Ngmoco made headlines last week when Jason Kincaid at TechCrunch reported that Google Ventures made an investment valuing them well above $100 million.  It’s amazing, considering that August 15^th marks only the ten month anniversary of Apple supporting in-app purchases through free apps.  In this post, I’ll brief you on key market information relating to the business of freemium mobile app publishing.

The Challenge

There are now over 244,000 apps in the App Store.  Getting your app noticed is no small feat.  It is even more difficult for paid iPhone apps since they comprise 72% of this total while contributing a far less proportionate number of downloads.

The Opportunity

Free apps are getting more than four times the number of installs as paid apps (source: Admob ‘09).  A few developers, like Ngmoco, are earning more money from free installs than most earn on paid installs.

According to data provided to VentureBeat from 21 companies, iOS freemium game apps are generating $14.66 per user per year.   Neil Young, CEO of Ngmoco, said in an interview hosted by Jason Calacanis on 6/29, that WeRule had received 2.5M unique installs leading to high hundreds of thousands of daily active users.   WeRule was only released in the U.S. on March 20, 2010.  Let’s assume that WeRule averages 800,000 active users for an entire year with no additional installs.  This would lead to revenue of $11.7M per year and $4.68 per install. The average cost of a paid app ($2.98) is less than the revenue generated for a free install of WeRule.

How does Ngmoco make so much money per user?

Inside Social Games reported that Jason Oberfest, VP of Social Applications at Ngmoco, told them that they were earning 40% of their revenue from in-app virtual goods purchases and the rest from other revenue sources including brand and app-install advertising.

Distimo reported in July that just 2% of iPhone apps leverage in-app purchasing.  The freemium model is working for more than just games too. Distimo reported that a significant number of apps from a range of app categories are leveraging in-app purchases including top performers. 

Freemium Mobile App Publishing Costs

Global app store revenue is expected to grow at 60%+ CAGR for the next few years according to many analysts.  Freemium mobile app revenues will grow even faster.  A market as ripe as this one is going to attract a boom of competition.  However, the costs to develop and market a freemium mobile app are modest.  The following is a high level breakdown of freemium iOS app publishing expenses.

The most basic freemium mobile apps require native iOS development as well as a web application backend.  The costs vary greatly depending on the complexity of the app.  A couple of established for hire custom game development studios have shared quotes with me ranging from $30,000 to $300,000.

There is plenty of organic installs being generated for freemium mobile apps. To accelerate the growth of your user-base I recommend that you also spend some money advertising your app.  Incented app advertising ranked the most effective method according to a few dozen developers we surveyed.   You can buy incented app distribution from W3i and others.  Create a campaign that drives around 50,000 installs daily for a couple days to achieve a top 50 ranking in the App Store.  100,000 incented app installs will cost you around $35,000.

Are you looking for a strategic partner and/or investor for a freemium mobile app? Contact me (ryan.weber at W3i.com) regarding an opportunity to raise $10,000 without giving up any equity for funding your freemium mobile app.

Ryan Weber, Vice President of Corporate Strategy & Co-Founder, W3i, LLC
Entrepreneur and pioneer of internet and mobile marketing, focusing on increasing revenue and distribution for mobile applications.

St. Cloud, MN, August 12, 2010 – The W3i Content API is launching at Affiliate Summit East 2010 for all W3i affiliates.  The W3i Content API simplifies the display of W3i content on affiliate web sites providing access to the full W3i content catalog of over 500 free downloads, creating new content experiences for users –driving affiliate revenue growth.

Through the new W3i Content API affiliates display W3i content with total ease eliminating labor costs.  Affiliate sites are integrated with the W3i Content API so W3i content can be pulled dynamically.  Free downloads are available in popular download categories:  video, music, games, social networking, utilities and desktop entertainment.    

The W3i Content API allows affiliates to create new content experiences by requesting the type of content to be displayed on a themed web site.  Web sites can be built quickly for various market segments.

By using the W3i Content API affiliates can also capture the long tail of consumer interests to drive earnings.  As new download content is added to the catalog, it will automatically populate to the web site using the Content API.

