Techneur

Reflect7 took the Freemium approach with our latest ad-based app, Final Madness.  Freemium is basically offering up a set of limited features for Free and then charging for Premium features.  Free + Premium = Freemium.  Within the app store, there are two ways to execute this strategy:

1) Have two separate apps: 1 lite version and 1 premium version.

2) Have one app that offers and in-app upgrade.

We did the latter with Final Madness. Thus far, the results are mixed.  The Final Madness conversion rate (the number of people who bought the upgrade out of all the people who downloaded) is a meager 1.55%.  I thought it would raise up to around 5% once March Madness started, but instead, it has tanked a few tenths of a percentage.  Why?

1) More Competition.  When we first released, we had little to no competition in the Free section.  Now there are 10 or so March Madness apps in the Free section and even more in the paid section.  This hurts conversions when initial downloaders can easily jump ship to another app once March Madness begins.  If we would have offered one lite version and one $1 premium version, we would have benefited far greater from our early bird status.  Those traversing the store in early March would have had only a few options and ours was one of the best for $1 at that time.

2) The app upgrade isn’t an out right killer.  This is no appzilla of March Madness.  If you want a more complicated app that can cook you breakfast, then CBS has that covered (and they have licensing).  CBS’s Freemium success hinged on the same initial motif that ours did: (a) have ads in the app to generate revenue and slightly annoy the customer, (b) offer premium features in the premium version (cbs streams live tournament games).  Given our scale, I wouldn’t change that one bit.

Where CBS differed was in having two separate apps, not just one app where you could purchase an upgrade.  This worked well for them as they were able to establish themselves as leaders in both the Free and Paid Sports categories.  They probably also gained revenue from people who traverse only the Paid section and thought that their app looked snazzy without giving a second glance to the free section.  These “blind buys” are eliminated when you only offer one app with an in-app upgrade.

Actually, I can’t think of any monetary or exposure advantage to having just one app.  If I were to do this over again, I would definitely say that we needed two apps: one lite and one premium. 

Advantages to having two apps (one lite and one premium):

Exposure (List) advantage: Since 80% of the apps that are purchased are free, most people who ended up purchasing the paid version of an app will have already purchased the free version.  This gives you two list bumps.  With an in-app upgrade, there is no list bump given when a downloader decides to purchase. 

Monetary advantage: More exposure means more purchases.  In addition, you will have curious customers who will purchase the app outright because they never traversed the Free section.  In addition, you won’t loose any purchases when compared to an in-app upgrade model, because app owners who patrol the free section will have already seen your app.

Summary

2 Apps are better than 1.  Having a Free and Paid app will give you more exposure and hence, more purchases.

-Brian

Five days have gone by since the last installment and we’ve learned what has and hasn’t worked.  Final Madness made it all the way to no. 13 in the Free Sports category.  The March Madness app held tight for three days until dropping back to the twenties.  I’ve crunched the numbers, made some predictions, and our team has restrategized.  Want to know how many downloads it takes to break top 20?  Wondering how many views you need for an ad strategy to pay off?  Reflect7 has gone through the journey and made the mistakes so you don’t have to.  Think of us as the tour guide that always dies in the horror movies, except with smaller man-boobs.  So follow us down this dark cave as we explore the creepy caverns of the app store.

Brief Recap

How downloads correspond to rank:

Last Saturday morning we were sitting in the mid 30s in the Free Sports category. We had high hopes for our conversion strategy: cross promoting to our other 60,000 sports fan customers.  We’re still executing but it has already paid off. 

Stats:

Saturday was big for us, propelling Final Madness to the top 15 spot in the Free Sports category.  Sunday was even bigger, helping us climb all the way to number 13.  We’ve learned that it takes about 1200 downloads to break top 15 in the Free Sports Category.  It takes about 650-750 to place in the top 19th-22nd range. I’m estimating that we need around 1600 to break top 10 on the weekend and about 1300 to break in top 10 on a weekday.

