Thoughts on the “studio-ization” of the application business

2 years after its launch the Facebook platform can almost be considered mature and the new belle in application town is Twitter (with apparently already over 11K applications). Due to the very low barriers to entry both platforms have become very crowded in a short period of time so it is time to ask the question what type of application developers can be successful on these platforms going forward. Nobody certainly beats out the single developer that can build and launch an application at very low costs but we have seen a few really successful studio approaches to the application business in the past year. When you look at the list of the most successful of those, RockYou and Slide were leading the pack in the beginning with Zynga and Playfish dominating the rankings as of late. As the Facebook platform matured the business model of these application developers matured as well and I would propose 4 success factors for a studio approach:

  • Focus on one vertical that you understand really well: Zynga and Playfish only do games and they are extremely good at it. Studios like RockYou or Slide with their very diverse application will most likely struggle in the long time.
  • Find a success formula and stick to it: Digital Chocolate describes their secret sauce for iPhone games by Originality x Quality x Ubiquity / File Size x Dev. Cost
  • Leverage the inherent strength of the platform that you are developing for: it is social for Facebook and real-time communications for Twitter.
  • Have a revenue stream besides advertising (i.e. virtual goods): even app developers that run large scale networks like Slide struggle to make enough money by selling ads.

Let me know your thoughts on this topic - and stay tuned for more announcements in the app studio space next week.

Posted: July 9th, 2009 under News.
Comments: 5

Comments

Comment from Danny Robinson on July 9, 2009 at 12:12 pm

I for one, am a big believer that total volume and quality of Internet “companies” is increasing at a remarkable pace. It’s becoming more difficult for developers to raise the visibility of their sites above the noise. Today we have a grassroots, social media marketing, way of getting the word out, but at some point, we will have to grow beyond that. Much the same way that a local music band needs a ‘label’ to go mainstream. But it wont mirror exactly like what the movie/music industry is doing. Consumer Internet is a very trendy space, just like music, movies, tv shows, and most other forms of entertainment. First it was friendster, then myspace, then facebook, now twitter. It should be no surprise that as those industries evolve under the influence of the Internet, consumer internet industries will evolve as well. I see a sort of “meeting in the middle.”

Consumer Internet experts will focus more on the product and not worry about the marketing or promotion of their product. VCs will morph into the equivalent of production companies. There will be specialized shops that you pitch to help you finance, and promote your product. This is very much in line with the vision that Boris Mann and I have for Bootup Labs and is where it is similar to the way that TV shows are produced today.

I could go on, but this is probably worthy of a blog post on my own blog!

Pingback from Extreme University – Startups take note! | Bootup Labs Blog on August 5, 2009 at 11:46 am

[...] See more of my thoughts in the comments of Boris Wertz’s blog post: The Sudio-ization of the application business [...]

Comment from Ian Bell on August 5, 2009 at 1:54 pm

Thanks to Danny for drawing my attention to this. A month later, it’s funny how prophetic Boris’ words were here. Slide’s challenges are now a matter of public record.

I’ve found the expectations that a small developer can break open a market with hardly any effort within these ecosystems to be naive (and so also the expectations of the breathless bloggers who encourage them).

In 1994 I put my friend’s chocolate store, Over The Moon, on the internet with a web site that let you custom-order boxes of chocolate and pay online (through some chicanery). Publicizing this site was easy because there were at the time only a handful of sites on the web were you could DO something, let alone PAY FOR something. So my expectations of having plenty of attention drawn to that site at minimal effort were met quite easily. NOW, were I to do the same thing, it would be a droplet in a pool.

For the first few apps in the Facebook, iPhone app store, or twitter app pools, getting attention and distribution were the easy part. When you’re one of a dozen it doesn’t require a lot of marketing smarts to get a good app sold. When you’re one of 11,000 however, the price of fame is much higher.

That doesn’t mean that the opportunity is diminished. What that does mean is that the cost of customer acquisition is likely to be much further away from free than it was for the early apps. Therefore, you’ve got to treat it like a business — and promote it like any other product — from Day One. Astonishingly, many investors are put off by this.

I think the answer to why that is discouraging says a lot more about the investors than it does about the ecosystem or the application in question.

Pingback from Assessing Competition Risk for Digital Media Startups | Bootup Labs Blog on October 1, 2009 at 12:19 am

[...] may soon fight for the elite PD guys the same way that TV networks fought for Dave Letterman. See Boris Wertz’ post (any my comment) to get a glimpse of our [...]

Pingback from Technology news – Techvibes Blog on October 1, 2009 at 4:25 pm

[...] may soon fight for the elite PD guys the same way that TV networks fought for Dave Letterman. See Boris Wertz’ post (any my comment) to get a glimpse of our [...]

Write a comment