The W3i Content API is easy to implement.   Each W3i content, category and content type have associated information. For example, content has associated information such as content name, description, images, etc. Content is assigned to both categories (such as Holidays) and a content type (such as Games). Make a query to request all content or the content belonging to a category or content type that you want to display on your site and the API responds with what is requested. Display only the information wanted on the site. The W3i Content API is a RESTful API and returns information requested in the form of XML.

“W3i’s Content API is a powerful tool that gives W3i affiliates easy access to W3i’s expansive catalog of free downloads.  Now affiliates can easily build sites that drive incremental revenue during peak seasons by creating a download portal that showcases all of W3i’s free downloads.  The W3i Content API is our commitment to partner growth, speed to market and ease of use.” comments Eric Montag, W3i Product Manager. 

Current W3i Affiliates can access the W3i Content API by going to the W3i Associate Portal: associate.w3i.com. To become a W3i affiliate, visit W3i.com and click on Affiliate Sign-Up in the Make Money menu drop-down.

About W3i:
W3i increases revenue, distribution, and engagement for consumer desktop applications, browser add-ons, and mobile applications.  On the desktop app side, app publishers get paid for recommending relevant applications giving advertisers a mass, performance-driven distribution channel.  On the mobile side, W3i Mobile Solutions offers low-cost, targeted advertising campaigns for iPhone apps on a pay-per-install basis.  W3i’s solutions use the company’s InstallIQ, intelligent installation technology, for recommending PC and mobile applications that users value.  InstallIQ was optimized on more than 400 million app installs–including more than 100 million in 2009.  W3i will prove to be a valued partner in growing your application business.  To learn more, visit www.W3i.com.

Press Contact:
Deborah Manthei
Director of Marketing Communications
320-257-7571
deborah.manthei@W3i.com

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What are Sponsored Advertisements?

Sponsored advertisements are ads that are paid for by one party and presented by another.  Cost per click ads that appear on Google are one example of this type of advertisement.  Advertisers pay to get their message in front of a user and the user receives something of value, like Google Search (or other Google products), for free.  Sponsored ads that appear within free applications are another example of this type.  These advertisements support applications so they can be downloaded and used for free.

Sponsored Advertisements Get a Bad Rap

Advertising within applications is a vital component in keeping some applications free for download and use.  However, sponsored advertisements in free applications have gotten a bad rap and are wrongfully associated with invasive or negative behavior such as software that is unknowingly installed on a user’s computer solely to collect user information without their consent.  This association is incorrect, as sponsored ads, when properly presented, provide an excellent way of making consumers aware of products or services that may be of interest to them and, as stated earlier, support development of free applications that people want.

To maintain a great user experience, free applications with ads should always follow industry best practices which include:

• Ability to easily uninstall the application
• Displays unobtrusive advertisements within the application
• Does not collect personally identifiable information
• Does not monitor activities

W3i Goes Beyond Industry Best Practice Standards

W3i connects people to applications.  Users receive quality, free applications and are given other application recommendations during the installation process.  Some of our recommended apps utilize sponsored ads to pay for further development and to keep the app free.  To support this, W3i goes beyond industry best practices. W3i’s intelligent installation manager, InstallIQ, uninstalls itself after installing the selected applications, it only installs applications that the user selects and each application has a disclosure which includes its terms and conditions as well as any privacy policy.  In addition applications have instructions on how to uninstall and can be easily uninstalled through the Control Panel/Add and Remove.  InstallIQ never collects personally identifiable information. 

W3i is committed to user trust and credibility, which is why we are proud that InstallIQ is the only installation manager that is TRUSTe certified.  InstallIQ only recommends applications that meet standards for being tested for malware and spyware set forth by TRUSTe and W3i.  W3i tests and monitors all applications, even those that display sponsored advertisements, within the W3i Application Network to remain compliant to these stringent standards.

Sponsored advertisements, when used properly, help users receive free applications that provide value and, at the same time, support the application developer.  W3i’s Application Network proves that sponsored ads in apps do what they are intended to – give the user what they want for free.

