MGF 2010: App stores and mobile gaming

Death of the operator portals?

What about the operators? Jean-Luc Ottensen from Orange France gave his views, saying that by summer this year, "we will have two million iPhone users in our customer base". But plenty of other handsets too, obviously.

"We still have huge traffic coming from our portal, but the most important thing we are doing now is our embedded program for demo games, our on-device portal that we have on many handsets, and right now to face what the manufacturers are doing with their app stores, we are deploying our own application shop, where customers will have the ability to have one-click purchase, and to have access to that content within this application shop, and to launch the content within this ODP."

Apologies for the long quote, but it was worth getting in full. Won't Amazon have something to say about one-click billing?

How is Orange working with the smaller developers in the market? "We are doing well with the big guys like EA, Gameloft and Glu - and RealNetworks [who are sitting on the panel next to him]."

But he admitted that while Orange is keen to work with smaller developers on a single entry point to distribute games through its store, it's not completely open. "Even though we have this direct route to market, we will still have some kind of selection of good content for our customers," he said, saying that 100,000 apps is too many.

Consumer choice

Patrick Mork from GetJar was also on the panel, and stressed that it's all about consumer choice. "If you want to be successful, you have to let consumers dictate and decide what is popular and successful, and let them vote with their downloads," he said.

However, he admits that GetJar has tightened up its policies, particularly in the realm of IP protection. Mork added that GetJar did around 500 million downloads in 2009.

Quality versus quantity

Eric Pfeifer from Handmark chimed in on the openness question, saying that its policy of focusing on quality over quantity has served it well. "We test everything that comes through our door, and obviously on an open market you can't do that as easily."

Moderator Tim Harrison brought up the question of customers rating and voting on games and apps, and asked whether that shouldn't be the first line of quality control?

"We have a core group of developers that we want to help make money," replied Pfeifer. "I could have 40 poker titles, but we'd rather work with fewer partners who'll make more money, rather than spreading it among everyone."

Thomas Richter from Fox Mobile Distribution - formerly Jamba - said his company still has a role in the industry, despite the explosion in app stores.

"The direct response model was not shaken by the app stores," he said. "It's a completely different model. It'll always be there, and you will always find a niche, and fashion trends that you can profit on. What is different is where is the profit for Fox, Handmark or any other intermediate guy? It's a question that's not fully answered yet."

However, Richter said there is still value to be provided by the middlemen, in managing the experience for consumers.

Publisher viewpoint

Armin Hummel from RealNetworks gave a publisher's view, saying that even the App Store can be improved in terms of its discovery and search functionality.

"We're not really changing what we're doing," he said, though. "We're just trying to be present where it makes sense."

Does that mean at some point some of these channels will be deprioritised, asked Harrison? Like the operator portals? Hummel didn't bite. "Not at this time, no."

Price erosion

Price erosion in mobile games is one live issue in the industry but Pagano said that he hasn't seen a problem outside the App Store - pricing is better on the operator portals than on Apple's store.

"Price erosion is something we are trying to stop, to some degree," he said. "For the small players it's a way to get an audience, and get in the Top 25 or Top 50 apps on the App Store. But we don't want to risk getting into a situation where we devalue the content that we produce and offer to consumers."

Pagano said when a publisher has a recognisable brand and a compelling experience, "you can hold the price up".

Orange France's Ottensen chipped in at this point. "I personally believe there is no elasticity when you just play with the price points," he said, referring to a trial Orange conducted with ad-funded free games a couple of years ago.

"People said the quality is low, because those games were free. There is a relationship between the price and what people think about the games. It's dangerous."

He also said Orange will be responsible for setting prices in its Application Shop. "All our partners' main purpose is to make money," he said. So games will cost six Euros, for example, rather than the App Store model where Apple lets developers choose their own prices.

How about GetJar and billing? Mork said that GetJar will introduce billing (i.e. paid apps) in the UK and US later this year.

