e-commerce champion) are fighting their battle for user acquisition and engagement in the most unexpected of places: taxis. Not only have Tencent and Alibaba both invested in taxi hailing apps (DiDi and Kuaidi respectively), they are both actively subsidizing taxi rides by giving discounts if users use their apps. The mini price war is so intense that in some cases, users actually get paid when taking a taxi. Apps like Line and Tango are taking a page from iOS and Android’s playbook, using game developers and content providers to add value to their platforms. With this “user landgrab” and high engagement, messaging apps are competing with the telco services and app platforms on which they are built, who are trying to achieve the same reach and share of attention. [tweetable]While most apps are just value-adds for iOS and Android, messaging apps are the first that can create a substantially new mobile landscape[/tweetable]. So what is the core business of chat apps that is being boosted? We’ll discuss the surprising dominant revenue model of social apps in part 2 of this post. Stay tuned! — Stijn #mau #weixin #line #overthetop #viber #wechat #mobiletrends #kakaotalk #Tango #whatsapp #asymmetricbusinessmodels #messagingapps

Business and Productivity Apps is a research report that explores the emerging enterprise app market and uncovers untapped opportunities for developers. The report identifies trends and opportunities in the enterprise app market, forecasts developer revenues and estimates the size of the market to 2016. You can download it for free here: https://www.visionmobile.com/product/business-productivity-apps/

Here’s our latest report, investigating the apps for cars market! What does it take to develop apps for connected cars? How can car makers learn from telco mistakes when dealing with mobile disruption? Find out, on our Apps for Connected Cars report: https://www.visionmobile.com/product/apps-for-cars-mileage-may-vary/

There used to be a time when developers worked hard to make their apps compatible with devices. [tweetable]Nowadays, device makers are working hard to make handsets and tablets compatible with apps.[/tweetable] Amazon built the Kindle Fire on the Android Open Source Platform in order to leverage Android’s developer ecosystem and adding value only in the missing parts of Android. BlackBerry built a “runtime for Android” into its BB10 platform in an attempt to close the app gap with its main mobile OS competitors. Jolla used a similar tactic in its Sailfish OS. And now Nokia has produced an Android phone, the Nokia X, against all expectations considering their focus on Windows Phone over the last years and the acquisition by Microsoft. The Nokia X is positioned as a low-end “stepping stone” device relative to the Windows Phone based Lumia range. How did this flip of fortunes come about? Why supporting Android apps is becoming a must Apps used to be bite-sized additions to the functionality of the mobile device; individually unimportant except for a very small number of key apps. [tweetable]The bargaining power of app makers is clear from the financial results of developers – that’s to say: near zero.[/tweetable] Six years into modern smartphone platforms, a full 60% of developers are still below the “app poverty line”, i.e. earn less than $500 per app per month, according to our latest Developer Economics survey (download the full Q1 2014 edition for free). However, apps in aggregate have now become a must-have and a big driver of competitive positions. It’s no longer enough to build your own app ecosystem, or even feasible for that matter. iOS and Android form a de-facto duopoly that is impossible to compete against. [tweetable]To survive as a mobile device maker you need to tap into Android’s app base[/tweetable] (as iOS is closed for other device makers). To convince consumers to buy your device, you need apps. Not just any apps, mind you. The hot apps of the moment (they usually are found on iOS first, Android second), as well as a long tail of apps catering to every imaginable use case. They need to look good and be fully featured too – lowest common denominator apps won’t do if you want to put a device in the market. To convince developers, you need to deliver many users at low development effort. The best way to do that is to produce an Android-compatible device. The second best way is to bet on HTML5 with many good cross-platform tools and advanced APIs – something that both Blackberry and Windows Phone have struggled with as well. A good long-term strategy? Both on the user and on the developer side of the ecosystem, device makers will fight a serious uphill battle if they don’t support Android. But is supporting Android a good strategy for Amazon, BlackBerry or Nokia in the long term? For players like Amazon and possibly Nokia who add value on top of Android, the move is in principle sustainable. As we explained in an earlier article: you don’t need to make an OS to win in mobile. Amazon and Nokia are basically replacing Google’s cloud services with their own (and in Nokia’s case: Microsoft’s), and use the Android OS for all the rest. This enables them to add value where it really matters, i.e. where Android and Google are weak. In Amazon’s case it’s crystal clear: the e-commerce giant leverages its promotion prowess and credit cards on file to help app developers monetize better. Device makers who try the Android compatibility approach can still lose out to fragmentation however. We argued in the Naked Android article that only a few companies in the world have the clout with developers to convince them to spend the effort on replacing cloud service APIs. GlassBoard developer Justin Williams illustrated that perfectly in his recent post, where he muses on whether or not to adapt his app to the Nokia X. (Short answer: he won’t.) [tweetable]For Blackberry and Nokia-X-as-a-stepping-stone-to-Windows-Phone, there is little hope that supporting Android will get them out of the slump.[/tweetable] They might attract opportunistic developers looking for a few extra users, but those developers are not likely to add to the momentum of the Blackberry and Windows Phone ecosystems. “Moving up” to the native ecosystem on those devices means that developers need to rewrite their apps. This idea clashes with the opportunistic motivation that attracted them in the first place. That’s my take. I’d love to hear your opinion. What do you think that device makers should do? — Stijn #handsetmanufacturer #amazon #nokia #kindle #mobilestrategy #Blackberry