Eric Montag, Product Manager, W3i, LLC
Eric is a Pragmatic Marketing Certified Product Manager and uses his experience in internet marketing to lead the charge in product research, planning, and execution from both a consumer and business standpoint.  

Web 2.0’s theme was the Power of Platforms.  It should be no surprise that a lot of people positioned their solutions as a platform, even if a year ago they were considered a web portal or something similar.   Some of the other non-platform related topics were Freemium, APIs (certainly not a new technology, but definitely a big buzz), and HTML 5.

With this theme, and cloud applications seeming to be around every corner, I expected almost every conversation to be about the cloud or Mobile.  But, there was not nearly as much talk about the cloud as I expected, although Microsoft was prominently displaying its suite of “cloud” products/platforms, Azure, in its booth.  There was not a lot of additional talk about the cloud; and most surprisingly, nothing about Google Chrome OS, despite its scheduled release for later this year. 

I think the highlight presentation, and rightly so, was Tim O’Reilly’s, “The State of the Internet Operating System”- a highly recommended read.  In this, he poses the question,  “What is the operating system of a Google or Bing search? What is the operating system of a mobile phone call?” They all work the same across many devices, so what is that operating system, where does it live and who will decide?  It seems like a crucial question to answer as we move forward.   From my experience, I see this as another cycle.  It was nearly two decades ago that mainframes and dumb terminals allowed organizations to centralize the workload of computing in an organization.  Now it appears that the cloud and netbooks will be taking that same concept to the next level. 

There was a lot of talk about Facebook as a platform, and a new positioning of Facebook seems to be no longer a social network, but the platform for the internet.   Facebook clearly stated that they want to be the place that a user does everything from on the internet, everyone’s personalized hub of information. 

Freemium and Beyond

There was a lot of talk about Free and the freemium model.   Chris Anderson, the author of the book, “Free: The Future of a Radical Price,” moderated a forum with Christopher Dean from Skype, Brad Jefferson from Animoto, and Joe Kennedy from Pandora sharing their experiences with the freemium model.  Pandora’s story is especially telling in that they started with a subscription model, went to an ad-supported model, and then offered a higher-quality freemium to their current ad-supported model, with no ads.  The trick, they say, is to make sure that your free product is really good. 

Another presentation from YouSendIt’s co-founder, Ranjith Kumaran, focused on the lifetime value of freemium clients.  This was a great presentation on applying the analytics that matter, such as your cost to convert a relationship to the lifetime value and not just “vanity” analytics like number of clients. 

In addition, there was a well-attended ‘Birds of a Feather’ session on Free and application discovery, as well as many other discussions on virtual currency.  Ironically, there was not a lot of conversation about the newly announced Facebook Credits and the impact they would have going forward.

APIs

Facebook may have started the big buzz on APIs just before the conference with the announcement of Open Graph, but there was plenty of information on APIs at the conference.   The strength of the API is to allow the community to fill in the gaps in your application.  The owner of the API still controls the logic and data layers, but it is the interface that the community has access to.  This power means that the owner of the API still maintains the valuable portions of the application, while many users can control the user experience. 

Another advantage of using APIs is that the API puts the workload on the server, not on the interface, so it’s not a CPU hog.  This allows for a much better battery life on the myriad of mobile products that are now available.

Mobile

This was a show with a theme about platforms, but mobile as a platform has taken a decidedly different twist in the past several months.

There was definitely a presence, but not so much on the mobile phone, but on the iPad.  Nearly every presentation given for a web app was done through an iPad.  In fact, the stage included a specific setup to allow presenters to set their iPad down and show you how their application worked with the touch-screen interface. 

The use of the iPad allowed a dual purpose for people demonstrating their products; it showed the strength of HTML 5 as well because it forced everyone to avoid Flash, since Flash is not supported on the iPad. 

HTML 5

This had the potential to be uncomfortable, especially when Kevin Lynch of Adobe was put in the interview chair.  Mr. Lynch praised HTML 5, saying that Flash filled a void that was needed, and now HTML 5 just posed a challenge for them to fill the next void. 

