Making Money from Content

This article has been reposted with permission from the Spark Minute blog.

It seemed that after the advent of Web 2.0 programming technologies, such as AJAX, that there was no more need for downloadable applications since any web page could now be a live application. With webware applications, each action would behave like a desktop application could. No need to reload a page every time you click a button, and more importantly, no need to download and install an application onto your computer.

On first look it appears that webware programs have usurped the need for downloadable applications.

But web-based programs have one very critical limitation. They require you to be on the web to use them. Webware programs can’t run all the time on your computer. They won’t shrink down into your Windows System tray.

As a result of webware’s limitations, there is still a strong market for downloadable applications. Looking at the history of popular downloadable programs, here are the three most successful categories:

• Communications applications – VoIP and video chat programs like Skype and all the instant messenger applications have always been popular. Many Adobe Air applications, e.g., TweetDeck, fall into this category.
• Anti-virus and spyware – Everyone MUST have these programs on their computer. Many people aren’t willing to shell out the bucks for McAfee or Norton, so they opt for one of the free solutions.
• Multimedia applications – Even though you can watch videos and listen to music online, downloadable desktop programs like iTunes and Windows Media Player remain popular.

All three of these categories have stayed consistently successful even with the amazing proliferation of webware applications.

And this is where itiBiti has found its comfortable and successful niche. DISCLAIMER: itiBiti is one of Spark Media Solutions’ clients.

Instead of trying to compete with any one of these categories, itiBiti is actually a mashup of a communication and a multimedia application, two proven and consistently successful categories of downloadable apps.

These downloadable applications succeed in one of the following three ways:

• They maintain a consistent connection with a brand that generates revenue through advertising (e.g., AOL with AOL Instant Messenger or Yahoo! with Yahoo! Messenger).
• They operate under a freemium model. Basic service is free but additional services cost money (e.g., Skype with Skype Out and Anti-Virus software with further scanning abilities).
• They operate a marketplace that sells content (e.g., iTunes with sales of songs, movies, and applications).

Given all these above described options, here’s the combination itiBiti offers:

• Always-on communications (text, voice, and soon video)
• Multimedia content (video, real-time news, web content)
• Branded application (white labeled so anyone can brand the application)

Since so many downloadable applications have failed since the advent of webware, it’s often a common belief that all downloadable applications are doomed. But if you look and realize that there are still many vibrant and highly demanded categories of downloadable apps, it’s easy to realize that there’s still a very strong marketplace. itiBiti aims to build success on a hybrid of already proven downloadable applications.

Want to know more? Interested in getting your brand on the itiBiti platform? Contact Brad Parry (bparry@intertainmentmedia.com).

Years ago when Napster went legit in its pay a flat fee for all-you-can-eat music, many believed that they hit upon something huge. People have already proven that they don’t like their consumption metered. Phone service and Internet service went in that direction. Later, DVDs-by-mail providers Netflix and Blockbuster did as well. Flat-fee monthly pricing seemed an obviously successful business model for music. But it still hasn’t worked nearly as successfully as iTunes’ $.99 per song own-it-forever model. Why?

People don’t want to pay an ongoing fee for the music they love

You can give people all the music they want for a comically low price (MOG offers a $5/month subscription and Rhapsody just lowered its price to a $10/month subscription) but it’s still not enough. Because once people have the music they love, they don’t want to part with it. And on the onset, these services are saying, to keep the music you love you have to pay us a fee every month to keep it. It’s a concept that rubs a lot of people the wrong way. Still both services allow you to download and purchase the music. But many people think that’s paying double for their music.

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More great news coming out of the itiBiti platform. We’re still in the BETA phase of the lifecycle, and already we’re seeing very positive metrics emerge.

A few of the highlights:

• Over 60% of those consumers directly targeted by brands in a closed environment have downloaded the application
• 64% of the users engage with the application regularly. When compared to other social media applications, this figure is very substantive (e.g., Twitter only sees 1/4 of its potential audience engage)
• Active Consumer Engagement with itiBiti is averaging 2.4 times per day, with an average length of 6.8 minutes

And underscoring this is the fact that no major marketing or brand push initiatives have been undertaken up to this point. All of these figures are coming from organic growth, and early adopters. Consumers are responding & engaging.

More and more brands are seeing the value in customized desktop applications. It’s critical that within a fragmented media arena every opportunity to continue a discussion with consumers is utilized. And in the desktop lies an avenue of untapped merit…

Check out the nbc.com Communicator version of itiBiti

We’ve just announced an agreement with a major US online distribution partner that guarantees 5 Million North American installs of the itiBiti platform before the end of 2010.

The users are showing us velocity…In February, average user “on time” was up to 2,125 minutes per month per brand, or 76 minutes per day, with engagement activity running as high as 20%…And now, we’re bringing the mass.

With the itiBiti platform, revenue is derived from advertising and data analytic services based on user engagement – the effect of 5 Million users will help increase the value proposition for our clients very quickly.

