This is a guest post from Barry O'Neil (@barryoneill), ex-president of Namco Bandai Network Europe and now founder and CEO of Other Ventures. Before joining Namco Barry co-founded Upstart Games, a privately-held publisher of mobile games, which supplied premium branded games to leading network operators globally.
In 2006 the Java games market stalled. Poor content discovery, billing fraud, fragmentation, and poor marketing held the mobile games market at about 4% penetration in Europe, 6% in the US. Penetration being the percentage of a mobile operator's subscribers that purchased a mobile game in the last year. This was a long way from the "analyst" reports that predicted constant upwards growth for the sector.
Then came the Apple App Store, everything was ok again and the growth of the mobile games market recommenced. Apple “Apps” achieved more than four times the penetration than Java ever did. Admob’s February analytics estimated the average number of paid for apps downloaded monthly by iPhone users is 1.8, with seven more free apps downloaded.
Apple's iPhone and iTunes combination represents a near-perfect convergence of concept, design, usability, technology and commerce in a highly polished, well executed package. Of course, by the time they launched the App Store, Apple had the advantage of 100 million customers with active iTunes accounts and associated credit cards. It was not that much of a conceptual leap for a consumer pay for an App instead of a music track, and certainly it was no more difficult. Apple had the critical mass required for success before it even launched the store.
Despite the iPhone representing just 14% of the smartphone market, it has had a massively disproportionate impact on the overall mobile games market. Most multi-platform publishers agree that the iPhone represents up to 25% of their mobile revenues. Comscore M:metrics estimate the iPhone represents 27% of the US mobile games market.
The iPhone has devastated the Java games market; it has probably halved in value in the last four years. Fragmentation of the Java market has also been relentless over this period. Now a Java developer has to ensure their game operates properly on over 600 handsets, that’s more than twice the number of handsets required in 2006. If you're thinking of launching a Java mobile game, you better have a great brand or excellent carrier relationships to minimise the risks associated with publishing a mobile game in such conditions.
What's the outlook for Java mobile then? Bleak is optimistic. While Java may represent more than 60% of current mobile games sales, it is rapidly diminishing. I predict that within two years Java will represent less than 25% of mobile game sales globally. Of this most will be generated in developing markets where there continues to be demand, due to a current lack of smartphone and 3G penetration.
Now we see an astonishing influx of Android powered devices to the market. These are heavily encroaching on mid-tier feature phones in mobile operator roadmaps - the same phones that the Java market depends on. I believe Christmas 2010 will see a heavy emphasis on low cost Android powered smartphones, and 2011 will see a $50 unsubsidised Android device for developing markets, further impacting Java.
Android has the potential to dominate if executed properly. Google's launch has been heavily flawed and in my view Android is still in "public beta." Android has had explosive growth, but alarm bells ring when you look at the inclination of users to purchase apps. Just 21% of Android users purchase one or more paid apps per month, compared with 50% of iPhone users. Where this gets unusual is that of the 21% of Android users purchasing one or more apps, the average number of apps purchased is 5. That is 1.4 more apps per month than the equivalent iPhone user!
I conclude therefore that a large proportion of Android users simply cannot purchase and download paid for apps to their phone. I blame Google and its appallingly poor management of the Android market. Despite having a Google Checkout account I still cannot see, never mind purchase paid apps. Of the free apps I see, many infringe the IP of others and many more simply fail to download or don't work on my specific device. Internet forums are flooded with similar stories.
Fragmentation and technical issues abound, content discovery is difficult, and billing doesn't work properly. It's 2006 all over again. I'm all for an "open" market, but Google's "completely open" policy has resulted in the Android market being a flea market, when compared to Apple's upmarket mall.
Google needs to understand that a constantly evolving "beta" product doesn't cut it. It has to learn from the mistakes of the Java business in order to save Android. If Google is to present a threat to the Apple App Store ecosystem, it needs to address discovery and purchasing as a matter of urgency, or abandon control and hand over the entire management of the Android Market to carriers, OEMs and trusted publishers. Consumers have a limited supply of patience, and there is only a limited opportunity for Google to make an impact on Apple’s dominance.