Visibility:

So why do we care about getting to the top of an app category? Visibility. 80% of iPhone users purchase apps from their mobile device.  80% of apps sold are free.  In order to be successful, Final Madness has to have a presence in two very important mobile lists.

1) Top 25 in Free Sports

2) Top 5 when a user searches for the term “March Madness”

Anything ranked lower is beyond the mobile default view and out of the users periphery.

It’s also important to make one app store desktop list:

1) Top 20 in Free Sports

This view is showcased on the sports category main page.  Anyone perusing the sports section on their computer will be exposed to this list.

Guide Lesson: Visibility is key.  If you can push your app to top 15 in it’s primary category, you’re getting great exposure where it counts.

Monetization: Ads or In-App Upgrade

Pleasure & Pain:

Our monetization strategy was simple.  Offer a free, ad-supported app with the ability to upgrade to no-ads within the app.  Motivational experts argue that there are two primal motivators for human action: Avoiding Pain and Seeking Pleasure.

Our strategy was to utilize these emotions in a way to maximize revenue.  Here’s what we did:

Avoiding Pain: We placed ads in an area at the top of the app that would annoy the customer just enough to purchase the no-ads version.  Honestly, I think they are only semi-annoying, if even that.  JP wanted to play a Jonas Brothers song each time a team scored but I said, “JP, we want users to upgrade, not commit suicide.”  So we left it out… for now.

Seeking Pleasure: If a customer upgrades, they will receive push notifications when a game ends.  They will also get all of the brackets and stats from 2003 until present.

Right now our conversion rate is low (around 1.7%), and it might stay pretty low given that a lot of competition has entered the “Free” zone.  I suspect we will see a higher conversion rate once March Madness actually starts.

Guide Lesson: If you have an upgrade mechanism, make sure to not only motivate your users with new features, but also with minor annoyances if they haven’t upgraded. 

Adding it up:

We’re expecting ads to be our main source of revenue.  As of midnight on Wednesday we’re sitting at a whopping $24.05.  That’s enough for JP to buy 24 McDoubles, or in Corey’s case, 10 Happy Meals. 

Stats:

At the moment, we’re assuming that users are spending little time within the app because March Madness games don’t begin until next week.  If you can afford the overhead and the programming time, I urge you to embed analytics code within your apps.  Knowing how long each session is and what parts of your app customers are using is invaluable.  Our ad server, Mobclix, has this code available and an analytics page that looks pretty snazzy. 

I won’t go into the math, but we can guesstimate that the average time per Final Madness user is around 2.6 minutes.  That’s enough time to see 6 ads (30 second ad rotation).  The chart above shows that we have a .69% click-through-ratio (CTR) which has earned us an average of $.53 eCPM (effective Cost Per Mille - for advertisers to display a thousand ad impressions in our app).  Here’s the revenue table for Ad Impressions vs. eCPMs:

A very optimistic projection is that we will have 18,000 active users by March 18th (I’m thinking 16000, but with 18k, it’s easier to display the math).  I also predict that users will double their daily time in our application to 5 mins 12 secs.  We’ve lowered our ad rotation to 23 seconds so those users will see a daily average of 14 ads.  If these numbers are close, then we should show around 252,000 ad impression each day (18,000 users x 14 ads per user).  With Final Madness having a $.53 eCPM, we will probably be making around $125 per day.

As the chart shows, you have to have about 250,000 ads impression/day and attain a $.57 eCPM to pull in about $50k per year with your app.  If you can increase your users session time, than you can dramatically increase the amount of ads you display.

Dead Ads: Part of attaining a high eCPM is getting rid of Dead Ads. Ads that your customers continually see and never click because they’re not interested in that product, or they already have it.  The best way to do this is to serve up the greatest variety of ads possible.  To accomplish this, you need to utilize as many ad networks as possible.  Mobclix serves up ads from several different ad servers.  They also allow open allocation for Admob and Google ads.  If all goes well, we’ll be allocating 30-40% of our ads to Admob before March Madness begins.  Hopefully, this strategy will raise our eCPM and put us in the .7-.8% category on the chart above.