Of course, there were iPads showing up in a lot of demos.  Scribd announced they had switched completely to an HTML 5 format and were no longer using Flash for the documents that they posted.   The two big hot points for HTML 5 are:

• Flash optional – a large amount of the video capabilities from Flash can now be handled by HTML 5, although, HTML 5 does not prohibit the use of Flash for the things that it is still best for, such as color correction and audio control. 
• Web fonts – a simple solution with a powerful impact; companies using unusual fonts, meaning not Arial or Times, for their branding do not have to make graphic images to place on their website.  They now have as much control on the web as they do in print and the information is indexable, which, of course, graphics are not.

With these two advancements alone, HTML 5 was looking to be the greatest thing since sliced bread.  

All in all, a great Web 2.0 conference!  The Keynotes are available online as are many of the presentations for the key topics of Freemium, APIs, Mobile and HTML5.

If you were not able to attend the conference, I would strongly recommend visiting the site http://www.web2expo.com/ and viewing some of the presentations. 

Kristin Oberhaus, Product Manager, W3i Holdings, LLC
Kristin has over 13 years of product management experience and is a certified usability analyst. She is an avid believer in pragmatic marketing.

MinneBar 2010, an (un)conference aimed at getting Minnesota tech and design communities together, was held on May 22^nd at Best Buy Headquarters.  Here’s a short recap of the event and what’s new on the Minnesota tech scene:

Opening remarks were by MinneBar co-founders Luke Francl and Ben Edwards. They thanked sponsors, including W3i.

The first session I attended at MinneBar 2010 was “Legal Implications of Limewire on File-Sharing Business Models” by Ryan Miest of Robius Kaplan Miller Ciresi, which described how most of the copyright concerns involving file-sharing networks go back to the Sony BetaMax VCR law suit from 1984. No one thought Napster had a leg to stand on. Others like Grokster andLimewire were able to continue after learning not to be centralized like Napster. The Limewire decision is likely to be appealed with respect to the courts findings of personal liability of their CEO. I didn’t think they sufficiently covered veil piercing.

Graeme Thickins briefly introduced me to Rick Mahn founder of Social Media Breakfast Minneapolis and Myke Roventine. I joined about 75 others to hear Myke’s MinneBar session, “Social Web Design: One Step Forward, Two Steps Back”. Myke pointed out what he felt were flawed design strategies by the market leading social media players like Facebook, Twitter, Google and Yahoo. Does everyone need to put their Twitter feeds on their blog? The Twitter feeds miss the context of the conversation, and aren’t making the web better when being on others’ blogs. He also commented that Facebook has changed functionality multiple times unnecessarily, such as moving the search box several times over the past couple of years. These unnecessary changes caused confusion for users. He also commented how Twitter’s “infinite scrolling” for tweets could be improved by adopting additional UI controls such as those found on BlipFM. He said the big guys are trying the changes instead of user testing. Phil Wilson remarked during the session how this was “try fast, fail fast.”  Also during the session Steve Borsch announced that he just deleted his Facebook account due to privacy concerns.

Next I went to “Bowling for Market Share- How to Grow Your Startup by Narrowing its Focus” by Curt Prins. Curt provided very good start-up marketing advice. Curt laid out his very pragmatic approach to B2B marketing for tech start-ups, and the developers in the audience definitely seem to embrace his methods.

Over lunch, Robert Stephens who was so gracious to advocate for Best Buy to allow Minnesota techies to use their space, briefly remarked on Best Buy’s strategy around digital televisions, and his recent trip to Google IO.

Next at MinneBar, I caught Aaron Kardell’s iPhone app marketing session entitled, “Getting started with iPhone & iPad Development.” Aaron is the founder of Performant Design and developer of the popular iGarageSale app.  Aaron shared his lessons learned in iPhone app marketing, such as the importance of getting on the top 100 lists, requesting app store reviews within your app, ideally after the user has been using it for about a week, some ideas on how to get noticed by Apple (such as taking out ads in Cupertino on Facebook), using roadblock ad campaigns at popular Apple/Mac blogs, using incentive app downloads to burst your downloads, and using vendors like Tapjoy and Flurry App Circle.  After the business discussion, Aaron coded an Italian food finder iPhone app using Yelp’s API and Mapkit.

