With unfavorable app store odds, industry is considering alternative models


App stores with millions of users, and a huge appetite for products, seem to provide the perfect ecosystem for game developers. It's a recipe for success, right? Unfortunately, many developers expect that by submitting an Android or iOS application, it naturally attracts millions of users.

Worldwide, hundreds of thousands of people access app stores every hour -- Apple boasts 400 million user accounts alone. They're downloading cool games, discovering new tools or simply perusing the vast marketplace for the hottest finds. It's a harsh reality for developers to consider from the get-go, so be aware of the following inevitable challenges you may face.

1. Be prepared to invest in marketing, OR plan to add it to your daily tasks

Unless the developer has deep enough pockets to invest in marketing, the sad reality is they'll fail 95 percent of the time – mainly for not demonstrating a reasonable return on investment. The remaining 5 percent are catching the attention of consumers and proving its worth to investors.

The key is to appeal to the store content moderation teams that manage digital shelf placement. Unbeknownst to many, there's a gatekeeper who controls the subsequent fate of developers.

Another common misconception is that organic growth will bring you to the top. In reality, Top Charts in both Android and Apple Stores are so dynamic that keeping lucrative positions will require significant investment. In other words, you have to continue to buy traffic (users) to download your application. At the end of the day, if your application doesn't perform well enough to cover user acquisition costs, you'll simply run out of money.

2. Allow for 30 percent of profits to be taken upfront
App stores will keep about one-third of your earnings, which may not seem that bad until you realize the actual costs of developing and marketing your own product. Without any in-store feature or promotion from Google and Apple, 30 percent of revenue is significant, especially considering the odds are stacked against you.

3. Understand the App Store barriers; realize the market is shifting
At any point App Stores have the right to alter or refine their policies. Therefore, your app might not be compliant based on policy changes, which puts you at risk. This has become increasingly difficult and especially noteworthy with Apple's infamous booting of AppGratis from iOS.

With the App Store and Google Play set to reach 1 million apps each, it's natural to project that having a greater selection will drive competition for the shelf space and increase user acquisition costs. The current cost per installation offer is between $1 to $2. So, for a 99 cent app, well, you do the math. Will this mean the end for smaller game studios in the current app economy?

Internet, or browser-based games, allow developers to produce their product as they see fit, not as it fits Apple or Google. The developer has the freedom to integrate and market their games with the audience that developer would want to attract. There is also no restriction regarding what payment methods to offer the end-user, which is actually quite a big deal when you utilize the app store – after all, not every country relies on credit cards such as the U.S. If you plan to release your game or app to a wider international audience, various payment methods need to be taken into consideration. A recent report by Javelin Strategy & Research noted that 46 percent of global online consumers have used an alternative form of payment within the past year, in lieu of a credit card. Based on this, to make big money on a game or app does depend on the ability to accept multiple forms of payment

The functionalities of providing local payment methods become obvious when looking at the fastest growing markets. In Brazil, for example: Local payment method, Boleto Bancário, represents nearly 30 percent of local online transactions. Or look at Russia, where alternative methods of mobile payments represent more than 75 percent of total revenue for some game developers. If the app stores can't support this shift in the market, then it'll lead to significantly less revenue for developers.

Additionally, with the popularity of PC-based and social MMO games moving to mobile devices, expect a revolution in gaming services. This is due to the introduction of LTE networks, which will penetrate the mobile Internet and even tap conventional users.

4. Browsers are evolving
Major browsers realize where the market is headed; therefore, they've increased investment to improve services. Mozilla recently announced its own Web app store and will offer seamless payment methods to simplify the user experience. For quite some time now, Opera partnered with MMO game developers to offer games under its product umbrella.

Having lost their content business to app stores, operators are hustling to reclaim its market share. Browser-based products have demonstrated the ability to be a cash cow when it comes to upselling data-plans. They're also seeking a piece of the mobile ad revenue stream.

Ask yourself this: Do you download CNN.exe or Google.exe on your PC to read news or search the Web? No? So there's no need to hassle with downloads when you can utilize your browser.

5. Know that investors are adjusting
Investors are also not in sleep mode. HTML5 engine Famo.us raised $4 million earlier this year while Intel acquired appMobi for its advanced HTML5 tooling. Disney also recently jumped in on the action. It's acquiring a gaming engine startup to build HTML5 games outside of app stores.

6. Forecast the future
The market is reshaping itself. The question now is determining how fast it'll transition from the conventional downloadable model to the games or apps as a service (GaAS) model?

  • According to Flurry Analytics, 42 percent of iOS/Android customers spend their time in browser and social network apps. Compare that to the 32 percent of customers who spend their time in native games. The paradigm shift in how users are willing to consume content is clear: Customers spend vast majority of their time outside of native game apps.

  • 15 percent of all Internet traffic is from mobile.

  • 1.5 billion subscribers of smartphone services with nearly 100 percent HTML browser-enabled coverage.

As a developer, it's important to know the game is changing and it's difficult to ignore. We must develop apps that work on multiple platforms – from native to social to the Web; they MUST be accessible on all mobile devices. The GaaS model, coupled with HTML5 adaptation, is booming.

Don't be left in the dark following the old App Store model. Understand it's time to step it up, adjust your strategy and take the industry to the next level.