The only way is app… Or is it?

The rush to bring out mobile apps left many marketers questioning their strategic role. But can the development of functions unique to tablets and smartphones now give brands a genuine reason to enter this £2.3bn market?

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The Apple tagline may state “There’s an app for that”, but marketers are beginning to question whether there really should be an app for every part of a business. With more than 425,000 available in Apple’s App Store alone, the glut of options available to consumers means most branded apps disappear without trace.

There have been 15 billion downloads from the App Store worldwide, but just 20% of apps published by large brands were downloaded enough times for the results to be recorded in a recent report by consultancy Deloitte. Of these, only 1% have been downloaded more than 1 million times.

The future of the branded app divides opinion among marketers. Some see them as a way to enhance the service they provide customers – especially if those apps use a smartphone’s functions like real-time and location-based services – but others predict they will eventually become obsolete for marketing purposes.

iPad
App-ortunity knocks: But Apple’s iPad can handle ‘full-fat’ as well as mobile websites

Paul Owers, operations director at fashion retailer Jigsaw, suggests that the functions apps provide are likely to come from services hosted on remote servers and delivered over the internet, rather than by an app stored on a mobile phone or tablet computer.

He predicts: “Gradually it will become an old-fashioned idea of having apps and software downloaded on a physical device. More and more people are talking about cloud technology now and hosted services.

“The app is today’s way because if you are not connected to those services all the time, it is very hard to use the cloud. But, certainly on mobile devices, I think in the longer term apps will be replaced by hosted services depending on the internet coverage that people on the go can access.”

Upcoming 4G networks will mean faster and more reliable mobile internet connections covering greater areas. Wireless broadband is also increasingly being installed in locations not previously served by the internet, such as the London Underground. With this greater connectivity, brands are asking what apps can offer them that mobile websites cannot.

Retailer Marks & Spencer is not yet convinced that offering an app would benefit its customers or market the brand more effectively. At the Marketing Week 1-2-1 Ecommerce Summit, M&S Direct business development manager for new technologies Sienne Veit told delegates: “We have not yet found the thing that is repeatedly useful and engaging. When you see an app from M&S, it will be because it is something that you cannot do on the mobile web.”

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This issue of customer convenience is one reason why a marketer might wish to devote their budget and resources to developing a mobile website rather than a dedicated app. Where consumers wish to do significant amounts of research before purchasing an item, the data they require is likely to need updating more frequently than is possible with an app.

RBS Insurance head of digital operations Colin Madders explains: “If you are just trying to find generic information or find out whether you are covered, there is only so much room you have to play with on a 3.5-inch screen. If you are putting all that information in an app, you have to store an awful lot of information on someone’s phone. And you have to ensure they have ready access to a decent 3G or Wi-Fi connection. The browsing capabilities are better served through a mobile-optimised version of a website.”

There are also commercial barriers that can make apps an unappealing proposition for brands, particularly when developing for Apple’s iPhone or iPad, which at 59% of the app download market is by far the dominant system, according to a survey from Research2Guidance. Apple gives subscribers the option to give their name, email address and postcode to app owners, but no financial details or data on how they consume content.

Jigsaw
Passion for fashion: Clothing retailer Jigsaw prefers transactional websites over apps

In essence, Apple controls the data. This led the Financial Times newspaper to withdraw its iPad app from Apple’s App Store in April in an effort to lay claim to its subscribers’ data. At the time, FT.com managing director Rob Grimshaw said he was anxious not to lose the direct relationship with subscribers at the “core” of its business model.

As well as loosening brands’ hold on users’ data, Apple’s policy of taking a 30% cut of revenues is weighing heavily on those brands that wish to make money from selling apps and subscriptions to their content. So too are other limitations on the commercial opportunities available to them through the App Store. Product placement is banned, as well as incentives such as ’virtual currencies’ earned within a mobile game that allow users to download further games (see Case Study, below).

Despite the successes enjoyed by mobile games, Real Games UK country manager Rumbi Pfende says that apps are still less accessible to most consumers than websites. She notes: “The web offers you a reach that you cannot get with an app at the moment.”

