Giving Handles, Selling Blades

(or, How to Make Money by Giving Free Stuff)

I just bought my first iPhone last week. Since then, my continuing odyssey through the wonderful world of the iPhone App Store has inspired some musings on why free apps (and other free products) can be great money-makers for an organization. Absurd, you say? Let me explain with an example.

One application I have downloaded is RunKeeper Free, by FitnessKeeper, Inc. The app uses the iPhone's GPS and a timekeeper to record distance, duration, pace, and speed. RunKeeper Free also provides me with a Google Map of my route, plus allows me to save my run history to the app and/or to the RunKeeper website, where I can also view Calories burned, elevation, and start/end times for each activity in my history. And, of course, because of the iPhone's multitasking abilities, I can also listen to my tunes while RunKeeper tracks my workout.

FitnessKeeper, Inc. also offers a paid version of the application - the RunKeeper Pro. For $9.99, the RunKeeper Pro provides the same features as RunKeeper Free, as well as audio cues, training workouts, iTunes playlist integration, the ability to post geo-tagged photos and status updates, and integration with social networking sites. The RunKeeper Pro also runs without the small, silent, inobtrusive ads contained in the free version - ads which, incidentally, I did not even notice until their absence was highlighted in the description for RunKeeper Pro.

A download button (linked to the iPhone App Store) for the RunKeeper Pro is included on a screen within its free counterpart.

So, if FitnessKeeper, Inc. offers a robust $10 application, why do they also offer a free version? Won't the free version cannibalize the paid version? Would anyone pay $10 for the Pro version when he can get the most valuable features for $0 with the free version?

The answers to the last two questions are "probably not," and "yes," respectively.

iPhone users who would download the free version (me, for example) would probably only download an app like this if it were free. If the only version available were the paid version (or the $10 paid version anyway), such users would probably decide that the app was not worth downloading after all. They would choose another, free, app, or no runner app at all.

Some iPhone users will download the $10 RunKeeper Pro right off the bat, even though they know that a free application with most of the same features is available. These users are probably either hard-core runners (possibly), exercise-motivation-seekers, or gadget aficionados (most likely). To these users, it is worth $10 for audio cues, pre-programmed workouts, playlist integration, photo-sharing, and social networking features unavailable in the free version. Thus, offering the RunKeeper Free does not steal the business of these paying customers.

Still other iPhone users will download the RunKeeper Free, and later decide to upgrade to the $10 RunKeeper Pro. Perhaps they loved the free version so much that they were ready to try the paid version. Perhaps their curiosity got the best of them, and they just had to try out the additional features. Or perhaps they developed into such avid runners that they came to see the RunKeeper Pro as a good buy.

Whatever the reason for the upgrade, the RunKeeper Free paved the way for some prospective paying customers to become actual paying customers. The free version enabled FitnessKeeper to build trusting relationships with potential customers. And it provided opportunities for RunKeeper Free users to show off the app to their running buddies, some of whom might be the types that would purchase the paid version.

And so, one can think of the RunKeeper Free as less of a profit-less product, and more of a marketing tool for the RunKeeper Pro.

It's like the strategy of razor manufacturers. Gillette, I'm told, sends a free razor to young men on their eighteenth birthdays. Those young men like the experience of shaving with a Gillette razor, so they keep coming back to Gillette to buy replacement blades.

Also, free products (or paid ones, for that matter), like the RunKeeper Free and RunKeeper Pro can connect the organization to fans who might also pay money for other items. FitnessKeeper could have among its customers a market for more FitnessKeeper gear, like t-shirts, running shorts, sweatbands, socks, watches, etc.

What products can your organization give away for free? And not just demos or promotional products, but real, useful tools that can benefit consumers and can help you to start building a fan base? Out of that trust-relationship, those fans may become paying customers for your other product offerings. Or, even better, they may spread the word to others like them who become paying customers, too.

Flash for All Smartphones...Except the iPhone

Users of Blackberry, Google Android, Symbian OS, Palm webOS, and Windows Mobile can expect to have full Flash player capabilities for their phones within the next few months, according to multiple sources, including Adobe.

Today at the Adobe MAX developer's conference in Los Angeles, Adobe introduced Flash Player 10.1, part of Adobe's Open Screen Project, an initiative to "provide a consistent runtime environment across mobile phones, desktops and other consumer electronic devices." Flash Player 10.1 is GPU-accelerated*, so users can view videos in HD, while [hopefully] conserving battery life and CPU** usage. Flash 10.1 will also support the capabilities of each mobile device, including multi-touch, accelerometer, gestures, and screen orientation.

Flash Player 10.1 will be available in beta for Windows Mobile and Palm webOS phones later this year; the beta version will hit Google Android and Symbian OS phones in early 2010.