As our President David Lucatch states,

itiBiti is working diligently to deliver tangible client results, providing brands with opportunities to strengthen relationship value with users. As most social media platforms are slow to monetize the user’s online experience, itiBiti and brand clients are experiencing immediate, and accretive, revenue generation, at premium market rates…

We’re looking forward to rolling this out – let us know your thoughts. Many thanks to BlackTorch Capital LLC, our US fiscal advisors who were instrumental in the introduction, structuring, and negotiation of this partnership.

Check out the nbc.com Communicator version of itiBiti

Intertainment Media and Itibiti Systems’ CEO, David Lucatch, is not ashamed to admit how much time and money he spends playing virtual games, especially ones on Facebook such as Zynga’s FarmVille. He admits to watching almost no TV, but is completely addicted to social gaming. Ask him about it and he’ll tell you it’s “research” but we all know he loves bragging to his Facebook friends about how many tractors he has.

Lucatch is not alone. Every day, 67 million people that aren’t running public companies are playing Zynga’s social games on Facebook. They’re currently the best model of how to make money with online content. Within the game you can pay real money to purchase virtual goods. Well now, Zynga, the $2 billion valuated company, is poised to make even more money. They’re offering pre-paid game cards at major retailers such as 7-Eleven, Best Buy, GameStop, and Target.

This is a brilliant move on so many fronts:

• What game do we buy your nephew? I don’t know what he likes and I don’t know what he has, but I do know that he likes to play Mafia Wars. I constantly get his invites on Facebook. Let’s just get him a gift card.
• Every year, an estimated 10% of gift cards go unused (source: TowerGroup consulting). That estimate was more than four years ago. Today I would guess it’s a lot higher. Have you noticed the racks and racks of gift cards now available at your super market? Here are some other amazing numbers from a Seattle Post Intelligence article from 2006.

Limited Brands Inc. said last week that unspent gift cards contributed $30.4 million to fourth-quarter revenue, boosting profit 4 cents a share. Best Buy Co. reported 4 cents in earnings last quarter from gift cards that it concluded would never be redeemed. Home Depot Inc. in June reported $43 million in pretax profit from cards sold before 2002.

• A great marketing ploy to the physical world. They’re now going to expose their brand to physical spaces and be seen. In total, Zynga will be physically distributing their game redeemable cards at more than 12,800 retail outlets. They couldn’t do this at all before with the model they had.

David Lucatch’s birthday is coming up in June. He may be a man that has everything, but he could use a few more tractors.

Verizon just made an announcement that they’re going to be offering free Skype-to-Skype phone calling on its 3G phones starting March, 2010. Even my lame Curve 8330 will be able to make those calls. Similarly, AT&T/iPhone has backed down in its argument against Google Voice and they’ve even opened up the platform for the SlingPlayer to stream video over the device.

Are we living in a topsy turvy world? Carriers are willingly allowing applications go after their core revenue model (phone minutes) or eat up their bandwidth (streaming video). For years, in the age of the “anybody can do anything” Internet, carriers have done an excellent job controlling their network: what goes on it, how people use it, and how they charge for it. With the proliferation of smart phones with direct Internet access that can use VoIP services, access to calling plans that undermines the carriers’ pricing (even free) is just an application download away.

In an app-enabled mobile world how long can carriers hold onto their old pricing mechanism for consumers? They can only block Google Voice and Skype for so long. You remember the old adage, the customer is always right? Well, in this new mobile world, the customer is calling the shots. And if you want to keep them, you better revise your revenue model.
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News just came out today from the Mobile World Congress in Barcelona that 24 mobile carriers from around the world are going to unite together to produce an international application store called the “Wholesale Applications Community.” It’s an obvious reaction to Apple’s iTunes application store which has a stringent review policy before any application will appear in its online store. For example, Apple has strict rules about pornography and profanity in its applications, but we’ve seen them relax those rules in certain cases.

Can this idea really work? Can 24 carriers along with three device manufacturers operate more smoothly than just a single device manufacturer?

My answer: Good luck.

I’m sure when the announcement was made there were cheers all around. Execs were slapping each other high five and saying to each other, “Watch out Steve Jobs.” And then as soon as everything calmed down, they all said to themselves, “Oh shit.”

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I remember attending a computer trade show years ago in Vegas (I believe it was Comdex. Gives you an idea how long ago) and seeing an endless array of portable video players. At the time, the Apple iPod had come out, but it had yet to release a video version of its digital player. I went to talk to a few of the manufacturers of the media players about their devices. After the obvious discussion of how big the hard drive was, the resolution, and the price, I asked what I think is the most important question with media players, “How do you get the movies onto the device?” Everyone I spoke to just said, “Oh, we have software for that.” Did they have a demo of the software? No.

It’s no surprise that none of those media players are around today.

