Why “New customer only” deals are bad for regular payment businesses.

I thought the effect of “New customer only” deals on long term business were well understood, but, in the last month, I’ve seen some examples which show that some companies still haven’t grasped their long term effects.

Its’ true that “new customer only” deals get people through the door (which every business needs), but for businesses that survive on regular payments (e.g. subscriptions or credit repayments), or want customers to continue to use them, it also has a crippling side effect. By doing “New customer only” deals you will annoy the existing customers who can’t get the best deal purely because of policies you’ve put in place and supported. This means you’ll see the number of subscriptions, repayments, or returing customers dry up and you may also alienate some customers to the extent they will refuse to deal with your brand in the future.

An example I’ve personally experienced is with my mortgage provider. They currently will offer new customers a 0.9% lower mortgage rate than they provide me with, which leaves me, as an existing customer of nearly a decade, with one of two choices;

1) Stay on the higher rate knowing I’m with a provider that is more worried about new customers than existing ones.

2) Move provider in the hope that the new provider has a better policy towards existing customers.

This means that for my mortgage provider they’re looking at two possible outcomes;

Outcome of 1) They have a disgruntled customer who is unlikely to recommend them or use them for further services.

Outcome of 2) Instead of the reduced income from offering me the lower rate they’ll see no income as I’ll be with a competitor.

Neither of which is good for their business.

So if you’re thinking of providing any service which requires regular payments in a market where you have competition (and that’s pretty much anything from subscription website services to loans), don’t alienate your existing customer base with “new customer only” deals because in the long run those customers who came through the door to take the offer up will, in all likelihood, go out it again when they get moved to your “existing customer” classification.

Experiences of In-App Mobile Advertising

With my companies Funky Expenses Android applicaion we have two versions; An ad-supported version and a pay-for ad-free version so that users can choose how they help to fund development (yes, we do get requests for a free ad-free version, but unfortunately that won’t keep the company afloat). The ad-free version is available from Google Market (which currently has the largest user base by a long way) and AndAppStore, and the pay for version is only available in Google Market.

We’ve always used AdMob for the in-app adverts because they have an Android SDK, the adverts are not too intrusive, users seem happy with the experience (the app has an average of over 4 stars on Googles Market and the active installs count is in the low thousands and on the occasional bad day decreases by only a few users) , and we’re happy with the results (an eCPM of around 0.21 US Dollars). We looked at Googles Adsense for mobile applications, but the 3 month minimum participation and reported issues with adverts meant that it’s not something that we’re willing to use at the moment.

While the revenue generated from the adverts would not be enough to sustain the company on its’ own, the monthly income from ads is nearly twice the amount we receive from sales of the ad-free version, and so is a significant source of revenue for future development.

I suspect many people would see sales of the ad-free version as being the key to success, but there are several reasons why a larger user base for the ad-support version than the pay-for ad-free version is beneficial to our business. The main reasons are;

1) Regular income.

Once you’ve sold an Android app on Googles Market the users get free upgrades for life. This, to us, does not make long term economic sense. To continue developing Funky Expenses we need source of regular income, and that’s what the ad-supported version provides.

2) Problems in Google Markets payment system.

Google Market has, by far, the largest number of potential customers, but the payment system (based on Google Checkout) is far from ideal. For example; we can only list applications in British pounds (because we’re a UK company) and most of the customers are in the US and so are used to dealing in US Dollars.

Any salesman will tell you that when dealing with a customer you want to deal in a currency they’re comfortable with so you don’t end up with the transaction being disputed because something the customer thought would be one price actually turns out to be another once the bank has done the currency conversion.

3) Not everyone can access applications which you have to pay for on Google Market.

This means that if we focused our development and revenue generation on the pay-for version the number of potential customers would be far smaller, which is not what we want.

This then leads to the question; Why have a pay for version? Well, the answer is simple, it’s what users asked for. Some users don’t want ad banners and are willing to pay to remove them, and, to us, it’s better to have a customer on a paid version than to have lost a user.

Hopefully this post will provide some of you with some ideas for your apps, and provide others with some understanding of why in-app ads make sense. If you have any comments please post them below.

Google strangles Android on Netbooks before it gets going

During my morning check of Twitter I came across this tweet from Google;

“Introducing the #Google Chrome OS http://bit.ly/N1rNZ“

Which started to raise some concerns. It had widely been predicted that we’d see Android making it’s way onto netbooks in the near future, but with this one announcement that idea has taken a huge knock backwards.