One smartphone, however, is blatantly absent from this list: the Apple iPhone. Over a year ago, Apple declared that desktop Flash was too CPU-hungry, and Flash Lite too poor-quality, to be used on the iPhone. As early as June 2008, Adobe developers began work on a Flash version that would meet Apple's requirements. The latest news from Adobe was that the development of Flash for the iPhone is "in [Adobe's] court." There has been no word today on whether Flash capability for the iPhone is forthcoming.

Is this another case of Apple refusing to play nicely with other technology companies? Or is Apple waiting for a Flash Player version that will meet certain standards of quality for the iPhone? Or, as one blogger speculates, is Apple intentionally providing a respite for web users weary of tiresome Flash animations?

One report suggests that Apple might indeed be taking a step in the Flash-friendly direction. The Unofficial Apple Weblog (TUAW) reports that Adobe Professional CS5 will enable Flash animations to be exported to iPhone/iPod Touch applications. So even though iPhone users will be unable to view Hulu and Facebook videos on the device, they will be able to use iPhone applications that feature animation.

I look forward to seeing what Apple communicates with its continuing lack of Flash capabilities for the iPhone. Will Apple announce that a version of Flash Player will soon be made available for the iPhone after all? Will they report that the decision for the iPhone to go without Flash was made with the consumer in mind? Or does Apple have something else up its sleeve?

Stay tuned.


Brief glossary:
*GPU = Graphics Processing Unit
**CPU = Central Processing Unit

Lessons from a [Virtual] Zippo Lighter

Yesterday I enjoyed another great article from one of my favorite marketing bloggers, Steve Smith. This time, Steve wrote about the phenomenon of Zippo lighters at concerts, and the life cycle of the Virtual Zippo Lighter app for the iPhone.

Watch this video to see the Virtual Zippo Lighter app in action (my favorite part is the flicking it open and closed!):



The Virtual Zippo Lighter app has been downloaded more than five million times since its release a year ago, making it the 13th most popular iPhone app, according to ComScore.

The beauty of the app lies in two things: its simplicity, and its connection to a cultural classic.

Simplicity: The Virtual Zippo Lighter has one single purpose - to look like and act like a virtual Zippo lighter. That's it. Nothing else. The Virtual Zippo Lighter flicks open like a Zippo lighter, lights like a Zippo lighter, and its flame moves and flickers with movement like the flame of a Zippo lighter. It's the beloved concert toy, without the fire hazard or lighter fluid smell.

Connection to a Cultural Classic: Had that first brilliant concert-goer never had the inspired idea to hold his Zippo lighter aloft and sway back and forth to a rock-and-roll hit, the Virtual Zippo Lighter would be pointless. A fire-starter that doesn't start fires? Please. But because this cultural phenomenon did happen with the ubiquitous pocket-sized object of the 20th century, Zippo was able to recreate this "Zippo Encore Moment" with the 21st century's own ubiquitous pocket-sized object: the smartphone.

Simplicity and connection to a cultural classic (and the ultra-low cost: the app is free!) created a fan-base 5-million-strong for the Virtual Zippo Lighter app. And now, Zippo and its mobile marketing partner Moderati are planning ways to re-launch the app into the growth phase of its life cycle.

Simplicity built the application's popularity; the next generation of the Virtual Zippo Lighter will inhabit the opposite end of the iPhone app spectrum: a full-media package, allowing users to customize their lighters and, possibly, to find music and information on the concerts that are happening near them. Brilliant, right? Add value to customers and allow them to find venues in which use of their app is logical and "cool".

As Steve Smith points out, it is difficult for a smartphone application to survive in the space between ultra-simplicity and ultra-complexity. Zippo and Moderati will be avoiding that "no-man's-land" and occupying both extremes. Customers will be able to choose either the free original app, or the 99-cent customizable, concert-finding version.

Zippo and Moderati used simplicity to attract fans, and will use complexity to build deeper relationships with those fans. Good move. Can we do the same?

Pre vs. iPhone - part 2

The saga of the Apple iPhone vs. the Palm Pre continues. (To read my first blog post on the matter, click here.) One week after Apple issued the iTunes 8.2.1 update, which blocked non-Apple smartphones (i.e. the Pre) from syncing with iTunes, Palm issued an update of its own. Among other features, the Palm webOS 1.1 re-enables iTunes synchronization. Of course.

I like Apple. It's a good company; it makes good products. Apple rose to fame for good reason - it consistently offered excellent functionality and beautiful, simple design, all for the purpose of providing the best possible user experience.

In personal computing, Apple's graphics remain unparalleled. In digital music, Apple's iPod is to MP3 players as Kleenex is to facial tissues. But in mobile communications, as Anders Bylund of The Motley Fool points out, Apple's iPhone is not the only viable smartphone anymore. The iPhone may or may not remain the best option, but it is certainly no longer the only one.

Mr. Bylund's article of yesterday reminds readers of Apple's famous "1984" Super Bowl commercial, which introduced the Macintosh computer to the world. In the ad, Apple was presented as the young, independent hero who would free the world from the reign of an Orwellian "Big Brother" IBM.

