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Mobile App Makers Seek Angry Birds Fame With Analytics

Photographer: Henrik Kettunen/Bloomberg

Graphics for the Angry Bird computer game are displayed on an Apple Inc. iPad at the headquarters of the game's developer Rovio Mobile Oy in Espoo, Finland. Close

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Photographer: Henrik Kettunen/Bloomberg

Graphics for the Angry Bird computer game are displayed on an Apple Inc. iPad at the headquarters of the game's developer Rovio Mobile Oy in Espoo, Finland.

Joel Auge, who devised a mobile game that pits a fictitious king against the mice infesting his kingdom, wanted to keep players engaged longer. So he turned to Swrve New Media Inc. for advice.

With a surge in the number of games and tools available for download through online stores run by Apple Inc. (AAPL) and Google Inc. (GOOG), it’s getting harder for developers like Auge to vie for the attention of fickle mobile-device users.

Not every mobile application can be the next Angry Birds. To improve their chances, programmers in growing numbers are turning to Swrve and other companies, such as App Annie Ltd and Localytics, which use mathematical models and behavior data to help mobile developers court users. Only a sliver of the more than 700,000 apps on Apple’s App Store or Google Play are poised to benefit from the $46 billion ABI Research predicts mobile apps can generate in 2016. So startups are eager for any help they can get in climbing store rankings and retaining users.

“You’ll see a dramatic improvement,” Auge, HitGrab Inc.’s co-founder and chief executive officer, said in an interview. Without Swrve, running the business “was like driving blind,” he said.

While the analytics industry is small, it’s expanding fast. Venture investment in apps-data companies more than tripled in the first half of this year to $16.8 million, compared with the same period in 2011, according to Rutberg & Co. Over that time, funding of mobile developers grew 35 percent to $1.24 billion.

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The ''Angry Birds'' mobile-phone game, designed by Rovio Mobile Oy is seen on an Apple Inc. iPhone 4 smartphone in this arranged photograph in London, U.K. Close

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The ''Angry Birds'' mobile-phone game, designed by Rovio Mobile Oy is seen on an Apple Inc. iPhone 4 smartphone in this arranged photograph in London, U.K.

Keeping Users

Swrve helped MouseHunt creator HitGrab pinpoint the moment when users tended to log off. The Toronto-based company then tweaked the game to keep users engaged longer. While Auge declined to disclose sales, he said that by next year about half of revenue will come from the mobile app, up from about 20 percent for 2012. MouseHunt was introduced in 2008 on Facebook Inc. (FB)’s social network.

“If at some point, more than 3 percent of players drop off, that gets immediate attention,” Auge said. “The return on investment for Swrve is self-evident. You can’t be a plumber without a good monkey wrench.”

Users have to stay in the game -- and keep coming back -- for free apps like MouseHunt to make money. Every day somebody plays, there’s a 2.5 percent chance they buy virtual cheese to bait their traps in MouseHunt, Swrve found. The cheapest cheeses can cost a few cents, while others -- along with digital items such as traps and charms -- can run anywhere from $1 to $100.

Search Struggles

Services like Swrve’s can help developers figure out app- store pricing dynamics, places within games that stump users, and ways to more effectively market their apps and virtual goods. While many analytics startups charge fees ranging from hundreds to thousands of dollars, others make money from serving advertising displayed within the apps.

Still, there’s no fool-proof method for ensuring that apps make money or keep users engaged. Most of the downloadable programs make little money, and almost one in five developers make none at all, according to Josh Martin, an analyst at Strategy Analytics Inc. The 300 most-popular applications grab 90 percent of sales, he said.

Compounding the challenge for developers, app stores don’t have enough search tools, making it hard for users to discover new offerings. Many users don’t return after the first interaction, according to Localytics. In addition to vying with legitimate competitors, programmers must also contend with startups angling to game the system. GTekna Corp., for instance, helps developers climb rankings through ads that promise prizes in exchange for a download.

Venture Funding

Those challenges aren’t keeping venture capitalists from backing the app-analytics companies. Swrve, based in San Francisco, last month raised $6.25 million in a financing round led by Atlantic Bridge and Intel Capital. The company began offering its services a year ago and charges fees starting at $1,500 a month to monitor a single game, to $9,000 a month for corporate customers.

“It’s not seen as a cost but as a revenue driver -- a part of the marketing budget,” Swrve CEO Hugh Reynolds said in an interview. He said Swrve has more than 30 customers, including game maker Activision Blizzard Inc.

In August, App Annie raised $6 million in funding from investors including Greycroft Partners LLC and e.ventures. The company began selling subscriptions earlier this year for access to its reports on app-store trends.

‘Valuable Measurement’

“During the gold rush, a lot of the guys who made money were not digging for gold, but selling water to the guys digging for gold,” said Oliver Lo, vice president for marketing at App Annie, said in an interview. Ten of the top 15 publishers in Apple’s App Store are customers, he said.

Another analytics startup, San Francisco-based Mixpanel Inc., raised $10 million in a May financing round led by Andreessen Horowitz. Boston-based Localytics received $5.5 million in a round led by Polaris Venture Partners in September.

Flurry Inc., a data outfit in San Francisco, raised $25 million led by Crosslink Capital in November.

Analytics tools can also help older apps prevent user defections to newer alternatives. Retention is becoming crucial as prices for smartphone apps plunge.

“Analytics companies are realizing there’s a really big opportunity there,” Martin said. “Measurement is valuable.”

The tools can also prompt users to make purchases at just the right moment. Introduced two months ago, a new data-analysis service from Localytics can tell when to send a user a coupon or a message, encouraging them to share content with friends, or nudging them to purchase accessories inside a game.

Removing Obstacles

Localytics offers a sobering picture of players the developers court for sales. One in four apps are only used once after being downloaded, Localytics found in a study released earlier this year. Of those who do make purchases inside apps, 44 percent do so only after playing the game at least ten times.

Revenue from providing this kind of insight is growing as much as 15 percent each month, Localytics CEO Raj Aggarwal said in an interview. Its customers include EBay Inc. and Salesforce.com Inc.

One Localytics client, the Daily news application, saw an uptick in the length of time users spent reading and sharing content after hiring the data startup to review its app last year. The original version featured a carousel, which readers were supposed to use to navigate and browse through pictures and stories. Instead, Localytics found that many of them logged off as soon as they encountered it.

“It was beautiful, but we found that people didn’t use it at all,” said David Brinker, senior vice president for operations and business development. The carousel was removed, the app streamlined, and users started spending 5 percent more time in the app, he said.

“It meant we didn’t have to invest in something that no one was using,” Brinker said. “Without them, we can’t measure whether anything we are trying or testing works.”

News Corp. said on Dec. 3 it will cease publication of the Daily this month.

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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