She adds that increasing competition from mobile operating platforms such as Android, BlackBerry and Symbian further obfuscates the picture where apps are concerned. Smartphones and tablets using these operating systems generally cost less than an Apple device, so more consumers are moving towards these brands.

From the developer’s point of view, these platforms place fewer commercial restrictions on apps than Apple. For example, Google’s One Pass tool, which provides a means for Android app developers to charge subscribers for content, takes only 10% commission on revenues compared with Apple’s 30%. It lets the developer set the terms of service between itself and the consumer. It also gives greater access to customers’ data with their consent.

Case Study: mobile gaming

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Among the most lucrative types of mobile app are games. UK consumers spent £280m on mobile gaming in 2010, according to research company Newzoo’s National Gaming Survey, and that figure is forecast to hit £321m by 2012.

Of those who download game apps in the UK, 35% use Apple’s App Store for the iPhone and 9% for the iPad, 24% use Android’s Market and 16% use BlackBerry’s App World.

Yet, according to Rumbi Pfende, UK country manager of game developer Real Games, which commissioned Newzoo’s report, Apple is severely restricting the ability of brands and game developers to make money through in-game advertising.

She explains: “You can’t do product placement or some of the stuff that goes on in social gaming, where in a ’freemium’ game you might handle a can of Coke or win points. You can’t have that points system with Apple, but you can on social platforms or other mobile platforms. That is an issue for me. From a money-making perspective, you are forced to look at other platforms.”

Despite the desire to explore competitors, Pfende acknowledges that these are themselves limited by their lower market penetration. Nonetheless, she points out the success of GetJar, the independent site through which consumers can download game apps to any mobile platform. It was the site originally used to distribute the Android version of the Angry Birds app, a game that has now been downloaded more than 250 million times across all its versions.

Games, like other kinds of app, are likely to see an evolution with the arrival of tablet computers. Indeed, Pfende argues that the popularity of game apps is driving the uptake of new mobile devices, rather than vice-versa.

She suggests that marketers from both brands and gaming companies look to this new area to find the future. “Mobile phones have taken it as far as it can go. You cannot get any bigger without giving them other functions. Tablets are definitely going to be the way for gaming.”

Pfende says these factors are leading her to consider Apple’s competitors: “We are currently looking at Android and BlackBerry. Those platforms are a little more open from an advertising perspective. If you customise games, brands know how games work and they want to be within those environments.”

But while Apple alternatives might offer marketers more choice over consumers’ data and their terms of engagement, all the technology options also place a strain on marketers’ already stretched budgets.

Jigsaw’s Owers says the growing number of mobile devices and operating systems, each of which requires different app technology, is one reason why his brand is prioritising a mobile website. “We went with the mobile web approach because it opens it up to everyone, which allows us to then work out what we want to do next,” he says.

Pfende of Real Games predicts that the majority of app development will in future use open-source coding that will make the apps usable on a multiple mobile devices. Until this happens, however, brands wishing to cover users of the entire range of mobile devices will need to develop for each of them separately.

The long-term trend is towards consumers using a greater variety of mobile devices and app platforms, but brands thinking of app development at present cannot afford to exclude Apple from their considerations. The company is still dominant, and is likely to remain so for several years. The iPad tablet has helped maintain Apple’s market share, and the advent of this and other similar devices is likely to ensure that apps do not disappear completely from the homescreens of consumers’ mobile devices.

The app side

However, this is not the end of the app story. The new style of apps appearing on tablets will need to offer marketers and brands something beyond what is available through the mobile web alone.

Customer publisher Seven, for example, is developing apps through which TV and film companies can deliver video content – including programmes, movies and extras – through the iPad. The technology includes the ability for users to invite friends through social media to view videos together and to write comments that will appear on other participants’ screens during the show. The publisher calls it “social screening”.

