Of all the revenues that mobile phone OEMs can measure and that are generated via apps (and here I’m excluding in-app advertising), over 90 percent come from “freemium” apps. “Freemium” means free to download and use, but with costs for getting more. A game might be free to download, for example, but if you want to advance to a certain level you might have to buy an item in the game, such as a sword or gold coins.
That means less than 10 percent of revenues come from pay-per-downloads. Consumers shut their pocketbooks and don’t pay for apps before they’ve used them because the transaction is one-sided: the customer is guaranteed of forfeiting cash without really knowing what she’s buying.
This past weekend, I had the privilege of speaking at my 20th Amherst College reunion on a panel that discussed the rise of mobile, social and digital tools that both consumers and marketers alike use every day. Not surprisingly, we fielded questions from anxious users who didn’t understand why their phones knew so much about them, including their location. When we explained that knowing location enables your phone to give search results for pizza, to pick an example, in your immediate vicinity and not just the pizza chains that get the most web visits worldwide, the light bulbs went on.
The takeaway for all mobile marketers and developers: if you are going to ask your consumers for anything – their names, email addresses, gender, location, or money (now or in the future) – be upfront about it. The intimacy, power, and proximity of our smartphones gives us clear advantages over a pre-mobile world. These things also can make consumers nervous that their information will be taken without their consent and used in ways they do not condone.
Mobile marketers that do not explain the value they give in return for the information they request will be punished by unhappy users who uninstall or don’t download apps and have the power to rate them poorly with one tap.
The remedy, thankfully, is really simple. If you want something from your consumers, give them something of value in return. Don’t know how much value to give? Experiment with different offers and see which ones result in the behaviors you most want to encourage. The end result will be users who know exactly what they are getting and what they are giving. As long as your app functions well, that should result in higher user ratings, more downloads and more revenue.