Screen grabs of 3rdWhale Mobile's app, Find Green, which helps consumers locate healthy, green businesses.
In the past couple of years, the marketplace for smart-phone applications - the programs ranging from the useful (business card reader) to the mission-critical (professional software) to the inane (iFart) - has grown exponentially.
Valued at $2-billion today, the sector is projected to expand tenfold within five years. This growth covers not just the number of apps out there, but the platforms for them, as ever more companies release their own phones: In the late 1990s, there were two mobile operating systems; today there are more than 10. The splintering has made the mobile app market, long driven by independent programmers and entrepreneurs selling their wares virally, increasingly crowded, cutthroat and expensive to penetrate.
Your Business recently spoke with Boyd Cohen, founder and chief executive officer of Vancouver's 3rdWhale Mobile, about his challenges marketing the company's Find Green app and his thoughts on mobile-app revenue models in general.
It seems like everyone is developing mobile apps these days. How did your company get its start?
I have a PhD in entrepreneurship, and I've been a professor of sustainable business for 10 years. I started 3rdWhale with the focus on building green, primarily mobile apps. This was just when Apple was opening its online store to app developers. Find Green helps consumers locate healthy, green businesses - any business that sells products that are certified, or has a green angle to it, or has greened its operations. The app costs $1.99 on the iPhone. We're also on the BlackBerry and Google's Android.
Tell me how your business model has evolved.
We had high hopes, as did hundreds of thousands of others, that consumers would be willing to pay for high-quality content for their smart phones. That proved not to be the case except for some sectors, such as gaming; or very niche, high-end things; or apps affiliated with very well-known brands, like Twitter. But if you're a new brand, like us, getting people to pay for your content, no matter how little it costs, is a struggle.
We looked at the traditional ad models, working with players like AdMob where you get ads delivered to your apps. The problem is you annoy your users. More importantly, that only works if you have a very sizable user base. Everybody in the app development world thinks that you'll be the next big thing and have millions of downloads. But there are no more than 10 apps that have more than a million downloads. The overwhelming majority don't. We've gotten amazing coverage, from TreeHugger to The Huffington Post and CNBC. That helped create buzz and brand, but it hasn't translated into piles of new sales. Even being listed on Apple's "staff picks" section, which did wonders for our sales, was only a temporary peak.
Is it possible, then, to build a business on mobile apps today? Is it a mature enough market?
Most app developers have found it pretty disheartening. You can't justify a full, scalable business off a single iPhone app, or even five apps. If you work out of your home in your pyjamas, which a lot of app developers do, you may be more successful, but if you have a staff and an office, that's hard to do. You need critical mass to monetize the app. You need a big hit.
What have been the biggest challenges for you?
The growing diversity of potentially viable platforms, as well as the rapid evolution of the technologies. You always have to stay on top of your apps because every month [the operating system companies]come out with new software developer kits. The cost of maintaining the apps is pretty significant. Since we're a niche app, we need to be viable on multiple platforms, and you can't find one person to build apps across all platforms, you have to hire several people.
What about distribution, has that been an obstacle?
Distribution isn't the issue, in my opinion. Apple blew distribution out of the water by mimicking the iTunes framework and every other vendor jumped in and came up with their own version [of the Apple Store] Making your apps accessible isn't the problem, but getting noticed is. The massive proliferation of apps has made that far more difficult. Advertising in traditional media doesn't work. If people read it in print, they're a step or two removed from being able to download, and second, you have no idea if they're even using a smart phone. Where you could spend advertising dollars is within another app - say, someone using this app has a high likelihood of wanting your app. Social media is also effective: We had a guy who managed our Twitter and Facebook accounts to reach out to blogger and social media.
How much has the app landscape changed since you started?
In January, 2009, when Find Green launched, competition for us was non-existent. I think there were somewhere around 30,000 iPhone apps then. Now there are 140,000, so the market has almost quadrupled in a year. There's still not much direct competition in our space, but there is lots of competition for user attention.
So how do you plan to monetize Find Green?
Our core revenue model, which we're beta-testing now in Vancouver, is to have green businesses pay us to deliver customers to them. So when a user searches for the nearest green coffee shop, the result will have a coupon associated with it that you can display at the counter on your mobile phone.
Do you think that will sustain Find Green?
Find Green is not self-sustaining right now, but we haven't launched the coupon model yet. Still, we're not an app that the whole world cares about. That's why we have diversified. We've partnered with GenGreen, a U.S. company slightly bigger than us, which has a larger Web database but didn't have a mobile component. We've started a family of eco apps across different platforms, and we're doing projects with other organizations whose values were aligned with ours to build our brand as a leading green mobile app company.
Are there business models for apps that could be promising down the line?
In the game space, you have the micro-payment stuff that's very interesting. People can buy virtual goods within the game. In-app purchasing could be a powerful revenue stream. Pizza Hut or Starbucks could allow you to make a purchase through your phone and then you just pick up the item. In-store purchasing - a bunch of companies are playing around in that space, where apps allow you to buy things without going to the register.
How do you see the mobile app market evolving?
I think you'll see similarities to the trajectory of the Web. There'll be millions and millions of apps, and the cream will rise to the top. You'll see some aggregation. You'll also see an effort for app developers to build in a single code base so their apps can be easily available in multiple platforms. And I think you'll see more of what we're doing: You start mobile and extend to the Web so you have both. Right now, you need a home run to be profitable as a pure mobile play.
Special to The Globe and Mail