How to build a business around buying and selling pre-owned (used) mobile games and apps.

Everyone loves a good bargain, isn’t that right? When you have pre-owned cars, phones, console games etc, then have you ever thought of owning a ‘pre-owned’ mobile game or app? This may sound weird and an unfeasible business model to a lot of people, but give it some thought (and read this article completely!) and such a business might actually make sense. I am surprised that no one in the industry has fully explored such a model.

First of all, what are the reasons people buy or sell pre-owned goods? Let’s run down a quick list. Let’s call this List A:

1) To save money.

2) To get rid of a product that they don’t use that much.

3) If they are not satisfied with the purchase and the return period has expired.

4) They just got bored of using the product after a while.

5) They found a better product.

6) In the case of a console game, they basically completed all the levels and finished the game.

Now what if you took the same principles and business models around the pre-owned goods business and applied it to mobile apps/games? Such a business has the potential to become a huge industry if it’s done the right way. By the way, I am using the terms ‘Apps’ and ‘Games’ interchangeably in this article. They both mean the same thing here.

First of all, how would such a system work? I did some research over the weekend (yup, my weekends are pretty lame) and came up with a plan that could potentially work. So here it is:

1) A user (let’s call her Norah) buys a mobile game named Rockstar for let’s say 99 cents. The game is built by a company called Bringit Studios.

2) She plays Rockstar for a while and then for reasons explained in List A (or some other reason), decides to sell the app.

3) She then puts Rockstar up for sale for half the price (49 cents).

4) She either sells it directly to someone she knows, or puts Rockstar up for sale through a third party pre-owned apps seller (like an Ebay or Craigslist mobile apps equivalent).

5) The sale goes through in a way that she gets to keep 50% of the sale, 40% goes to Bringit studios and 10% goes to the third party seller. Or if she sells it directly to someone she knows personally, then she gets to split the revenue 50:50 between herself and Bringit studios.

      Now if Bringit Studios sold a 100,000 of their iPhone game apps for a dollar. The revenue is $100,000 The 70:30 revenue split with Apple gives Bringit $70,000. This is the studios initial revenue. Now if let’s say 30% of the buyers decided to resell it for half the price. After doing the math, the studio would make another $7,000 to $10,000. And I am not even considering the revenues from in-app purchasing and advertising. That in itself would bring about a decent amount of revenue to the studio.

Sounds simple, doesn’t it? But obviously it’s not as simple as that. So what are some of the issues here?

1) The first one is the app store policies itself. Apple or Google will obviously not allow such a system to work because it can potentially cannibalize new app sales. One reason they might consider such a model is if they were getting a share of the sale too. So if Norah sells the app and a portion of it goes to Bringit Studios as well as Apple/Google, then it’s a win-win situation for all of them. But the mobile gaming industry in general is still in its infancy. So I feel it will probably be a long time before Apple or Google (or Microsoft) even consider implementing such a system.

2) The bigger and more successful studios would not want to do this for their popular games because they are anyways making a killing from new sales. Such a system will work best (atleast initially) for the less popular games and studios.

3) The biggest criticism of this concept would be that studios in essence or not selling the app itself to the consumer, but they are selling a license to purchase the app. So Norah only gets a license that gives her an instance of the app on her phone. Well, a license is always transferable to another user  as long as the eco-system allows it (case in point: Serial Key Numbers). Thats the primary reason why bigger platforms like the Apple app store or Android won’t be interested in this now but smaller gaming platforms like OpenFeint, W3i or Playphone can make such a system work because they build their own policies and all their apps are downloaded from their own app store. I have built games for the Playphone App store and they have the resources to implement such systems. But the main catch here would be that app developers will have to work through these platforms to resell an app.