According to Seven digital development director Mike Burgess, this style of app is intended to provide a new business model for TV and film distributors. By creating a viewing experience unique to a tablet, Seven hopes to provide an incentive for consumers to pay for content, rather than downloading illegal pirate copies from the internet.

Burgess says: “DVD sales are on the decline and are not going to get any bigger. This is a way of adding value to the customer and generating extra revenue for the content owner. The difference between a digital download and a DVD box set is about $16 (£10). The perceived value of a download is quite low, so in order to maintain that value we need to give the customer something extra in the form of the DVD extras and the extra functionality.”

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Similarly, Madders at RBS Insurance says that apps on smartphones and tablets should distinguish themselves in future by focusing on functions that are useful when not connected to the internet or which cannot be replicated on a mobile website. He points to his company’s Rescue Me iPhone app for its Direct Line insurance and Green Flag breakdown cover brands.

Drivers pushing the app’s Rescue Me button will simultaneously call a recovery helpline and send location data using the iPhone’s global positioning system (GPS), so that a breakdown crew can easily find someone stranded on the roadside. The GPS technology also provides traffic updates in the surrounding area. Renewal dates for MOT tests and insurance documents are stored in the phone’s calendar.

Madders explains: “It is taking advantage of the native capabilities of a smartphone. If you are stuck by the side of the M1 motorway at 4am, rather than trudging 150 yards to the nearest SOS phone, getting your documents out and trying to explain your location, the number is in your phone and it has a mapping capability to show where you are.”

Visual search can take you from ‘thought to bought’ in seconds… The mobile becomes a bridge between data and the physical world

Other brands suggest the future could lie in apps that work with the mobile web to take advantage of the benefits of both technologies.

As Google UK chief executive Matt Brittin told an audience at Marketing Week Live! last month: “You can build really powerful applications within the browser that give you that usability, functionality and interaction.”

He cites Google’s weather forecasts, which appear at the top of its search results when a user searches for the term ’weather’ in a web browser. The user can adjust the time and location of the forecast returned within the browser page. Conversely, Google’s search app features voice and visual search – technology not available on the standard desktop or mobile website – but presents results on a browser page within the app.

Brittin is particularly enthusiastic about the future of visual search product Google Goggles. The technology compares pictures taken by a smartphone’s camera with millions of reference images and returns search results with the closest matches. From here, users can research the item in the picture further and, in some cases, go on to purchase it or a similar product.

“Visual search can take you from ’thought to bought’ in seconds – no text, no typing, nothing. Anything you can see you can search. The mobile becomes a bridge between data and the physical world,” says Brittin.

While this type of technology is still not developed enough to be of significant use to marketers and their brands, it does demonstrate that the role of the app is still evolving.

The past few years have seen brands rush in to create mobile apps without a strategic agenda beyond simply owning one, but it is now possible that new functionality may give apps a genuine reason to exist.

As Seven’s Burgess concludes: “Whereas the web is a huge, sprawling giant, an app can be a nice, discrete package of content that you start at the beginning and finish at the end. These two things serve different purposes.”

If apps can become a channel that offers businesses a genuinely useful opportunity to speak to their consumers, they may be able to revive the sector’s marketing potential.

With insight firm IHS forecasting the market to be worth $3.8bn (£2.3bn) in 2011 – up 77% on the previous year, it is up to brands to stop chasing new technology without purpose and allow the app to be reborn as a critical business tool.

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Q&A: Paul Owers, operations director, Jigsaw

Marketing Week (MW): Why have you not developed a mobile app so far?

Paul Owers (PO): If you are going to go for an app, you need to first make it web-enabled. You have to provide the mobile web offer first and then build it into an app.
Where you have good internet service, you will become less reliant on the app. People who have Apple iPhone apps find themselves having to update them regularly because they keep changing.

If you are going to do an app, you also need to give people more value added into the offer. When you go for an app, you have to look at the things that differentiate you from others and the service you can provide on top of that.

MW: Is that why you chose to prioritise the development of a mobile website?

PO: We could see from the statistics that lots of people were using mobiles to access the main site. If people are out and about and have the opportunity to see our catalogue, look at items, get a bit more information and do some research, it might help the stores and not just the online sales. It is collecting the marketing channels together.