The next MinneBar 2010 session I attended was “How to Measure P&L When Your Price is Free” by W3i’s Product Manager, Kristin Oberhaus. With users wanting free apps on the Internet, you need to balance the demand gained for free app versus paid app promotion.  Kristin pointed out various models to drive revenue for free applications, including cross-subsidy, three-party, freemium, and nonmonetary.  When free is your model, your P&L must be based on the value driven by your free app and not the price.   

Next I spoke on a panel of Minnesota tech thought leaders, and discussed “How Can Minnesota be Better”. Thank you to Jeff Pesek and Mike Bollinger for inviting me to participate. The session was largely centered on the culture of risk aversion in Minnesota, how Minnesota tech start-ups need to focus on home runs and not just niche singles and doubles, and funding. Jon Dahl, co-founder of YCombinator-backed, Zencoder said that if Minnesota was going to try an incubator concept like YCombinator or TechStars the incubator would need a lot more cash, given the lack of local angel funding and VC activity, and a mentorship program– both essential elements of YCombinator.

MinneBar 2010 proved to be a great place to network with top Minnesota tech experts. I spent a couple of hours after the sessions ended schmoozing with several new faces, including Derrick Shields & Dylan Petersson & of WebproLeads, Matt Bauer of Pedal Brain, and Thomas Grabowski, co-founder of LogLogic. I also listened in as the first ever Minnespark award winners were announced. 

Further, it was refreshing to hear a lot of buzz about Minnesota tech jobs. I gathered that W3i is not the only company hiring right now. It seemed to be a common theme that Minnesota tech jobs are in abundance as many of the companies present indicated they have positions available.  Minnesota Recruiters survey indicates that there is optimism for job growth in 2010 and an increase in personal job security. Minnesota’s tech scene has a large, highly skilled, and growing workforce demonstrated by the energy and attendance at MinneBar and the tech job buzz being generated there.

Thanks to the organizers and attendees, along with Best Buy for allowing us to use their campus (which is absolutely cool) to promote Minnesota tech and design.  As evidenced by the increase in attendance over the 2009 event, MinneBar rocks.

Rob Weber, Vice President of Business Development and Co-Founder, W3i, LLC
Rob is an Internet marketing pioneer with over ten, profitable years evolving W3i in the consumer application industry.

Why is the opportunity for marketing free apps larger than paid apps? Analyzing user engagement trends, mobile app advertising trends, and details regarding the lack of attention being given to free apps compared to paid apps gives some strong indications. The explosive growth of mobile apps since Apple’s App Store launched on July 10, 2008, has led to increased competition as well as innovation. App store revenues are expected to grow from $4.2 billion in 2009 to $29.5 billion in 2013. Mobile advertising expenditures are predicted to increase 28 percent to $914 million in 2010.

The value of free mobile apps is not limited to advertising revenue; free mobile apps are also the leading influencer on paid downloads and support the rapidly booming virtual goods business through in-app purchasing. The importance of free apps is misunderstood by developers, as the number of paid apps is disproportionate to their demand and revenue contribution.

Free Mobile Apps Drive User Engagement

Android, iPhone, and iPod touch users are averaging 79 to 80 minutes per day engaged with apps. This is phenomenal usage.

Flixster, the leading online destination for movie enthusiasts, touts 30 million unique visitors per month and 2 billion movie ratings. Flixster found that mobile apps provided superior user engagement over their mobile Web page. Flixster apps offer an easy way to share movie choices and meet-ups with movie-going friends because it combines movie information with social networking. Flixster now has 11 apps built for various platforms including Facebook, MySpace, iPhone, BlackBerry, and Android. The “Movies” app is said to be installed on one in five iPhones in the United States. Eight million users engage with the apps, adding to the 20 million unique visitors Flixster attracts on the Internet. Using mobile apps, Flixster’s mobile user base more than doubled in 2009.