The best example is products itself like MS Office. A user can download a trial copy for free, and then all he has to do is purchase a serial number in order to validate this application. Millions of users use MS Office and then sell these serial numbers to other buyers. And since only 1 instance of such a serial number is legal, the new buyer gets complete ownership of the license. This is exactly the premise that I am basing my idea on. An app can be serialized, and then only 1 instance can be allowed. This gives a chance to a license holder to resell the app. My whole concept deals with a business model that helps studios generate extra revenue. And I am discussing a model that in real life has worked for every single industry known to mankind. If the pre-owned business works elsewhere, then why can’t it work here?

4) As always, there will be resistance to such a system, because the pre-owned goods business has always been looked down upon by product creators. In the end, the customer always wins so sooner or later, someone will start doing this (if someone hasn’t done it already).

      Alright now let’s talk a little about its advantages:

      1) This method can actually benefit Bringit Studios. Most mobile games/apps have a very small shelf life. By giving Norah a chance to sell this app, they are making sure that the game is still being circulated within the gaming demographic. And every new user brings with him/her a new revenue making opportunity.

      2) Most mobile games don’t have a lot to offer in terms of in-app purchasing. There is only so much that Norah could potentially buy within the game after which she would either get bored or would not want to buy anything else in the game. And at some point, she will probably move beyond this game and play other games too. By giving her a chance to sell the app, Bringit gets to make some money, and when the new buyer starts playing the game, Bringit has another chance to make more money through in-app purchasing, advertising and as well as from the actual sale of the app itself.

      3) Let’s just put it this way, how many apps do you currently have on your smartphone that you haven’t used in a while? And how likely is it that you will actually ever use them again? So how about selling them off the same way you sell your other used stuff on Craigslist or Ebay? Sounds compelling? I am sure it does!

      

      4) With this method, Studios will actually encourage higher spending habits among its demographic. Because if Norah has the opportunity to sell an app after she has used it for a while, then there is a higher likelihood that she will actually buy it in the first place.

      5) And of course, this is software we are talking about here. So the buyer is getting a product that’s basically as good as new.

So what's the best way to actually implement such a system? There are definitely some nuts and bolts here that need to be tightened in order to make sure this model can succeed. Based on my limited intelligence and experience, this is how the system can work:

1) The best way to build such a business is through 3^rd party gaming platforms like Playphone, W3i, OpenFeint etc. These companies can build an online pre-owned apps store within their platform and encourage studios to work with them and make their apps available for sale in such a store. So all the transcations will happen within the realm of this store itself. It can function pretty much like eBay where users can buy/sell their apps. The ideal scenario would be if Apple or Google themselves allowed it, but they won’t do it unless this becomes a really lucrative industry. It’s best for smaller gaming platforms to indulge in such an initiative and become leaders in this space before the big boys start encroaching in.

2) Paying actual cash to a user is always a legal headache for companies. So instead of money, Norah can get paid in ‘digital currency’. So the approximately 25 cents that she made on one sale can be equivalent to 25 digital coins. And she can use this currency to buy other games/apps in the store itself. This way, the money will get circulated back into the app store, which would be awesome for the gaming industry itself because the money never leaves its ecosystem.

3) To make sure that these apps are not being constantly sold off multiple times at increasingly lower prices and also to avoid unhealthy competition between sellers, Studios can put limits on how many times their apps can be re-sold. So Norah could only sell it once and then the new buyer is not allowed to sell it again (because he/she already got it for a discount).

4) Once Norah sells this app, the app is automatically disabled or deleted from her phone. Only one instance of this app can be available for use at any time.

5) Now if the game itself is free and depends completely on in-app purchasing. Then Norah can find out the exact value of the app based on all the purchases she made, and then sell it.

6) Norah could potentially ‘loan’ this app to her friends too. This is a whole different story but the same business models that I have explained in this article can work for this too. I would be happy to explain this system in a future article.

If pre-owned goods can do well as a business in other industries, then what's stopping companies from incorporating the same mechanics into the apps industry?

I try my best to keep these articles short but that doesn’t seem to happen. I am happy to explain this concept further and clarify any questions you have. And of course, I would love to hear your comments/criticism about this idea. You can mail me at aabidsiddique81@yahoo.com or Follow me on Twitter @aabidsiddique. My personal site is at www.aabid.me.

