The one percent: on the winner take all App Store and the importance of positioning
One of the last magazine articles I wrote, before starting Whiteboard, was about the so called “one percent”. You know, the wealthiest percent of the population that, in Europe, holds 20 to 25 percent of the total wealth. Or more: according to one Swedish researcher I spoke to, that’s probably an underestimation.
Research from Canalys yesterday reminded me of that wealth distribution. Canalys found that the top 25 app developers take the lion’s share of the revenues in Apple’s App Store as well as in Google’s app store (Google Play): 25 developers rake in 50 % of the income of the App Store.
“Based on daily App Interrogator surveys, Canalys estimates that just 25 developers accounted for 50% of app revenue in the US in these stores during the first 20 days of November 2012. Between them, they made $60 million from paid-for downloads and in-app purchases over this period.”
Most of the top earners in the App Store are game developers, says Canalys: Zynga, Electronic Arts, Disney, Kabam, Rovio, Glu, Gameloft and Storm8’s TeamLava. The only other app is Pandora, a music service (that was in the news yesterday because its stock price took a severe hit after it missed analyst’s earnings expectations).
Canalys thinks that part of the success of the top app developers is that they have multiple titles generating revenue. Another part of their explanation is that ‘discoverability is a huge issue in the Apple App Store’. Meaning: having a huge brand is key to becoming successful. I personally think that the first is probably the result of the second: these developers have multiple revenue generating titles because they have powerful brands, or found a way to get mass distribution fast.
If you look at (relative) newcomers like Rovio and Zynga, it’s clear that they have been very savvy about marketing and distribution. Rovio has a knack for clever partnerships ranging from NASA and CERN to candy makers and Star Wars. Zynga figured out how to use Facebook to get distribution traction. (You might also want to read what David Sacks of Yammer says about distribution, and Martin Varsavsky).
So the App Store, just like the web before it, has a very outspoken fondness for winners, simply because any efficiency advantage in terms of marketing and distribution, however small in percentages, will be huge when added up over a period of time. There might be more niches with winners today, but it’s still the winners who get the biggest part of the pie. (I’ll leave it to the specialists to discuss whether this means that the long tail is an illusion, or that it means that we are living a long tail reality, but with ‘superstar effects’ - you’re welcome to discuss this in the comments, as I enjoy good, deep, geeky discussions about these things).
It’s useful to remember that this effect will likely play in all the new technologies that are supposed to hold a promise today – the cloud, 3D printing, online publishing…
Promotion or positioning? The battle for consumer’s minds
So while Canalys advocates promotion for aspiring app developers, I think it’s just as useful to think very hard about positioning. Rovio is able to secure those tie ins and cobranding efforts in a large part because they are a market leader, not the other way around. No amount of promotion by the number two in the market will overcome this handicap. On the contrary, every euro you spend on marketing in Rovio’s niche will probably reinforce Rovio’s top of mind position, as Al Ries and Jack Trout warn in their marketing classic ‘Positioning: the battle for your mind’ (1981)
Mobile games: Rovio. Social games: Zynga. Online video: YouTube. Online audio: Soundcloud. European entrepreneurship: Whiteboard What’s yours?
Photo: “we are the 99 percent” (Occupy Wall Street, Flickr)
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