Guide Lesson: So when thinking about monetizing with ads, always use analytics to see how long users are in your app.  We didn’t and now we’re left with very loose projections.  In addition, try to minimize the number of dead ads you show by maximizing ad servers.  This can raise your eCPM substantially with little work.

-Brian

This segment is the first of a multi-part post cataloging our adventure as we push our March Madness iPhone app to the top of the store.  We’ll show you our revenue, stats, and share our experiences while they’re happening.  We’ve even set up a counter website where you can view the app’s free downloads, $1 upgrades, and conversion rate.  So instead of getting important work done, you can stalk the app 24/7 like I do.  We’re basically blogging our entire strategy and analyzing it for your entertainment.

Brief History: Reflect7 & our app Final Madness:

We’re a small software company (3 part-time dudes) located in Lincoln, NE.  That’s right, Nebraska now has software and the electricity to run it (watch out Google!).  Our Final Madness app has been released for about a week and it’s been steadily gaining ground since we started our marketing campaign.  The guys and I took a bet on how much revenue we thought the app would accumulate.  Corey said $15k, JP said $1.5k, and I said $54k.  Initially, I was going to do $15k but it would have been a jerk move to go right above Corey’s estimate, price-is-right-style.  Instead, I went balls out to $54k to make it seem like I had some inside mojo.  But honestly, if Final Madness can just break into the top ten list for free sports, we’d all be happy.  Not because we’re making money, but because we’re finally starting to make sense of the app store.

The Campaign:

1) Our first order of business was to release a simple and elegant app that would never crash.  We adopted the 37signals mantra, “Underdo your competitors.“  I’ve been doing that my whole life, just ask my previous girlfriends. Our mobile developer must have been doing it too, because that is where Corey shined.  He built a simple bracket slide interface with live scoring, push notifications, linked stats for every game, and previous years brackets.  Everything a basketball fan needs to follow March Madness.

2) Next was cross-promoting Final Madness in our other apps.  For the last six months, we’ve had nearly 200 team-specific applications on the market.  Here’s the customer breakdown:

The sport with the $ next to it represents apps that people paid for.  The ones without a $ represent free apps (about 75% of our total). You can see in column O33 that we have about 60,000 customers.

Reflect7 is operating off the assumption that making a top 10 list in any category is a self-feeding process where new views bring in more downloads, which raises your app rank for more views.  Our goal was to leverage our 60k customer base in a condensed time period leading up to March Madness.  If we could convert 33% of our base to Final Madness in a period of 7 days, we’d be looking at 20000 downloads.  That’s almost 3000 a day and enough to get us to the top five of the Free Sports list.  After that, we’d hopefully sustain a top presence from the list view and March Madness hype.

So far we’ve inserted icons in all of our 91 NCAA basketball apps and a handful of our NBA apps.  Final Madness had the largest jump in sales after those updates were approved.  The conversion strategy seems to be working, but we’ll have more on that next week when I crunch the early numbers.

3) Our next move was to build a Final Madness website with a Twitter/Facebook promotion. That promotion began today.  We’re giving fans a chance to win a 40” Flatscreen when they retweet or update their facebook status with our message.  So far, we only have about 5 entries so if you’re reading this, the odds are pretty good. I’ve never done anything like this before so it’s really up in the air.  We’re tracking all the links so it will be interesting to see the numbers next week.

To supplement the promo, we’ve set up a facebook fan page and decked out our twitter page Final Madness style.

Well that’s all for now.  If you’re just tuning in we’re sitting at 2033 downloads with 44 $1 upgrades and it’s Saturday, March 6th at 6am.  We still have a few marketing tricks up our sleeve but you’ll have to wait until next week to read about them.  With this being a big College Hoops Day, I’m anticipating 1000 downloads. Hopefully, that will push us into the top 10 free sports apps (fingers crossed).

Check back next week for an update on our struggle, including details on: stats, Mobclix ad campaign, promo stats, strategy…

-Brian