An entirely different technique to advertise a mobile game.

In my last article, I laid out a different method on how to market a Facebook game. The basic premise was simple: Instead of paying Facebook or other media companies to advertise your game. What if you PAID THE PLAYER directly to do this? I have tried my best to explain how companies can do this effectively without any legal or logistic hurdles. Here is the article (http://bit.ly/vixmo1)

In a similar vein, mobile games can be marketed the same way using referrals but with a completely different technique. To my knowledge, I haven’t seen a mobile game in the app store that uses “in-app-texting” to market its games. Not sure what this means? Then read on.

The concept is simple: Let’s say there is a game in the app store that sells for 99 cents. Under this technique, a player (let’s call her Jane) initially starts playing this game by downloading it for free.

After she has completed the first few levels, a window pops up that offers the complete game for free if Jane sends an Actual Text Message (SMS) to 5 (or more) of her friends inviting them to download the game.

If Jane agrees to send the text message, then the app directly accesses the native text-messaging system present in the phone. This way, Jane can access her phonebook and decide which friends to text the invite to. As soon as Jane sends these text messages, she receives the full app for free.

Such a technique hasn’t really been explored before. But the advantages here are quite a few. I will list some of them here.

1) Game studios could charge Jane for sending these text-message based invites. The way this would work is that these text messages could be charged 5 cents per text message sent. I know you might think “Why would Jane want to pay for these text messages?”  Well, it’s simple: If Jane can get a 99 cent app that she really likes by sending 5 text messages that will only cost her 25 cents overall, then why wouldn’t she?

The cool thing here is that studios are completely getting away from the freemium/paid model and relying on an entirely new system to generate installs. And this system is basically giving every penny to the studio directly without having to share it with anyone else.

Studios could even partner with carriers like Sprint, Verizon and have the 25 cents billed directly to Janes monthly cellphone bill. This way, Jane does not even have to use her credit card.

One issue here could be that in the future Apple or Google might not allow this feature because it deprives them of any revenue. Well, this system can be built in a way that the same 70:30 revenue share can be applied here too.

2) Jane can also be rewarded for her behavior so as to encourage her to send more invites. So if Jane refers this app to 5 of her friends, she can actually make money every time each of these friends refer the app to 5 of their own friends. For example: Jane spends 25 cents to invite 5 of her friends. Then she can get paid 2 cents for every subsequent text invite that is sent by her friends (the remaining 3 cents go to the studio). This obviously is not gonna make Jane a millionaire, but if she can make enough money to buy another paid app, then isn’t that a good enough incentive for her to send these invites?

3) In the same way, the reward structure can work for installs too. So if Janes invites 5 of her friends, then she can expect to get paid 2 cents for every install that happens as a result of these invites. If you do the math here, the studio will never have to pay a single dime on advertising because the studio earns 3 to 5 cents on every referral and also manages to distribute its app to a huge audience.

4) Using this technique, studios don’t have to rely on interstitial ads too. Ads generally use up some real estate in the game and it can be distracting a lot of times. Studios could provide a much more cleaner looking app which is also technically “free” for all to play.

Some critics may point out that if Jane doesn’t like the game at all, then why would she even spend that 25 cents? Well, again the answer is simple: She has the opportunity to get her money back if enough of her friends accept the invite or install the game. So technically, she can potentially end up paying nothing for the app.

This is an abstract idea for now. But I am confident of its prospects because it uses the power of incentives to encourage sharing of content. And ultimately, the best form of advertising is one in which the customer himself recommends a product to his friends.

I am happy to clarify any questions you might have or delver further into this methodology. I personally feel that this technique can do well as long as its implemented the right way. Companies like Playphone and Openfeint have the resources and the knowledge to develop such a system.

You can follow me on Twitter @aabidsiddique to stay updated about my latest blogs. In case of questions, please reach out to me at aabidsiddique81@yahoo.com.

