Microsoft has one of the strongest developer communities of any IT company in the world. A quick LinkedIn search yields more than 1000 evangelists whose responsibility is to make sure people creating products on Microsoft platforms have the best knowledge and tools available to them. But with Windows 8 and Windows Phone, this strength has actually become a weakness.
The reason is simple – Microsoft itself has little experience in the app ecosystem, compared to Google and Apple who launched their platforms several years earlier. Just recently they have begun looking into alternative monetization solutions such as subscriptions for Office. So developers, who usually get great information from Microsoft, do not really have an expert channel where to turn in the matter of app monetization.
Windows-first developers are now in the same position as their Android and iOS colleagues were some years ago, with no clear understanding of how to monetize their apps. Fortunately for Windows developers there is now a ton of data and best practices available from the previously launched platforms which can be used to inrease probability of success. I have outlined four key points below that should help Windows developers better plan their business model before diving into code.
Advertising Or Virtual Goods?
When iOS first launched, the majority of developer revenue came from advertising. For any new online product, advertising seems to be the go-to choice for revenue when the product itself is given away for free. However, advertising has two drawbacks – it is disruptive to the user and not easily scalable.
Advertisements block some part of the screen and ruin immersion, especially when it comes to games. Even when the advertisement is targeted, it is still unrelated to what the user is trying to experience within the app. If they do want to leverage advertising, they should at least help their fellow developers out as well – there are several cross-promotion ad networks available such as TapJoy for Android and iOS or AdDuplex for Windows. These bring app downloads to both them and other developers using the network, benefitting the whole ecosystem. As for scalability, there is only so much advertisements which you can fit on a screen. You can divide gameplay up into several screens to increase banner impressions but overdoing this will eventually cause the gameplay to become erratic.
However, virtual goods are directly related to the game experience and allow the developer to create their own ecosystem within the game. They can also be scaled (by adding additional goods for purchasing) and used for marketing (by creating volume discounts or running holiday sales). Creating an economy within games needs careful planning – paying customers should not have unfair advantage over non-paying customers. When the disparity becomes too great then there will not be an increase in revenue – instead casual gamers will become frustrated and more likely to quit. They should make sure that the game will not enable people to buy themselves into power.
Flurry’s data shows that virtual goods became dominant over advertising long ago on iOS and the same goes for Android. Instead of going for the simple solution of putting advertisements into every page of the app, Windows developers should instead try to figure out how to create an economy within their game. In the long run, this creates an organic ecosystem and an additional feature which keeps people coming back to the app.
Freemium Or Premium?
Just like advertising has eventually become less relevant on Android and iOS, data by App Annie shows that freemium app revenue is growing at a much faster rate than premium app revenue on both platforms. This is something which should be kept in mind by Windows 8 developers as there are several simple reasons why freemium works better for apps:
When the user is making a choice whether to purchase an app or download it for free, one of the above issues will almost always cause them to go for the freemium option. Of course, premium does sometimes work better – when you already have a well-known and established brand or when you can’t create your own economy within the app (e.g. you are developing a document editing suite). But for most developers, freemium can potentially generate more revenue.
If a developer does decide to go for the freemium model, everything should be done to increase chances that a user can make payments after the initial download. This is something which Google and Apple have pretty much ignored so far and where Windows developers gain a strong upper hand – namely alternative payment options.
More Payment Options, More Paying Customers?
Payments for apps are something which Google and Apple have wanted to keep strict control over. Even though Apple has data on 400 million credit cards and Google Wallet is seeing increased penetration, they are still focusing mainly on credit card payments. Beyond the mature economies of USA and Western Europe, there are billions of people who do not have credit cards. China – now the largest smartphone market in the world – has four mobile phone owners for each credit card owner. This is a missed business opportunity, to say the least.
Microsoft has taken a different approach and completely opened up its payment ecosystem. While supporting credit cards, they also accept alternative solutions such as PayPal and mobile payments. With alternative payment options available, the market for paying Windows 8 and Windows Phone users might actually be larger than that of Android or iOS. This of course depends on how well Windows 8 and Windows Phone are picked up in these emerging markets. But from talks with our own customers we have clearly seen that mobile payments have a higher conversion than credit cards. And even if they didn’t, developers should still make sure that any potential client has the possibility to make a payment.
What Else Should Windows 8 Developers Not Forget?
There are some additional aspects of planning app monetization which should be considered: in which countries to start out publishing their app, how much content should be localized and how to take into account wealth disparity when figuring out pricing for their in-app content. With Android, we have seen that starting within emerging markets is often easier as the competition is less tough. However, this opens up another challenge – making sure they can provide localized content (in countries where people do not speak English as a second language) and customer support.
Local pricing is a different question altogether and would require a separate article, but just to give an idea – if you publish your app globally and set the same price points everywhere, you should not be wondering why you’re not getting as much revenue from China as you are from the USA. After all, the purchasing power of 1 USD is very much different in the two countries. Thinking through the monetization strategy and examining payment data from users is the best feedback which an app developer can receive for their app.
As stated in the beginning, Windows 8 and Windows Phone developers have a huge depository of information based on iOS and Android: two rather different operating systems which still are showing similar trends regarding monetization. So instead of trying to reinvent the wheel I’d rather suggest developers building on Microsoft platforms to talk to their counterparts on other platforms to figure out how to get it right from the get-go.