The reason is simple; Androids design is primarily focused on touch screen devices, Chrome OS is focused on netbooks, and netbooks rarely (if ever) have a touch screen.

So netbook manufacturers are left with a choice; Build a netbook with an interface to support Android (yes, you can use Android with a mouse, but it’s a bit painful), or use existing hardware and install Chrome OS, and in the cost conscious netbook market I know which way I can see most OEMs going.

Is the iPhone 3GS a rip-off in the UK?

(If you want to tweet this please use the tag #O2iPhoneRipOff)

Is it me or is the new O2 iPhone pricing policy looking like a bit of a rip-off?

First off, there is the cost of the ‘phone. At Apples WWDC it was announced that in the US;

3G 8GB goes from $199 to $99.
3GS 16GB to be $199 (same as old price for 3G 8GB)
3GS 32GB to be $299 (same as old price for 3G 16GB).

From O2 in the UK we get price rises rather than cuts. For example on PAYG;

3G 8GB stays the same price.
3GS 16GB costs about £50 ($80) more than the old 3G 16GB
3GS 32GB costs about £150 ($240) more than the old 3G 16GB

and on Pay Monthly tariffs where you need to pay for the ‘phone you’re looking at paying an up front cost of around £55 ($88) more for a 3GS 16GB than the 3G 16GB, and £145 ($235) more for a 3GS 32GB than the 3G 16GB was!!!

This price increase is also reflected in the £45 per month tariff where the old 3G 16GB was free, now you have to pay £87.11 ($140) for the phone.

You might think that the extra costs cover materials, well, to put those prices into context, the difference in price between the 16GB and 32 GB iPhone 3GS (so you’re getting 16GB of additional storage) is more than enough to buy yourself an entire 32GB Solid State Hard disk for a PC or Laptop.

There is also a rip-off in relation to Tethering; On pay Monthly tariffs “unlimited UK data and Wifi” is included in the tariff, but if you want to tether your iPhone you have to pay £15 per month extra for a 3GB limit, so if you pay monthly you get unlimited data in your plan, but if you want to tether you suddenly get a 3GB limit, how, exactly does that make sense? (If you wondering Pay As You Go customers can’t tether, O2 just don’t offer it to PAYG customers).

If you compare the price to O2s mobile broadband tethering actually works out worse value for money than the mobile broadband offering. With mobile broadband you pay the same amount for the same data allowance and you get free Wi-Fi, but with the iPhone you’ve already got free WiFi on the monthly contracts, so you’re either paying for WiFi twice or getting 3GB of data for a higher cost than they charge mobile broadband customers, which again just doesn’t make sense.

If that wasn’t bad enough; the iPhone tariffs that O2 offer their pay monthly customers have an 18 month minimum term, so if Apple stick to a 12 month release cycle pay monthly customers will always end up with a “contract buy-out” or “6 month hold-out” choice as has happened to the current iPhone 3G owners on O2.

Come on O2, sort out your pricing policy!!!

Update – cheapest tariff : To top it all for the Pay Monthly customers, if you don’t use the Wi-Fi from O2 or it’s partners, the pay monthly iPhone tariffs don’t even offer the best value for money over 18 months.

If you buy a Pay As You Go 16 GB iPhone 3G S and put it on a £19.58 per month 12 month minimum term SIM-only simplicity tariff and add the free unlimited web bolt-on you get 800 minutes talk time per month, 800 texts per month (1600 if you buy on-line), and over 18 months the whole lot costs £792.84. If you compare that to the £34.26 per month iPhone Pay Monthly tariff which offers 600 minutes talk time (200 less than the simplicity tariff), 500 texts per month (300 or 1100 less than the simplicity tariff), and unlimited web, you end up paying £801.66 over the 18 months.

Update – 12 month cost: If Apple do go for a yearly refresh cycle and you really want to upgrade, the PAYG iPhone + Simplicity tariff will cost you £674.36 over 12 months, whereas with the iPhone pay monthly contract you’ll still be locked in to paying £801.66 over 18 months.

Update – O2 trying to defend itself : Apparently, to O2, a “one month minimum term means you can turn it on and off when you like”, it’s just a shame I’d use tethering with my GPS for 1 day out every week or two which means I would pay for 1 month and 3 GigaBytes of tethered access just for 3 or 4 days of usage and about 1 Megabyte of data, and to them “iPhone tethering costs more as it uses a lot more data than traditional browsing on your iPhone itself” – Did they miss the bit of their own web site which says the iPhone tariffs already have “unlimited UK data and Wifi” as part of them???