Please note: All the numbers/prices I am using here are purely for understanding how the system works. Studios should have their own pricing models in place.

A unique and more cost-effective way to make a social game viral.

In my earlier articles, I have noted how Facebook is become a very expensive and unstable platform for advertising social games. A lot of Indie game developers opted out of Facebook because it was just too expensive to market a game on the social network and the returns did not justify the investment.

There are many reasons here. Facebook lacks an app store like Apple’s popular platform and because of this, it’s hard to gain visibility on Facebook. And Facebook has become notorious for changing its policies as well as its designs to better satisfy its users and not the developers. And of course, everyone has heard of the special favors it grants companies like Zynga.

Anyways, my article here is more about a different method of making your game viral on Facebook. I am not here to criticize Facebook (which I do regularly).

Here is an abstract of this idea. Instead of paying Facebook or other ad companies to advertise your game (Facebook Ads, Interstitial ads etc), What if you PAID THE PLAYER directly to advertise your game?

I know a lot of companies would think, “Well, there are legal limitations here, paying a customer in cash or rewards is hard because we will have to ask for their personal information to make the payment, and a lot of customers are wary of sharing any of their info”.

First of all, let me explain how this concept works, and then I can also show very simple and non-intrusive ways to reward a customer. 

1) Each player is assigned a unique referral ID when he logs into the game for the first time. (Like how Amazon does it).

2) Every time a player shares the game URL (with the embedded referral ID), he gets rewarded with a few points whenever one of his friends clicks on that link and installs the game.

3) Once a player has received enough points, he can then redeem them for real-world rewards.

In a real-world scenario, you could equate 50 installs to $1. So once about 50 of a players friends have clicked on the shared game URL (with the embedded referral ID) and installed the game, this player would be eligible for a reward worth about a dollar. (I will talk about types of rewards later)

Of course, this is very similar to the Frequent Flyer rewards program. Let’s just call it the Frequent gamer rewards program. But look at the advantages here.

With this method, you don’t have to spend money on advertising on Facebook. Generally CPC rates on Facebook are very high and you need to spend atleast a few hundred dollars a day on marketing your game. A lot of Indie developers spend about a $100 a day on Facebook CPC ads.

A $100 a day spending on Facebook can fetch you a few hundred installs at the maximum. But with this new method, you will be spending a $100 for almost 5000 installs!

      

      This also encourages players to recommend games more often. And people are always more comfortable playing games that are recommended by their own friends.

Ok, now to the tough part. How do you reward your players? For many companies, this can be a legal nightmare. Most rewards have to be mailed to a users address. But in this method, we can completely focus on giving players ‘digital’ rewards. For example:

1) Redbox/Blockbuster DVD kiosk rentals. These DVD’s rent for $1 a day and it’s very easy to give these out as prizes. As you may know, Redbox gives out free rental codes on a regular basis which can be redeemed for a one night DVD rental. A studio could buy these codes in bulk and offer them as prizes.  All a studio has to do is email this code to the reward recipient. No need for any home address, phone number etc.

2) iPhone, iPad and Android paid apps, music and games – Most of these apps sell for 99 cents. And iTunes allows a user to ‘gift’ an app to someone else through the iTunes application. So a company could ‘Gift’ a paid app to a recipient.

3) Game coins – Companies could partner with gaming portals like Hi5 or iWON and offer game coins as prizes. These are easy to gift too.

4) Longer game playtime – A lot of gaming portals like Big Fish Games, Wild Tangent or Gaikai offer playable demos of their games. These games can be played for about 30 minutes before the user has to buy the game. Studios could tie up with such companies and offer longer play times (let’s say 60 minutes) of these demos as rewards.

This is just an abstract and I am happy to share more info about this. As usual, feel free to discuss and point out potential flaws in this method. And I wouldn’t be surprised if such a system has already been tried before.

Thanks, you can follow me @aabidsiddique on Twitter to stay updated about my blogs. Or you can also mail me at aabidsiddique81@yahoo.com if you have any other questions.