Apple at that time had already proven the successful marriage of device (iPod) and application (iTunes). It was truly simplicity. I remember when I installed my iPod for the first time, I was blown away at the simplicity. It just found all my MP3s and sucked it into the device without any difficulty. It was the best consumer product experience I had ever had. Many competing products claimed, “Oh, you can just bring all your music into our device,” but it was far from simple.

Hey tablet PC makers, don’t let software be an afterthought

Lenovo Ideapad U1 Hybrid

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PepsiCo just underwent an onslaught of public dissent (#pepsifail) and debate over the “Before You Score” iPhone application for its AMP energy drink. Here’s the commercial that shows the application in action.

There’s been endless debate on the subject. Read Mashable’s article on the issue and then their follow up piece on AMP’s apology. Here’s my summary of what PepsiCo/AMP did right and what they did wrong.

What did the PepsiCo/AMP brand do right?

1. They created a controversial application that got people talking.
2. They created an application specifically targeted towards their demographic, young men.
3. When the online anger took off, they immediately responded and apologized if some saw it in bad taste, but that their intention was humorous. Here’s the tweeted apology.
4. They invited feedback.
5. They saw that the discussion was trending on the hashtag #pepsifail and tagged their tweeted apology with it. This first and foremost guaranteed that their apology would be seen, but they also accepted the community decision that this was how this story would be classified.

What did the PepsiCo/AMP brand do wrong?

1. The application’s content was not unique, it just played off of tired stereotypes.
2. It could have been funnier. AXE’s commercials and content are funnier because they create a completely over-the-top male fantasy. And AXE’s content really pokes fun at the male fantasy. This one didn’t really poke fun at male behavior, even though that was AMP’s tweeted intention. Rather it stereotyped women in an often unflattering way.

Having done standup comedy myself I know that offending people is an unfortunate part of the business. It’s hard to get away from it. There are very few comedians that don’t offend anyone. Even Jay Leno who is about as squeaky clean as you get actually has a mean streak as he makes fun of people for their ignorance in his “Jaywalking” segments.

Ultimately, was this application, the community response, and AMP’s response successful? I think it was successful for the following reasons.

1. I didn’t even know what AMP energy drink was before this happened. I’ve now “discovered” AMP.
2. Nobody died and they had an open and honest dialogue with the community about the application, and their intention. They didn’t cave to pressure and pull the application down (the usual response). Rather they engaged in a very open conversation. We’ve seen true social media failures where the communications department runs in around in circles trying to hide their mistake. Those epic failures live on as what not to do in social media. This will not live as one of those examples. Instead this case will live on as an example of how to spin a mistake into a win in social media.
3. They got TRAFFIC! As of Friday last week all of 150 people had download the program. Today, Wednesday, they have over 17,000 downloads, according to an AMP spokesperson I talked with. UPDATE: I talked with the AMP spokesman again, and it turns out those numbers are very dated. As of Thursday morning they had nearly 77,000 downloads of which 75,854 came AFTER the story broke on Mashable. They’re now the #2 free entertainment application, and #12 overall in free applications.

What do you think? Can you argue with success like that? Do you think the PepsiCo/AMP iPhone application was a success or a failure?

I can’t make heads or tails of this, but the cost of mobile applications varies widely between different mobile platforms, or sometimes not at all. There’s no consistency. It’s all over the map. For simplicity, I’ve decided only to compare iPhone vs. BlackBerry applications.

Let me show you some examples:

BlackBerry app more expensive than iPhone app

iPhone/iPod

BlackBerry

iPhone app more expensive that BlackBerry app

iPhone/iPod

BlackBerry

iPhone and BlackBerry app priced exactly the same

iPhone/iPod

BlackBerry

While both BlackBerry and iTunes have many free apps, only iTunes seems to have inventory of $.99 apps. With BlackBerry, after free, the applications cost $2.99 and up. Most wouldn’t think much between $1 and $3, but that is THREE TIMES AS MUCH.

A few top selling $.99 iPhone applications

In this sample I only looked at games, not productivity applications. When you get into that space the price varies even more widely, especially when you start comparing Windows Mobile applications which back in the day could cost hundreds of dollars on Handango. Now productivity applications have come down to a more reasonable arena of about $29, but it’s still violently more expensive than other applications. I’m just confused as to why the pricing of the mobile applications have no rhyme or reason to them. I don’t track the gaming market that closely, but I can say that when a game is released on the three major platforms (XBOX 360, PS3, Wii) it’s priced the same. So why isn’t it the same for mobile platforms?

Possible explanations for the complete inconsistency in mobile application pricing:

• Who cares? It’s usually less than $5.
• Nobody is deciding between an iPhone or a BlackBerry app. They’re deciding whether they’re going to get the app at all, so they never compare prices on other platforms.
• The cost of applications is never a deciding factor when purchasing a mobile device.
• Pricing for mobile applications is far from settled. We’re all still in a “figuring it out phase.”

Got some other explanation? Let me know.