But 25 years later, as Mr. Bylund notes, Apple's recent actions seem more characteristic of "Big Brother" than of the young hero. Bylund has some intriguing speculation into why Apple might be acting this way, but I'll let you read his thoughts on your own.

My only comment is that Apple just needs to stop being so unfriendly. Stop doing things like preventing non-Apple smartphones from syncing with iTunes, and shutting down iPhone apps that use Google Voice. These actions may be within Apple's rights, but they are unbecoming to a company that once prided itself on fighting Big Brother.

So other smartphones are now competitive with the iPhone. So what? Apple knew it would happen. The proper response is not to try to stop the progress of competitors' models - progress which, by the way, attests to the excellence of Apple's products by piggybacking on iTunes and the iPhone. Rather, Apple should stop worrying about competitors and return its focus to pursuing excellence and innovation in function, design, and user experience.

That focus is what made Apple great, and that focus will enable Apple to keep pushing greatness forward. To borrow words from Satchel Paige, don't look back to see what might be gaining on you. Keep pushing forward.

Free Movie Tickets? Where?!?

Sprint sure is doing some interesting things to promote the new Palm Pre. First there were the series of commercials for Sprint's Now Network ("the first wireless 4G network"); I first saw these spots in May at my local movie theater.

The Now Network commercials were paired with home page takeovers on sites like Yahoo, YouTube, and AOL.

Next came the "Flow" commercials for the Palm Pre itself; these commercials have been deemed "creepy" by my new favorite mobile marketing blogger, Steve Smith.

Then there is the Palm Pre website which reflects the setting of the "Flow" commercial, and which invites visitors to, among other things, "Experience the Pre ad campaign" (italics mine).

Additionally, when a person turns on the Palm Pre for the first time, they see another beautifully done video in the same earthy, "flowy" feel as the television ads.

And now Sprint has launched the "r8 it" campaign, which gives participating movie-goers in a chance to win a year's supply of free movie tickets when they rate the movies they see. Viewers can rate the movies and view poll results on the National CineMedia website NCM.com, or, better yet, via the mobile "r8 it" app.

Sprint is also partnering with ScreenVision to install interactive kiosks in 500 movie theaters across the nation. Sprint subscribers can use the kiosks to download mobile coupons for the concession stand.

So, is this intense marketing effort working?

Well, for one thing, Media Intelligencer reports that the award-winning integrated campaign was successful in sparking early interest in the Pre. According to comScore, search terms related to the Pre doubled to 216,000 during the week of the YouTube takeover campaign. That number dropped after the release of the iPhone 3G S, but rebounded in the two weeks after the Pre was released.

Another clue is the Apple iTunes 8.2.1 update, which prevents non-Apple smartphones from synchronizing with iTunes. The Palm Pre's much-anticipated ability to sync with iTunes lasted for little more than one month before Apple blocked it. Is Apple nervous about the new iPhone competitor? Or just annoyed?

It will be interesting to see how the Palm Pre fares in the smartphone market. If it succeeds as a viable iPhone rival, perhaps Sprint's extensive campaign(s) will have had something to do with it.

Mobile App Idea #1: Gas Station Locator

From time to time, I think of ideas for marketable new products or services. My dear readers, I would like to share some of these ideas with you. If you find one of my ideas to be absolutely brilliant, so brilliant that you want to actually develop it, please do so. Unless otherwise noted, I will demand no royalties for my ideas.

However, if I conceived an idea, I might have further insights on how to actually implement it. You may want to pick my brain. Or at least send me a thank-you note for inspiring your profitable new invention. Just a thought.

Allow me to share with you an idea that came to me today for a new mobile phone application: a Gas Station Locator.

Running out of gasoline can be a rather inconvenient experience. Not that this has ever happened to me, of course; this is just what I hear.

Someone (maybe a fuel company? maybe AAA?) should develop a mobile phone application that uses the phone's GPS to locate the nearest gas stations. The app could be geo-visual, like the Nearest Tube application for the London Underground (see the YouTube video below).



The Gas Station Locator app (perhaps it could be called "Fuel Up!") could generate bubbles containing relevant information for each gas station - items like the station name, distance, estimated driving time till arrival, gas prices, sales and specials, availability of restrooms, and customer ratings. Maybe the application could even communicate with the vehicle's computer, to report how much further one can drive before running out of gas. Perhaps the driver could set a minimum gas level (something like "3 gallons", or "1/4-tank"), below which the application would automatically open and start locating nearby gas stations.

But drivers staring at cell phones kill people, you say.

The app should be completely audio-driven and voice-activated, so that the driver does not even need to look at the phone. The driver could ask the application to audibly list the stations in order of distance, or gas price. The app could even give spoken, turn-by-turn driving directions to the selected gas station.

Do you think drivers would like an app like this one? Do you know how to build it? How to coordinate all of that information? You are welcome to develop it with my blessing - you might be nice and let yours truly download it for free, though.