Marking Apps on Googles Android Market

There seems to be a lot of variation on how many stars people give an application on Googles Android Market. Some give 3 stars for an app they find hard to use, others give 1 star because the developer chose not to make the applications source code available (even though this doesn’t affect the application as delivered to the user).

I’m trying to stick to the following marking scheme and would welcome comments and feedback as to any changes people think would make sense. Everyone is welcome to follow this scheme if they want to, and hopefully the idea will bring a bit of consistency to the market ratings;

1* – Fundamental problem (i.e. crashes or needs permissions it shouldn’t such as Internet access for a non-net aware app).
2* – Works but very limited (i.e. missing fundamental feature such as date tracking on an accounting program)
3* – Works but is hard to use and/or missing some features I’d like to see (i.e. has a complex user interface ).
4* – Works but I find minor things I’d like to see in the first few minutes of use (e.g. touch screen keypad for a pin entry screen or minor user interface peculiarities).
5* – Works and it takes me a while to think of anything that I’d want to see added.

Does this seem a reasonably way of marking applications?

Google Market for Android Paid Apps launch = Fail

Android developers have been waiting for the ability to list pay-for applications in Googles Market, but now most of them wish it had never arrived because the experience it’s giving users may just turn them off Android forever.

The first joy is the “copy protection” offered by Google. Developers can turn this on for their apps but doing so can stop a the application running at all regardless of if it’s been copied. If a developers application does run, then, well it’s not really all that well protected because it took less than 12 hours to break it using tools which have been available for months. So for starters the anti-piracy measures included are worthless even if they let your application run when it should.

But hey, developers can switch it off and trust users to be honest, well, that’s true, but don’t worry, that’s screwed as well, because even if you turn off copy protection there’s no guarantee that your users will be able to download the applications, and because Google offer a 24 hour no questions asked refund customers who encounter this problem can get a refund and write the developer off as useless when there isn’t a problem with anything the developer has done.

But you’d think developers can see their feedback and see whats going on, well, some can, but not if they’ve bought a development ‘phone from Google, or they’ve bought a G1 in the UK, because the only people who can see Googles comments are those who can buy apps, and, for some reason, Google decided to roll out the pay-for feature to US G1’s without running any form of wide beta test using the army of ADP owners out there.

And if you’re a UK developer, well, then you’re going to be handicapped at the outset. UK developers can list pay-for apps, but, because of the limitations of Google Checkout, they can only list them in British pounds (despite the only customers being in the US and used to US Dollars), and they can’t see any of the comments because, as I pointed out before, only US G1s can see paid for apps.

So there we have it, Googles take on a revenue generating mobile application store; If you enable the copy protection you run the risk your app won’t run and even if it does run it’s not really protected, if the users buy an app there’s no guarantee they can download it, if you bought a development phone you can’t see your app or the comments users are making about it, and if you have a UK G1 you’re not only in the same position as someone who bough a development ‘phone, but you have the added bonus that you can’t list apps in the currency that your customers use.

As was suggested on the mailing list, Steve Jobs must be laughing his ass off at this.

Will the Android Market T&Cs kill off “fun” apps?

Over recent weeks there has been a lot of speculation over when Android users will be able to buy applications from Googles Market, but some of the terms and conditions in the Developer Distribution Agreement could scare many developers away before they deploy their first application.

The first thing that came to light is that purchasers will have 24 hours in which they can get a refund apparently with no questions asked. This is a good thing for purchasers, but could kill the business model for developers working on applications which only have a few hours of enjoyment because users can buy it, get their use out of it, and return it and the developer will not make a bean from it.

You may think that it’s good to enforce this, but a number of iPhone developers release cheap short-lived apps to build their funds to develop more substantial applications and many games may only be designed to entertain for a few hours and are priced accordingly.

Following on from this came the discovery that, according to Googles Market terms and conditions “…Products sold for less than $10 may be automatically charged back to the Developer”. This means that if a user tries to return a product any time after purchasing it, and the application cost less than $10, the developer could find the money taken from their Market earnings without being consulted let along getting the chance to offer some help to the user, verify the problem, or issue a fix.

Comparing this to the iPhone application store Terms and Conditions (where 90+% of apps are in the 99 cent to 10 dollar price range) shows how weighted against developers Googles terms are.