Demand for App Distribution Drives Mobile Ad Innovation

Publishers are using mobile advertising campaigns to propel their app to the top of app store lists. AdMob routinely sells burst campaigns to help marketers achieve prominence in the Apple App Store. Being on the top of app store lists fuels revenue, whereas not making it can plunge an application into the great abyss. Of course, the cost to buy your way into the top 25 free apps in the App Store is growing fast: $10,000 in October 2008, $11,000 in December 2008, and $20,000 in March 2009. The coveted number one spot can cost as much as $250,000. It’s tough to make these numbers work without a strong business model.

New promotional methods are leading to new, innovative distribution alternatives for mobile apps. Here are some examples:

• Rebates (paid apps)
  • iPhone Game Rebates
• Free for a day (paid apps)
  • Free App A Day
  • Great App a Day
  • Free Game of the Day
• Free for virtual goods (free apps)
  • Tapjoy
• Cross-promotion in-app advertising
  • Flurry: AppCircle

Free Apps Are Underserved

Apple knows it. Apple acquired mobile advertising firm Quattro Wireless in January 2010, investing $275 million. Apple launched in-app purchase support in October 2009, to support the monetization of free apps. Popular opinion is that Apple will feature app ads in the App Store similar to AdSense.

Google knows it. Google is investing in a mobile future by signing an agreement to acquire AdMob, a mobile display advertising company, for $750 million. It was reported in November 2009 that AdMob served over 10.2 billion ad impressions per month, up from 1.6 billion a year ago.

Game developers know it. Backflip Studios CEO, Julian Farrior said he uses its free app (Paper Toss, now with 17 million downloads generating 400 million impressions per month) to cross-sell Backflip’s paid apps and generate ad revenue. “Free impressions give you a lot of flexibility in terms of how you run your business,” Farrior explained at the recent 2010 Game Developers Conference.

SGN, iPhone game publisher, CEO Randy Breen said, “The charter of this company is free apps with micro-transactions.” He predicts the mobile market will become larger than Facebook.

click to enlarge

The power of free is driving the success of mobile app marketing. Users continue to demand apps with value – be it time-killers (entertainment) or time-savers (information) – and the companies that can figure out the way to leverage this monumental demand while promoting their mobile apps for free will be the long-term winners.

Rob Weber, Vice President of Business Development and Co-Founder, W3i, LLC
Rob is an Internet marketing pioneer with over ten, profitable years evolving W3i in the consumer application industry.

New York is exhausting compared to central Minnesota, but I love the passion for Internet marketing one finds at ad:tech. It always regenerates me.

If you didn’t make it this year, here are some of the trends that I picked up on for Application Marketers:

1. Mobile – The talk is mobile. The slow-up is facilitating the transfer of money and getting found (distribution).
2. The Cloud – Creating opportunities for open-source application developers. Cuts down on overhead costs.
3. Generating revenue from content – Consumers seek knowledge; deliver value in your application and they will follow.
4. Social is here to stay; it pays to really listen. Multiple tools are available for listening. How many do you use?
5. Increased spending in digital. Combining digital with traditional media can double response rates (per Rod Lehman of HP Software). Be adventurous—think application, it’s a powerful engagement tool. http://www.adtechblog.com/blog/detail/marketing-3.0building-great-brands-in-the-digital-age/
6. App discussion: “Branded apps are not marketing”:
   • Again, apps need to have utility—they must serve a purpose. User’s app interests vary by geography. In US, consumers like social apps; in India, productivity apps rule.
   • 64% of mobile users are open to seeing advertising on their phone(per GetJar); advocating for the free model.
   • Apps offer incredible engagement.
   • Mobile another touch-point.
   • Measuring success through number of downloads, returning traffic, and engagement.
     http://www.mobilemarketer.com/cms/news/database-crm/4579.html

What do you think the latest app trends are? I appreciate your comments—now back to my emails.

Donny Snyder, Business Development Manager, W3i, LLC
Donny uses his experience and excitement for the internet industry, along with W3i’s Application Network, to provide distribution and monetization solutions for content providers.