"We have to reinvent the business models in mobile, especially around mobile games," he said, pointing out that some of GetJar's fastest growing markets in terms of downloads are India, South Africa and other emerging markets.

"Look at a market like India, 97% of the market is prepay. Those people are not going to pay for content, and if they do, it'll be cents rather than dollars. That's our challenge as an industry."

He drew a parallel with Facebook's app ecosystem, where Zynga is "rumoured to be doing $50 million a month in revenues... if you look at iPhone, you haven't seen a single successful exit... yet. What games need are a Facebook-like model based around in-application billing and virtual goods, which give the consumer a way to pay within the game, but don't make it a pre-requisite. That's something we haven't seen yet."

Freemium models

As the world moves more towards free, what will this mean for an independent portal like GetJar? "It's the Holy Grail for us," said Mork.

Harrison asked Pagano when we'll see the first freemium mobile game from EA. He didn't bite, "but we are looking at micro-transactions in general, and freemium as a model to take to market".

EA, of course, IS trying this in some of its PC games - Battlefield Earth for example - while it's already selling songs in Rock Band and virtual items in The Sims 3.

However, he reasserted the traditional view from the mobile industry that mobile users are "used to paying for content".

Handmark's Pfeifer agreed that robust billing interfaces are going to be crucial to the growth of app stores in the future - it works with a number of operators to offer carrier billing, although it also offers everything from credit card billing through to PayPal, Amazon billing and Google Checkout.

D2C makes a comeback?

What about publishers running their own branded storefronts? "We're not experts there," said RealNetworks' Hummel. "At this point it does not make sense for us to actively get into that area. But, certainly in the future it will be an asset that we have when we can try to shift customers from one platform to another."

Pagano agreed on the cross-platform shifting thing. "In the old world, it was kinda simple - you just had to have good relationships with the operators, make sure you got good placement, and the job was pretty much done. The world is much more complex now... The operator portals have stopped becoming the destination of choice for consumers."

By which he meant that consumers are now searching for, discovering and talking about mobile games online too - they're not just going to their operator's portal to find a game to download.

Mork said GetJar is starting to work with more operators, running app stores for them, while also working with Sony Ericsson on the back-end submissions for its PlayNow Arena portal.

Viral buzz

Mobile firms and app stores are using more viral marketing and social media techniques - Handmark released a Twitter client that was free for users who tweeted about it, and notched up 50,000 downloads before it even officially launched, says Pfeifer.

Meanwhile, when asked what they'd like to see improved in app stores in 2010, Pagano had a one-word answer: "Billing." He said that's one of the key planks in the App Store's success.

"We have one fundamental powerful tool in the operator's hands: operator billing... which is what enables that impulse buying that's so critical to our industry. The more stores start integrating operator billing, the more success we'll see in these marketplaces."

Meanwhile, Real's Hummel said he'd like to see an improvement in selection. "The customer should know when he buys something that he will get quality. That's an area where Apple can improve a lot."

Don't stores need to allow crap to enable the good stuff rise to the top?

"I would like to see the App Store like a supermarket. You don't see supermarkets selling much crap," says Hummel, who suggests that "you could have the 'premium' app store, where customers know they get the gold product."

However, Mork disagreed, saying that the democratic model is to allow a lot of content onto the app store and let consumers decide, with content then rising or falling based on algorithms - a combination of downloads, click-throughs to the product page, and user reviews.

"It's in the eye of the beholder," he said. "You may have a game that for a consumer in the UK is a piece of crap, but for a consumer in South Africa is pretty decent. Who's to decide?"

Richter capped off the session, with a question about who is going to 'win' in the apps space? Who will lead in two to three years time?

He didn't quite bite. "I think the OEM app stores as we see them now are not so different from the carrier decks we saw five years ago. It's just people shiftinn their view to another 'saviour' who will grow the market."

So? "I guess we will have a diverse ecosystem with people who provide billing and platforms, with publishers that provide good content. And we need to watch that we still make a lot of money, and do not go freemium all too easy. That could be the next barrier for the industry."