Is Developing a Mobile App Worth the Cost?

The Reach Of Different Mobile Channels

partial article from: February 24, 2011 by Aaron Maxwell, Mashable Business

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From a pure “how many prospects can I reach” perspective, the best mobile marketing tool is text messaging. About 68% percent of American cell phone subscribers sent a text message in late 2010, according to comScore’s mobile market share report.

Of course, you can do things with apps and websites that you can’t do with SMS. So how many people can you reach with an app? And how many with a mobile website?

For mobile websites, it’s easy. The best indicator is how many people actually browse the web on their mobile phones. As of late 2010, it’s currently over 36% of all U.S. mobile phone subscribers. So, about one half as many people as you can reach with a text message.

There is more to the story for apps. I was at the San Francisco de Young museum a couple of weeks ago. They threw a little shindig to celebrate the release of their official mobile app.

The only hitch: You could only install it if you had an iPhone. Those of us with Androids and BlackBerrys couldn’t play. That reflects a current reality with apps. An iPhone app only works on, well, iPhones. Your app has to be made separately for each platform.

In North America, the most important smartphone platforms right now are iOS, Android, and BlackBerry. How many mobile users are on each? Here are the ratios in the U.S., as a percentage of all mobile phone users, for the last quarter of 2010:

• iPhone: 6.75%
• Android: 7.75%
• BlackBerry: 8.53%
• TOTAL: 23.0%

In other words, if you decide to only make an iPhone app, fewer than 7% of all mobile phone users will be able to use it. If the app’s primary purpose is marketing, you’ll need to decide whether this reach is big enough to be worth it.

And if you develop three different apps to cover these three most common platforms, you’re going to potentially triple your cost. All so you can reach only a fraction of the number of people you can get with a mobile website.

To make things worse, I’m ignoring Windows Phone 7. A year from now it may have a very significant market share, thanks to Microsoft’s joint venture with Nokia. Most mobile websites will work fine on the new Nokia/WP7 phones the day they are released. But creating and pushing out a Silverlight mobile app is no small task.

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Apps Aren’t Free

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The costs for this can add up. There’s no such thing as a “typical” app, so it’s hard to give a meaningful average cost. But as a general working figure, we can say it costs at least $30,000 to design, implement and deploy a brand-quality iPhone app. I haven’t found published studies for the equivalent costs for Android and BlackBerry, but since the device fragmentation is greater, it would makes sense that the costs are at least similar.

All the above means that, at the end of the day, creating a set of mobile native apps that reach, say, 80% of smartphone users is going to be far more expensive than creating a mobile web app that reaches 90% of smartphone users. I don’t even mean twice the cost; I mean more like five, maybe even ten times the cost.

In many situations, that’s acceptable. As noted, sometimes you want to do things that just aren’t possible with a mobile website, at least with good quality. Or maybe it is possible, but you know you can create something of better quality with a native app, so that the result is more engaging. For enterprise-scale organizations like consumer banks and nationwide retail stores, they have the capital, and the ROI justifies it. But if your budget for mobile is under $100,000, it may not be a good approach.

How does a mobile website compare in cost? I haven’t found any published study of the typical cost for mobile web design and development. But from my experience running a company that does just that, I can tell you that it’s almost always less than the $30,000 for an “average” iPhone app.

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What’s the ROI?

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Given all this, how many prospects will a venture reach per dollar? At a conservative estimate of 234 million U.S. adults with mobile phones, here’s the breakdown:

In other words, you can reach nearly five times as many people per dollar invested with a mobile website rather than a native mobile app. And that’s conservative, assuming it costs just the same to create the BlackBerry app as it does to create the iPhone app (it doesn’t), or that a mobile website will cost the same as an equivalent iPhone app (generally, not even close).

Does this mean you shouldn’t do an app? Of course not. There are many other factors involved. If an app user converts 10 times more frequently, for example, the difference is more than justified. But that’s a big hurdle to clear. And if you want to reach users across more than one mobile platform, you have to consider the extra capital investment as well.

Whether you go with a mobile website, a native mobile app, or both, you’ll probably benefit. The continued mobile explosion will make sure of that. Just take care that you get the most bang for your buck by doing what’s best for your business.

Posted in: Mobile Marketing,Mobile Websites