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The tide is raising all boats in the world of iOS and Android apps.  Record Apple iPhone and iPad sales numbers each quarter, for example, make for very exciting news to the development community – lots and lots more consumers to buy everything from games to utilities to books.  With an install base over 460MM units across all platforms since 2007, the opportunity is seemingly tremendous for a developer to plunge in with a killer app that will make millions of Dollars.

But the wonderful growth numbers we see in the overall growth and size of the device side of the markets masks a very harsh reality beneath the surface on the app side.  The reality is that most of the sales, most of the revenue, and most of the success on the app store will be generated by a small minority of apps – it is the Pareto Principle at work.  There are over half a million apps available but it is the top 10, 50, 100, and 300 that make the lion’s share of revenue.  The remainder – still well over half a million in that camp – fights for niches and scant revenue.

For many developers the hypercompetitive nature of the app market can prove to be a bloodbath, particularly in some areas of the app store that are more hit-driven or susceptible to changing consumer tastes.  This then explains why some developers resort to various methods – some in the gray area – to get that competitive edge.

For example, aside from the apps that are copycats of existing successful brands and whose developer’s intend to swindle customers out of money (read: Apple removes several iOS copycat games from one offending developer), some app developers are resorting to “appayola” to give their apps a boost up in the ranks (particularly the free app category in the hypercompetitive games category) in the hopes that true consumers will become aware of the app, install it and hopefully buy it or its in-app purchasables.

Basically, it’s akin to a multistage rocket:

STAGE 1: Build an app (a free app perhaps with in-app purchasable) and pay third party firm $5,000 in appayola for third party to get thousands of people to install the app in a given store to boost it up the ranks. STAGE 2: Increased appayola downloads then trigger rapid rank accession and app becomes visible in top 10, 50, 100 or 300 rank(s). STAGE 3: Real prospective users who see the app in the top ranks – which is where most apps are discovered and hence make most money – click install and hopefully purchase in-app items. STAGE 4: The virtuous cycle continues and, viola, a hit app is born.

However, such attempts to game the system are being slapped down by Apple as they want nothing but the best possible apps to make their way up to the top of the charts – genuinely and legitimately.  The logic goes that if an app is really, truly good then the invisible hand of the market will surface the app to the top of the heap.  To be sure, there is a great deal of logic and validity to that view, but it is also true that developers need to think strategically and come up with innovative marketing tactics to increase the probability of success in an incredibly competitive market.

In past posts we have touched upon topics such as Price and Promotion (two of the Marketing 4 P’s) but today’s post will focus on the brilliantly employed strategy by Out Fit 7 in the areas of Product and Placement (the other two of the Marketing 4 P’s).  What makes the strategy laudable is clearly borne by the 300MM downloads that they have seen with their products to date but also by the subtle tactics that they use to defend their gains.  To understand their strategy we need to begin with an understanding of what is called the “Blue Ocean Strategy.”

The strategy certainly had its origin since the time products were first brought to market (and has gone by many names, such as green field marketing) but as a strategy it was codified and described in detail in this book:

A summary of the strategy is reflected in the table below.  In essence, it says that you should create your own uncontested market that you and you alone can serve.  It is certainly easier said than done and requires innovation, creativity and a keen sense of understanding trends.  What is more, the market you create needs to have a high degree of profitable potential to justify the endeavor – large number of potential consumers, high levels of consumer willingness to pay, and high rates of consumption, etc.  But when it is done correctly the results can be tremendous, and this is how Out Fit 7 have become so successful.

In all likelihood when Out Fit 7 scanned the app market they saw the tremendous growth and publicity that the games category was receiving, but with that growth and publicity came the deluge of competition.  More and more games made their way into the category turning what was in 2007, 2008 and early 2009 a blue ocean into an increasingly competitive red ocean in 2010 and 2011.   Sure there would be winners in the games category but the probability of success diminished over time, particularly as the ocean saw the influx of larger competitors with deep pockets, well-known brands and strong marketing muscle – just look at the Top Paid and Top Grossing Ranks to see a who’s who of top game publishers.

At the same time another realization was made: games are clearly a form of entertainment, which means that on the iTunes App Store the Entertainment category could be shaped into an uncontested market space from a ‘Game-like’ perspective.  Coupled with this realization came the fact that as iOS became more mainstream and broadly adopted the user base would not only expand but also diversify to include different tastes and user habits.  Thus, the chances of users exploring different parts of the app store to find new innovative apps would surely increase.

And so the Blue Ocean Strategy for the Talking Tom series was born, a game-like product with innovative voice recognition technology and 3D visuals.  As of this writing, according to the Out Fit 7 Web site, there are 16 different apps in the Talking series, some of which are paid apps and some are free (with in-app purchasables).  In other words, they own the category for game-like Entertainment apps.

A subtle effect of how this Blue Ocean strategy was adopted may also be seen by how their Entertainment app icons (free and paid) stand out so much more than, say, a given game app in the free and paid sections in Games.  Here is the Games category (as of 2.16):

The icons are a veritable color explosion – large characters and bright and attractive colors screaming for attention and installs.  Now let’s look at the Entertainment category:

Though there have been a few new entrants into the category (akin to Talking Tom) many of the other steadfast players are the likes Netflix, HBO, xFinity, SketchBook Pro by AutoDesk, and other completely different apps with more subdued icons.  For instance, when you look at the top 3 Top Free Entertainment apps, you will see the powerful brands Netflix and ABC network’s app, but juxtapose it is the newly released Valentine’s Day themed Talking Tom app, “Tom’s Love Letters”.  If for no other reason, Out Fit 7’s app gets a great deal of credibility by being in the company of these two other very disparate apps and also separates them rather distinctively.

In other words, Out Fit 7 has cultivated a highly successful Blue Ocean Strategy that is serving them very well – to the tune of 300MM downloads and counting!

Remember, whether you have 1 app or 100s’ of apps sign up for a free account to gain access to data analytics and metrics to better understand the performance of your apps, including our new Overview page that features:

• Return on Sales
• Unit Margin
• Break-even Analysis
• Price Elasticity
• App Icon popularity tracking – New Feature
• Social Media Trends – New Feature
• Global Market Popularity Heat Maps – New Feature

Best regards,

The Analytical Path Team