Wednesday, January 5, 2011

Cross-selling iPhone Apps

As some of you may know, I created an iPhone app last year, PottyMouth! The app translates popular cuss words in different languages along with the audio rendition. The app has been downloaded in 60+ countries and continues to grow. Now, the only way to buy the app is through app store run by Apple Inc. 

While thinking about marketing strategy for PottyMouth!, I got an idea: Wouldn't it be good to package this app along with a similar product and sell it as a "bundle" e.g., there are several books on cussing on Amazon e.g., Creative Cussing and many others. It is very likely that the person buying this book could also be interested in buying PottyMouth! app. This would benefit all stakeholders: Apple (additional channel coverage), Amazon (more sales plus increasing stickiness with every increasing mobile apps users) and App developers (more sales). 

How can this scheme be implemented?

For paid apps, upon app launch in the app store, Apple currently provides a certain number of download coders to app developer so that the developer can distribute these codes to people who may be interested in reviewing the app and who don't want to pay for the app. 

There are 2 ways these codes can be used for cross-selling apps on a different website:

1. Apple has a tie-up with these online retailers and provides them with its database of apps. Online retailers can use "match-making" technology to find out which of their existing products match-up with the apps (e.g., most online retailers suggest similar products on a product webpage... Amazon recommends buying a group of books together at a discount). If the online customer is interested, he/she buys the app as well and gets a download code which can then be used to download the app. Today, revenue sharing model between Apple and Developer is 30% and 70% respectively. With introduction of another channel member, I'd recommend following share: 25% (apple), 15% (online retailer), 60% (app developer).

 . Doesn't require intervention of app owner. 
 . Allows simultaneous release of an app on Apple's app store and multiple online retailers. 

 . Search & Mgmt. Overhead: Apple needs to have tie-ups with these vendors.
2. Developer buys the codes from Apple (at a discount) and then partners with online retailers to sell them to end customers e.g., app developer pays apple 25% of selling price of the app and then later shares the remaining with the online retailer: 15% (online retailer) and 60% (app developer); revenue sharing is essentially same as in previous case.

 . App owners are not restricted by Apple's online partners.

 . App developer needs to spend capital in buying the app codes and there is no guarantee that all these codes will ultimately be sold. To mitigate this, Apple can choose to forego revenue until the app is purchased by end customer although this could be difficult to implement.

 . Managing several online retailers could be challenging for the app developer... in this case, I suppose a new syndicating entity may come which creates syndicating infrastructure; in this case it increases channel members by 1 i.e., App Developer, Apple, Syndicate Agency, Online Retailer, Customer.


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