The iPhone App Store T&Cs state that purchasers can ” withdraw from your transaction without charge and without giving any reason until delivery of the Products has started”, so customers can get refunds if they’ve mis-clicked on something, but they don’t get a 24 hour trial period in which they can just return the app, and they certainly don’t get the right to return a $9.99 app at any time and get a refund without the developers involvement.

In an ideal world we would all get our apps for free, they would do what we want, and we’d all be happy, but unfortunatley developers need to earn money, and so given the choice of developing an application for  a platform where if you’re app costs less than $10 you could see users refunded with any consultation with you, or a platform where once the user has the app running the developer knows that unless there is a serious problem they will get paid, I’m pretty sure I know where many developers will be going.

Update : After posting this Google announced that pay-for apps can now be listed, so we’re going to have to see what happens.

Will US Patent laws strange Android?

In recent days there the issue of the US patent obtained by Apple relating to the multi-touch functionality has reared it’s head on the Android development lists, and the discussions have left me deeply concerned about whether Android will ever become a serious global player in the mobile OS market.

The discussion started rolling when a patch to add multi-touch functionality on Android was posted on the android-platform mailing list, and ran in parallel another list directly discussing the impact the patent may have, but surprisingly ended up with a post from a Google employee saying that patents should not be discussed on any of the google hosted android lists, and this was further expanded by another Google employee saying that it was “because of legal repercussions”, and “it is simply best not to know about them”.

This to me seems bizarre. Firstly I was always taught that in law ignorance is not a valid defence and you can’t claim immunity from prosecution just because you didn’t know about something. Secondly, and more importantly, in a vast majority of the world software patents are not enforceable. In fact in 2005 an attempt to introduce them in the EU was voted down by 648 votes to 14, that’s right, only 2% of the delegates were in favour of them, so you can bet your money that the Symbian foundation isn’t going to limit functionality in it’s OS just because there is a US patent, and if you expand this to the middle east you then have Samsung, LG, and a host of others for whom software patents are not even a consideration for their non-US ‘phones.

Early this month a US company which is well known for trying to enforce US patents took a shot at Nokia, RIM, and Palm, but all it could do was apply for a block on US imports of those phones, so the rest of the world will still gets these features whatever happens, the only people losing out are consumers in the US.

So now I can see the paths the Android team can follow;

The first leads down a road where it steers clear of any functionality which may be covered by a US patent and heads toward Android being a niche OS which only gains market share in the US.

The second is where discussion of patents is barred and the Open Handset Alliance, Google, et al get sued on a regular basis in the US. This path heads toward Androids resources being wasted on fighting patent laws and the mayhem of lawyers controlling the development of the OS.

The third is where patents are openly discussed and US-only versions of Android are released which have the patented functionality removed, leaving the rest of the world with a competitive mobile OS.

To me the third path looks the way to go, but Google is at the wheel, so as a passenger I’m going to have to see where we end up.

Android licensing system

Funky Android has made available a Android application licensing system via AndAppStore. It’s something that we feel has been missing from the Android space and we hope that it’ll help companies looking to focus on (and thus make money from) Android applications.

So if you’ve been waiting for a way to commercially license your apps feel free to give it a spin and send in your feedback.

(Declaration of interest : I am a director of Funky Android)

Google finally coming good with the Android Development Programme

It looks like the folks at Google are listening and they’ve taken a big step which will help a number of developers get at least one Android powered device to work with.

Yesterday Dan Morill announced a new version of the SDK with a link to the android blog, what he didn’t mention is that the blog post also reveals that Google have created a programme for developers which allows they to get what is basically an unlocked T-Mobile G1.

The Android Dev Phone 1 as they’re calling it will initially be available to developers in the following countries; US, UK, Germany, Japan, India, Canada, France, Taiwan, Spain, Australia, Singapore, Switzerland, Netherlands, Austria, Sweden, Finland, Poland, and Hungary. Google are looking to add to that list as and when it’s possible.

This is a great move and one worthy of praise, because it will truly kick start development in those countries by providing them with access to an “official” Android device.

The only people I can see losing out because of this will be those making ‘phones for those regions where T-Mobile aren’t providing the G1 (such as Koogan providing their Agora, and Koolu putting Android on a Openmoko Freerunner) where developers were buying these ‘phones to get their hands on some hardware running Android. It should also be made clear that Google is not trying to steal Koogan, Koolu, or anyone elses market entirely because the Android Dev Phone 1 will only be available to developers registered with Android Marketplace, and won’t be on sale to end consumers.

Now here’s hoping that the next big step is API equality for all apps to address my other big gripe with the Android strategy at the moment.