1. Apps: Friends or Foes?

2. Agenda
• Why apps matter
• Apps are your friend
• Apps are your foe
• Making money with apps
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3. 3

4. 4

5. Friend: Apps are everywhere!
60
50
40
Downloads (B)
30
20
10
0
2008 2009 2010 2011 2012 2013
Source: App Ecosystems Opportunities; Apps Forecast 2008-2013; Virtual Goods Drive Real Revenue 5

6. Apps are your Friend
1. Apps offer an unrivaled direct consumer relationship
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7. Popular App Categories - iPhone
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Games Entertainment Utilities Photography & Video Social Networks
Asia Pacific Central & Eastern Europe Central & Latin America Middle East & Africa North America Western Europe
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8. Popular Categories - iPad
60%
50%
40%
30%
20%
10%
0%
Games Entertainment Utilities Productivity Education
Asia Pacific Central & Eastern Europe Central & Latin America Middle East & Africa
North America Western Europe Grand Total
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9. Tablet – More Popular on iPad than iPhone
6%
4%
2%
0%
Asia Pacific Central & Eastern Central & Latin Middle East & North America Western Europe Grand Total
Europe America Africa
-2%
-4%
-6%
Productivity Education Books & Reference Business Games
Lifestyle Utilities Healthcare & Fitness Photography & Video Entertainment
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10. Apps are your Friend
1. Apps offer an unrivaled direct consumer relationship
2. Apps offer a controlled second screen environment
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11. Friend: Apps drive engagement
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12. Friend: They Drive Engagement?
180 60
160
50
140
120 40
100
30
80
60 20
40
10
20
0 0
Netflix HBO GO Twitter ABC’s Hulu Plus Fandango Bones Shazam for IntoNow The Walking
Grey’s Movies – iPad Dead
Anatomy Times &
Sync Tickets
Average of Rank Number of Appearances
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13. Apps are your Friend
1. Apps offer an unrivaled direct consumer relationship
2. Apps offer a controlled second screen environment
3. Apps offer increased revenue opportunities
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14. Four Main Business Models
• Paid Download
• Advertising
• Virtual Goods
• Subscription
• Unforeseen revenue uplift
• More coming
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15. Q. Which business models do you plan
to use to generate revenue next year?
70%
60%
50%
40%
30%
20%
10%
0%
A la carte (users Advertising In-App Virtual Subscription Not generating
pay per download) Good sales revenue
Last Year Today Next Year
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n=1,298

16. Increased Revenue Opportunities
$30
$25
$20
Revenue ($B)
$15
$10
$5
$0
2008 2009 2010 2011 2012 2013
Download Revenue Advertising Revenue Virtual Good Revenue
Source: App Ecosystems Opportunities; Apps Forecast 2008-2013; Virtual Goods Drive Real Revenue

17. Apps are your Friend
1. Apps offer an unrivaled direct consumer relationship
2. Apps offer a controlled second screen environment
3. Apps offer increased revenue opportunities
4. Apps enable global distribution without partners
5. Apps provide leverage for content owners
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18. Apps are your Foe
1. Apps flatten the competitive landscape
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20. Apps are your Foe
1. Apps flatten the competitive landscape
2. Ecosystem and device fragmentation make apps costly to maintain
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21. There are too many devices needing apps…
21

22. Fragmentation is bad

23. Android Fragmentation
2.3.3, 4% 1.1, 1%
2.3, 0%
1.5, 15%
2.2, 17%
1.6, 27%
2.1, 30%
2.0, 3%
2.0.1, 3%
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24. Apps are your Foe
1. Apps flatten the competitive landscape
2. Ecosystem and device fragmentation make apps costly to maintain
3. Difficult to quantify ROI
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25. Apps are your Foe
1. Apps flatten the competitive landscape
2. Ecosystem and device fragmentation make apps costly to maintain
3. Difficult to quantify ROI
4. Create unreasonable consumer expectation
5. Create friction with MSOs
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26. Quantifying ROI
How does a company quantify the ROI for an app?
– Paid apps are easy
– Ad supported apps are easy
– Purely mobile subscription apps are easy
– Social network initiatives become trickier
– Hybrid mobile-PC become more difficult
– Brand extensions are increasingly difficult
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27. Driving revenue from apps
1. Do not expect HTML5 to be your savior
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28. Pure HTML5 is not your savior
1. HTML5 does not secure your
video content
2. HTML5 does not allow for
audio
3. HTML5 apps are less capable
than native apps
4. HTML5 apps will need to be
tweaked per device
5. Finding HTML5 apps will be
difficult
28

29. Driving revenue from apps
1. Do not expect HTML5 to be your savior
2. Invest in new business models
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30. Top Grossing iPhone Apps that were Free (US)
90%
80%
70%
60%
50%
40% Top 100
30% Top 10
20%
10%
0%
Source: App Ecosystems Opportunities; AppTRAX 30

31. Driving revenue from apps
1. Do not expect HTML5 to be your savior
2. Invest in new business models
3. Leverage your brand to offset broken discovery
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33. 33

34. A big box store
250’
40,000 ft2
160’
80,842
34

35. Floor Space Needed
10 copies of each app
10’
5 copies of each app
2 copies of each app
1 copy of each app 35

36. Conclusions
1. If not utilized properly apps will be a foe by flattening the
competition and reducing available viewer attention
2. …however if utilized properly apps can extend a brand to
screens/locations once thought inaccessible
3. Set quantifiable objectives when developing apps and create
internal metrics to gauge success
4. Leverage new technology to make engaging apps
5. Utilize well known brands to drive users to your apps
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