I returned from Boston last week after attending my first Software Industry Conference (SIC).  In this post I wanted to share with you some general information about the conference, the buzz, and information about W3i’s participation to keep you up to date with what transpired.

General Information

• The conference was held at the Boston Marriot in Quincy from July 16th to July 18th.
• Attendance was down a bit with an estimated 200 attendees (attributed to the economy).
• Cost was only $269 at the door and as low as $229 if you registered early enough!  The organizers aim to keep costs down so that even small publishers can afford to attend.  The cost of admission includes a full conference pass, breakfast each day, food in the evening at events, and one luncheon.
• Though inexpensive, the conference is packed with things to keep you busy including educational sessions, exhibit night, networking events, and the Shareware Industry Awards.

The Buzz

• There was quite a bit of buzz around the topic of business models.
• Free and paid models were discussed including very innovative approaches at improving performance with both.
• The dominant model is definitely paid shared by participants and their service providers.
• Publishers were very focused on a paid only model and hadn’t considered a hybrid model, which would leverage both paid and ad-supported options.
• The hybrid model though may satisfy the greatest number of users.  I found an article on how online music is being impacted by free ad-supported alternatives and I thought this was a great parallel to how publishers might want to consider hybrid models with downloadable software.
• I was excited to learn of a few publishers that were willing to participate in hybrid model trials to explore this further.  This may include both high and low converting shareware titles mixed with the ad-supported solution offered by my company.  I hope that we can complete these trials and share our findings at a future date through a subsequent blog post.

W3i’s Participation

• I gave a presentation titled “Increasing Your Bottom Line through Leveraging an Understanding of User Engagement”.  In my presentation I highlighted suggestions and examples of how application publishers are improving user engagement from initial discovery all the way through the complete customer life cycle.  By pleasing the user, you get the same benefits as if you just focused on revenue, only easier.
• My twin brother Rob spoke about How to Squeeze More Money from Your Apps in his presentation which detailed various business models.
• W3i announced a new product at the conference, 3quency, which aims to provide a better custom toolbar solution.
• W3i had a table at exhibit night which was the highlight of the trip for me.  For 3 hours a room was filled with conference attendees.  Here is a picture of me juggling in front of our table.
  

For any shareware providers interested in exploring a hybrid business model which includes ad-supported services provided by W3i, please contact us and we’ll discuss the details further.

I hope this wrap-up keeps you in the know and better yet drives you to attend next year’s conference in Dallas, which I hope to attend.

Ryan Weber, Vice President of Corporate Strategy and Co-Founder, W3i, LLC
Entrepreneur and pioneer of Internet marketing focusing on increasing revenue, distribution, and engagement for applications.

St. Cloud, Minnesota, February 13, 2009 – The freemium business model can increase your bottom line.  In 1865 when King Gillette started giving his safety razor away for free, creating demand for his high-margin, disposable blades, the freemium business model was born.  Without using the freemium business model, Gillette would not have built his empire, and it is now a commonly used business model especially in the marketing of digital content. 

The freemium business model has many names—try-before-you-buy, shareware, tiered service, trial—to name a few.  Basically, it means giving something of value away for free, supported by revenue earned from the sale of an upgrade or complimentary product.  This is a very common business model in the software industry.  Software marketers promote a free version of their software supported by the premium, paid version.  The trick is to create the right mix of features, offering enough utility to the free user to create credibility, and promoting highly attractive features that will persuade the free user to become a paid subscriber.  

To create profit, the financial model looks like this:  the lifetime value of paying customers must be greater than the cost of acquiring and supporting both free and paying customers.  Reported conversion rates to the premium version vary by product, but range from .05 and 5%; the average being 2%.

There are several reasons why you should consider a freemium business model.  Here are some of them:

1. When done right, quality trials build loyalty and trust.
2. Reduces risk by giving the user a chance to experience the value of the software.
3. Expedites a large customer base, increasing network effects and efficiencies resulting in:
   • more brand awareness
   • collective intelligence
   • faster product adoption
   • a more defensible business model, and
   • more efficient marketing, as costs are spread out over a larger base.
4. The cost of distribution and the support of digital content are never lower, allowing this model to increase in popularity.

