Russell Beattie

Let's take a look at downloadable mobile apps. I really don't care what type - J2ME, Symbian, Brew, etc., but let's concentrate on Java. Here's a neat company called Jamdat that you can check out if you don't know what mobile games look like. I also bought Siberian Strike the other day from another company called Gameloft as well. Learned a lot - the experience in downloading was worth the $4 alone.

And that price was typical. It looks right now that someone somewhere has determined that the average price of a J2ME game is like $4 or $5 an app. Maybe this is the teenager sweet spot, I don't know, but it seems a bit contrived. But hell, if you spend more on a Super Sized Big Mac than on a Java game, then it's "cheap" to just about any teen in the world and that's good. (Some Symbian apps by the way, do cost more, but they also DO more... and there's not a lot of competition right now. I'm sure this will change).

Now here's some questions: What percentage of Java enabled handset owners are going to buy games? And of this percentage, how many games do you think they will download in a year? And finally - the most important - how many games do you need to sell at $5 a game in order to make a living or support a business?

The last one is pretty easy. Say you want to earn $500,000 for your business in the next year. That means you have to sell 100,000 of your Java games. Nice and easy math. Seems like a lot of games at first, but the economics of this may actually work out over the next few years if you believe the reports out there. Here's a quote:

In the US games already account for 15 percent of wireless data usage. In Western Europe the mobile games market is currently estimated at EUR 273 million and could generate EUR 4 Billion by 2008, according to "Mobile Content and Entertainment: Forecasting the Future for Games and Other Wireless Content" a November 2002 report by London's Analysys Research.

And this quick post says actually it'll be $7 billion by 2007. And this one talks about $10 Billion by 2005. The one thing these reports all have in common is how huge the market is now and how enormous it's going to be.

However, let's look at the near future. Let's pretend for a minute there's a standard and easy way to PAY for the Java games - it's a long stretch, but let's just assume it. And also assume that this way of paying doesn't take any money out of your pocket like some of the carrier-deals that take a very high percentage, or even VISA's charges as well. And say for example that your average customer who likes your games will download four games this year totalling $20 in revenue for you. All you need is 25,000 customers and you're all set.

It seems to me - judging by the number of downloads even on the FREE Java games at Handango, that this is a big number of users right now. Unless these analysts are just talking completely out of their ass (which they might, remember the lessons of B2B and WAP), these numbers will ramp up, but for now it seems hard to imagine. Where the report above got $273 million in European game revenue RIGHT NOW, I'm not sure. I don't know anyone who's downloaded a game of any type. Even an SMS game or something like that. Then again, I'm not 17 and neither are the people I know, so let's just go with it.

My point to all this is that you're trying to generate $20 in revenue from your apps per customer per year. You need to do this with little marketing and no percentage cuts off the top.

My idea is this: You can do this with mobile advertising instead.

Like I said in my Crossword post, I don't think advertising for mobile phones is a dead end like it is on the Web. In fact, I think it's a perfect match. Captured audiences are good. As long as the ad isn't overly obtrusive, long, obnoxious, etc. it should work.

So the biz plan simply comes down to creating some games with advertising to see how the idea flies - then if it works, resell that infrastructure to anyone who's interested. Since you only need to generate $0.38 a week per user to match the same cash that you would make selling four $5 games, it seems to me to make business sense. Especially since this price could go even lower as you add more users.

The ads - in my mind - would be "sponsorships" that would come up in a Splash screen. The games would need to download a new ad every week or so. Just like trialware on a PC, you'd have several chances to get the latest ad before the game stops working. Everytime a user downloads a new ad, the advertiser pays for that week. The advertiser could pay more and the game could last longer before downloads. The ads could have also interactive features like "click me for more info" which calls up a WAP page, and a "call me for more info" which prompts to dial a number.

The bad thing about this scheme? Well people get sick of games. And quickly. Thus, it's going to be very rare for someone to use this game EVERY WEEK all year, thus it'll be harder to generate that magic $20 you need from him. However - this will be offset by the OTHER feature of MobadWare: Quick sending of the game to your friends. Basically having the game on as many handhelds as possible is a good thing so getting people to give the game away as much as possible is a good thing too. Maybe if the game is a smash hit, you'll have a massive revenue generator on your hands. Other games won't generate as much. But the idea is that as the number of users goes way up above that original 25,000 you don't have to generate as much money per user.

Finally - since we're updating the user with ads, and sending off SMS messages with links to download the games free of charge to others, why not notify the users of 1) additional downloads and 2) updates to the game they have already with who knows what, different levels or whatever. Think if the app WASN'T a game, but a utility program that checked your email or something. This IS an app that you'll use every week (generating more ad revenue) and you'll be interested in updates.

That's idea #2. Believe it or not there's more.

-Russ