Wednesday, August 17, 2011

Business model challenges

"Information wants to be free" is the rather lazy call from those who focus on the costs of distribution without factoring in the costs of production. It's certainly near-free to distribute an electronic newspaper, but the journalists who fill its pages still have food, housing and other bills that need to be paid somehow.

One of the challenges of the Internet economy is that users have become conditioned to paying zero, in purely monetary terms, for the services they consume. Mostly they currently accept advertising based on an increasingly intrusive data-gathering model that harvests their personal profile details so that ads can be targeted more precisely.

But in the smartphone 'apps' world, users have become conditioned to paying small amounts for applications.

I'm intrigued, though, by the experience of Hungry Shark publisher Future Games of London who switched from a paid-for app with 1,000 daily downloads at $1 to 250,000 daily active users of their free version who can be 'monetized' through in-app purchases of upgrades.

Firstly, it's nice to be getting $1,000 per day of gross revenue; but nicer still to increase revenue from $1 to a claimed average $3.26 per gamer.

However, doesn't this model rely on the supplier having to find ways to continue to get the consumer to buy 'stuff' within the app?
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