10 things we learned from AppNation 2011
The state of the union
In only its second incarnation, the AppNation conference, held in San Francisco, certainly demonstrated the breadth of the manic activity occurring in the world of mobile games and apps.
Ranging across topics such as content - games, video and music - to app stores, advertising strategies, monetisation options, search, and more, it, and its networking opportunities, provided plenty of fuel for thought.
So here are ten points we think say something about the current state of the ecosystem.1. The platform always corrupts
A general observation but one brought into specific focus by the continuing uncertainties over download incentivisation on the Apple App Store, a platform holder's power over its platform means change will always tend to be in its favour.
Of course, this sort of behaviour isn't limited to digital distribution. The same thing occurs with physical retailers such as Walmart and Tesco as they squeeze their supply chain in ways that improve their balance sheet.
For that reason - and many others - developers and publishers shouldn't take an all or nothing approach. As well as maximising your potential audience, a cross platform strategy will limit your vulnerability to the mercurial attitudes of Apple, Google, RIM, Nokia, Microsoft, Amazon etc.2. Whose line is it anyway?
There's a broader point to be made on the previous subject. Digital distribution has removed many of the traditional players from the retail supply chain - notably distributors, the vast majority of publishers and, of course, retailers.
However this doesn't mean the tasks undertaken by these specialists - ranging from sales and marketing to promotion, discounting and resupply have disappeared. Most have been taken over by the platform holder, while the biggest complaint for developers concerns discoverability; something they would have previously relied on publishers to undertake.
Equally, the disruption caused by digital distribution has created new areas of expertise; analytics, new promotion methods such as incentivisation and cross promotional networks, third party social platforms and even third party cross platform app stores. And it's here where we will continue to see battles between these new players and the platforms holders over who has the rights or the best solutions to solve these problems.3. The app store has peaked
But maybe we're too hung up on app stores anyway. Some commentators are arguing we've passed the high point of the app store model, and the pendulum is now swinging back towards the browser as being the most important channel for content distribution in future.
Of course, the browser versus app store debate will always be with us as changes in technology make the inherent advantages of each approach more (or less) significant.
But with HTML5 being massively pushed by the likes of Google, Facebook and even Apple, it's clear that certain content - although not necessarily high quality games - will be better distributed this way.
Indeed, Amazon's integration of its Appstore for Android within its standard web storefront demonstrates the many advantages, in terms of search, recommendation and even billing, this approach delivers, all of which are weakness of the app model.4. Here I am
One of the biggest current deficiencies with app stores is search. As has been pointed out many times, an app store search for 'mad fowl' won't get you Angry Birds. Taking a web-style page rank approach doesn't work well when you're looking for a singular result.
However the problem is more general than just searching for specific apps. The functionality offered by apps isn't well integrated into search, which only access an app's name and its description.
Several companies, notably start up Quixey, are now attempting to tackle this problem using a so-called 'deep search' approach that enables search terms to connect with the functionality offered by apps. For example, this would solve the problem of searching for 'open restaurants', by launching an app such as Yelp, also automatically using functionality such as your location to improve the quality of the results.
Would it solve discoverability? No. It would shift the problem to SEO; perhaps moving us half a step forward.5. Where are your groupies?
As with device fragmentation, developers complaining about discoverability is just another admission of failure.
Don't expect anyone to do your job for you, or as one panelist put it, "You need to market your app just like bands build a fanbase."6. Large numbers aren't enough
Although beloved by market analysts, venture capitalists and CEOs looking to sell their companies, the explosive growth of the smartphone business doesn't mean it's becoming any easier to make money.
Indeed, it's clear that the tens of millions of new smartphone owners every month don't have anything like the same app buying patterns as the early adopters of iPhone and Android. For example, the availability of the iPhone on Verizon didn't boast App Store sales as expected, while much of the future growth of Android is going to happen with very cheap handsets in countries such as China and India.
Combined with a broad industry switch to free-to-play content, especially for games, and developers can boast of high download numbers and active users, while struggling generate meaningful revenues.
Brutally put, it seems that individual titles need 10+ million downloads while companies need 50+ million downloads to be noticed.7. Be the best
As always happens as a market matures, there are two extreme approaches businesses can take to take advantage of a large, hard-to-monetise audience; become an aggregator (or large publisher), or specialise.
The latter is the only option for most developers, with VC panelists at AppNation, in particular, pointing to the value of being a category leader, especially in a cross platform world.
Of course, the trick is to choose the correct niche to attempt to dominate. We'd suggest the realistic vehicle racing, match-3, football (American and soccer), and physics trajectory categories are already well supplied.8. Eastern disruption
China is often spoken about in extreme and confused terms. It's either a once-in-a-lifetime opportunity, or a place where your IP will be reversed engineered in minutes: a global threat to US economic and military power or a third world country containing a dozen first world city states.
The truth seems to be a bit of everything. There are clear obstacles to business in terms of the need to partner with Chinese companies and restriction on revenue repatriation. "What pays in China stays in China," as one panelist put it. Additionally, China Mobile's stranglehold across much of the industry limits innovation.
Yet the disruption caused by the rapid adoption of Android smartphones is shaking things up; even if no one knows how it will all play out.
Perhaps more exciting though are the changes occurring in Japan. Long the global leader in mobile networks, if not handsets, the sales of iPhone and Android - notably Samsung devices - is shaking up an otherwise mature and incredibly lucrative market.
Placed in that light, the $303 million and $104 million deals by DeNA and GREE respectively for smartphone social networks ngmoco and OpenFeint could be seen as defensive moves by cash-rich players worried their duopoly is about to be broken apart.9. Will you be my friend?
Continuing the theme, we can now say the first wave of social mobile gaming platforms is over. OpenFeint and ngmoco were the two most successful players and their investors have cashed out big. As for the rest, AGON Online went bust, Chillingo's Crystal remains effectively an underused proprietary system, while Scoreloop's business is as a white label play for carriers. New players such as Papaya Mobile have also appeared.
The broader question concerning did any of these technologies actually make us more social mobile gamers remains unanswered though.
Certainly achievements and leaderboards are now seen as standard components in all games. Yet if personal experience is anything to go by, this, combined with inviting a few existing friends into my social graph, is - at best - the most coarse implementation of mobile sociability.
Social mobile gaming 2.0 will have to do much better, as well as actually being able to generate some revenues, if DeNA and GREE's deals aren't to be seen as massively overpriced.10. The kraken awakes
Less a business point, more an observation. During AppNation, but unrelated to it, social gaming giant Zynga bought another mobile game studio. No surprise there you might think - it's bought over a dozen in the past 12 months.
The symbolism of its acquisition of UK studio Wonderland however was that it developed ngmoco'sGodFinger game; Zynga previously bought Newtoy, developer of ngmoco's We Rule.
Both titles have long been run as services internally by ngmoco following their initial development and launch, so there won't be an issue in terms of player services. Nevertheless, it does suggest Zynga will finally be doing something significant in the mobile freemium space - and that in itself is significant.