Online Retailers and the Mobile App Profit Dilemma

by Holly Shoemaker

A recent report from research2guidance reported that in 2012 most online stores made less than five percent of their revenue from a mobile app. 

Numbers at a Glance

The company surveyed more than 600 mobile-commerce companies and found the following:

• Almost 19 percent of e-commerce companies made more than 25 percent of revenue via mobile channels. 
• One third reported that they expected to generate more than a quarter of their revenue from mobile within the next five years. In addition, 15 percent of those companies reported that they planned to generate half their revenue from mobile apps.
• For online retailers to profit from mobile apps, they need to achieve downloaded numbers of more than two million. At this time, many online stores only achieve a few thousand downloads. 

Mobile Ad Spending to Grow

eMarketer predicts that U.S. mobile ad spending will reach $7.19 billion in 2013 and more than $20 billion in 2016. Despite those numbers, mobile only entails a small percentage of total ad spending. It comes in at just 2.4 percent. If the number increases as expected to $20 billion in 2016 that will bring the percentage to 11 percent – that means it will rank higher than radio, but will not overtake print.

Hope for Online Retailers?

The future for online retailers and revenue from mobile apps depends on the goods or services sold. Stores that sell virtual goods perform well. Companies that sell game apps and upgrades or virtual goods inside them also have a better chance at becoming part of the exclusive five percent.

App Developers Finding it Harder to Break Even: More Time Needed on Marketing Efforts

by Holly Shoemaker

A study published in May by App Promo, an app marketing and strategy firm, found that it has become more challenging for developers to generate profits from apps.

Numbers at a Glance

App Promo surveyed over 100 application developers and found the following:

• Fifty-nine percent of mobile apps do not earn enough money to break even.
• Eighty percent of respondents confirmed that even with a successful app, the revenue generated was not enough to support business.
• Twelve percent of developers earned $50,000 or more from their apps – Those who earned this level of income had marketing budgets of $30,000 or more. Fourteen percent of the lifecycle time was spent on marketing efforts.

Concluding Thoughts

The study reinforces suggestions I previously made. Developers need to ensure they set aside adequate marketing time to promote an app. This includes looking beyond the initial download for repeat business and using mobile app releases to remain relevant.

Calling App Developers: Facebook Accepting Apps

by Holly Shoemaker

On Wednesday, March 9, 2012, Facebook announced that it plans to allow users to download apps via its App Center, its new online store. The App Center is currently available to developers and Facebook has encouraged developers to get their apps in prior to the consumer launch. Facebook’s App Center should become available to users in the coming weeks.

What Developers Should Know

• The company plans to take 30 percent from app-generated sales.
• To date, Apple has generated more than $1.7 billion in app sales, something that has not gone unnoticed by Facebook. Guidelines for the App Center are stricter than Google, but not as strict as Apple. Facebook, like Apple, will select what applications it offers. Facebook also plans to remove apps when needed. The company will base its standards on items such as ratings and engagement.
• If Facebook does not select specific apps, developers will have the ability to build software using Facebook’s tools and promote their apps via the news feed. 

Concluding Thoughts 

The announcement times well with the company’s initial public offering (IPO), which it will hold next week. Analysts expect the IPO to become the largest one ever for an  Internet company.

This is a good move for Facebook. More users are gravitating toward the company’s mobile site, and the company needs to increase its ability to generate revenue as limited advertising opportunities exist on its mobile app.