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Apple, Walmart, and you: Making money in mobile

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Open...and Shut Mobile is top-of-mind for every developer and every business, but it's not yet reaching stuffing-of-wallet for much of anyone.

The problem, as one friend described it to me yesterday, is that mobile users have the attention span of goldfish. When users are in and out of an app or website in few-second snatches, the chances to actually make money from them are fleeting, whether you're selling web services or apps.

What to do?

The problem isn't that people don't spend enough time with their mobile devices. They do. Ever since the CrackBerry hit the market, people have been gorging themselves on mobile communications.

The problem, it seems, is that this "gorging" comes in snack-sized bites for which few seem willing to pay. This is confirmed by new Ofcom research data from the UK market, which shows vastly increased mobile activity combined with stagnant mobile revenue growth over the past 10 years.

Carriers make money providing the data services, but see razor-thin profit margins. App developers, for their parts, make even less money, and negative margins. Apple has relegated the carriers to the role of infrastructure providers: they sell network time and little else, despite their best efforts.

App developers, for their parts, have been sucked into the Apple reality distortion field, wherein they sell apps for $0.99 each (or whatever the price), Apple takes 30 per cent, and ... that's it. This is not a great business model – and not only because the app sale model is in decline, by some metrics.

As Google's Tim Bray suggests, "Selling anything on a one-time basis at a price below $10 is historically the kind of business that's been owned by companies like Walmart." Walmart is obviously a big company, but there aren't many like it.

And in the case of mobile, Apple is more akin to Walmart than anyone else, because it's Apple that owns the relationship with mobile users, not the actual app developers.

But this isn't really a question of app sale versus in-app purchasing versus something else. It's about how to engage users over a long enough period of time that they're willing to pay. While the web has traditionally excelled at fueling discovery of brands/services/etcetera, apps have been champions at driving user engagement.

The trick, however, is to convince someone that it's worthwhile to buy an app in the first place, or simply download it. This turns out to be non-trivial.

So now people are shifting the conversation from app downloads to app engagement, as Urban Airship's Scott Kveton does. However a user finds their way to the app – be it via an app store's "Top 25" list, a news-article mention, a "click-to-add-to-home-screen" web-app function, etcetera – the trick is to engage the user in a meaningful, if quick, manner.

And while few are currently doing this, it strikes me that a key way to motivate user engagement is to make the app experience extend beyond any single device.

My attention is increasingly split between the various screens (smartphone, tablet, laptop) I carry, so an app that allows me to start reading a story about how Arsenal has failed to sign yet another player, for example, should continue with me once I shut off my smartphone and open my tablet. I may have the attention span of a goldfish, but if an app can stitch together my truncated mobile experiences, the more likely I'll be to recognize the aggregated value of the app.

Which is, of course, just a guess. The thing that is increasingly clear to me in mobile is that no one has yet to figure it out. The development methodology. The business model. Everything is up in the air.

What do you think is the key to a winning mobile experience? And, perhaps more telling, which apps do you find yourself paying for, versus "snacking on"? ®

Matt Asay is senior vice president of business development at Strobe, a startup that offers an open source framework for building mobile apps. He was formerly chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfresco's general manager for the Americas and vice president of business development, and he helped put Novell on its open source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears twice a week on The Register.

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