We can adapt the mobile site and present it in 15,000 different browser types. Even if you are on an old Nokia mobile phone, it will do a good job of rendering the site and giving you a good experience.

MW: What were your initial objectives for the mobile website and how has it performed?

PO: The conversion rate so far on the mobile has been surprisingly good. In the first two months, it has produced several thousand pounds. We did not expect to be taking a huge amount of money through it because putting card details into a phone is not something we expected people to want to do.

I am quite surprised and pleased about that – the mobile site was more for giving people information about their closest store along with a bit more information about the products and the range when they are on the go. It was more of a marketing exercise initially, but it is actually proving to be quite good in terms of converting customers as well.

MW: Does this mean the mobile website is likely to be important for making transactions in future?

PO: The desktop website is always going to do better for sales because people are more comfortable with that. They are in a private environment at home and able to use their card details, which people are concerned about. You are not going to get a card out and type the numbers in on a mobile phone, unless you are somewhere safe and secure.

There are improvements to be made in the card services area to make that work well. When we can save people’s card details like PayPal and Amazon do in the background and have that stored in a secure way, the mobile will become easier to use for transactions. But there is a little way to go with that yet.

MW: Are Apple’s mobile platforms more important than its competitors’ for the purposes of marketing through apps and the mobile web?

PO: A high proportion of users in this country are Apple iPhone users, and the iPhone is quite well-suited to the mobile site. We do not tend to push the iPad to the mobile site because the iPad is so big it might as well use the ’full-fat’ version. Outside the UK, people mainly seem to use Android.

I would not go for Apple ahead of everybody else. In the UK, the iPhone is king – there is no doubt about it. But outside the UK that is not the case. In the US, where we also have a business, Android is more predominant. We will look at all of the platforms.

How to set your app apart

Churchil
Oh, yes!: One Churchil-branded app uses the canine character’s catchphrase

Before consumers can evaluate the worth of a branded app, they first need to know it exists. With so many apps available and so few ways to promote them within app stores themselves, this is a challenge in itself – regardless of the quality of content.

Richard Diskin, marketing director of Ghost Telecom – the company behind the FooCall app that offers low-rate international phone calls – explains: “There are so many apps that, unless you are in the top 20 of your category, you cannot expect too many users to stumble upon you. Your activities therefore need to be focused on driving users directly to your app store presence.”

One method marketers can use is to place mobile ads within other apps and on mobile websites, which Ghost Telecom does through the Adfonic network. But different marketing strategies are required for different app platforms. In the Android Market, for example, apps are not vetted in advance in the same way as Apple’s App Store, meaning competitors are of varying number and quality.

“Android is open and has no approval process. That leads to vast numbers of applications on the market that, in our opinion, users really should not be subjected to. That is not to say that there isn’t some rubbish on Apple’s App Store too,” he says.

Once users have found the app, brands then need to give consumers a reason to use it. RBS Insurance head of digital operations Colin Madders says that despite an increase in the number of customers purchasing insurance on mobile devices in the past year, the company has not raced headlong into providing transactional apps. He argues that this is better done on websites where detailed information about insurance cover can be consumed more easily, without having to download it to the device and update it regularly.

RBS Insurance’s brands use a mixture of utility and brand awareness for its app offerings. The apps for its Direct Line insurance and Green Flag breakdown cover brands are designed to help motorists call for recovery and pinpoint their location when stuck on the roadside. Churchill branded apps have taken the alternative approach of encouraging consumers to engage with the insurance brand. In one, users can take photos with the iPhone camera that place Churchill’s dog mascot in the picture with them. In another, users ask the dog questions to which it responds with its catchphrases “Oh, no!” and “Oh, yes!”

Madders advises: “Before you go down the app or mobile website development road, work out the purpose you are trying to serve. It is possible that you might have more than one goal, so you might be able to have a bit of fun and also buy a product through the same medium. But make sure you are going to get the best customer journey.”

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