There are also several reasons why this model has its limitations:

1. People value what they pay for and will make more effort to discover how it will benefit them.
2. It is difficult to cover the acquisition and support costs if only 2% of those installing your software are actually paying for the product.

There are other “free” models that you might consider:

1. Give a “desired” product away for free when a customer commits to a long-term subscription with you.  The mobile business uses this extensively when they give a cell phone away for free if a user signs up for a long-term contract.
2. Ad-supported free – Many magazines are free or highly discounted because of the revenue-generated from their ads.
3. Giving a product away for free while charging for a complimentary, high-margin product.  King Gillette had this down to a science.  Also consider that every time you go into a theater the cost of the ticket is subsidized by the profit the theater makes when you purchase popcorn and other high-margin snack items.

Whichever business model you choose to pursue, W3i can piggyback with your offer to layer on an additional revenue or distribution stream.  Through W3i’s Download Network you have the ability to increase distribution and revenue for your downloadable content.  By using W3i’s proprietary Windows Installation System, Install IQ, you can increase distribution for your download by being one of the value-added software offered during the installation process.  Or you can increase your revenue by using the demand for your download to be combined with other value-added software offers during the installation; and you are monetized when the user selects your software as well as the additional software.  You can then earn money on 98% of users that would otherwise get away.  Software offered through Install IQ converted by as much as 60%.  Contact W3i to learn more. 

Josh Fiedler is the Business Development Lead at W3i Holdings.  As a leader in innovative ways to increase revenue and traffic for downloads, he focuses mainly on downloadable games and utility software.

About W3i:
W3i delivers proven, integrated desktop and browser marketing solutions.  With solutions tested and optimized on over 200 million installs–currently 4.2 million installs monthly, W3i can increase revenue and traffic for downloadable software, applications and digital content or provide a receptive consumer base for customized, targeted distribution programs.  W3i’s solutions utilize Install IQ, a proprietary Windows installation system and download manager developed by W3i.  Install IQ is the first installation system to be certified in the TRUSTe Trusted Download Program.  To learn more about W3i, visit www.W3i.com. 

Press Contact:
Deborah Manthei
W3i Holdings, LLC
deborah.manthei@W3i.com
320-257-7571

In a recent article in the Wall Street Journal entitled, “The Economics of Giving It Away,” Chris Anderson, editor in chief of Wired magazine, states that “Free may be the best price, but it can’t be the only one.” 

Twitter, Pandora, Pogo, Facebook, and YouTube have all built an enormous user base using the free or freemium model.  Now they are all working on the problem of how to raise enough cash to cover their overhead.

South Park even had a show about this issue.  Have you ever heard of the Underpants Gnomes? Their business plan is – Phase 1:  Collect Underpants; Phase 2:  ???; Phase 3:  PROFIT!  In other words, collect a lot of users and hope to make a profit, but having no idea where the profit is going to come from. 

W3i can fill in the Phase 2 of the Underpants Gnomes business model.  Give your downloads away for free by joining W3i’s Download Network.  Since 2000, W3i has installed over 200 million downloads for free, supported by its Download Network, generating cash for software companies.  Several companies with free software models have partnered with W3i to increase their revenue—Digsby, Anchor Free, and startup, Bewiki.

This is how it works.  Companies join W3i’s Download Network for two reasons:  to increase revenue or to increase distribution.  Companies with demand for their downloads use W3i’s proprietary Windows Installer, Install IQ, to offer their users valued-added software from companies like Yahoo!, AWS Convergence Technologies (WeatherBug), and Winferno, who have revenue-generating business models and are looking for distribution.  The user downloads your software, as well as the value-added software that they select, creating revenue to support your acquisition or operational costs. 

So go ahead and give away your free software, but be smart about it and join W3i’s Download Network.  To learn more, contact W3i.

Rob Weber, Vice President of Business Development and Co-Founder, W3i
Rob is an Internet marketing pioneer with over nine, profitable years building proven business models that increase revenue and distribution for downloads.