Episode #489: How to find mobile revenue in emerging economies – with Jacob Hauskens of Fortumo

Episode #489

Mobile has democratized entrepreneurship, international business and opportunity. This is so true but the work it takes to make something a success hasn’t gotten any easier as a result. There are two ways to approach a business: The first is a one-size fits all approach many app developers and mobile strategies are guilty of today. The other is to understand that each market you serve is different and requires a different approach. I know a lot of companies that ignore this and believe that if it fits in North America the rest will take it but this is wrong and this episode shows you why and how to approach new markets.

Joining me to discuss this very important component of a successful mobile strategy is Jacob Hauskens, VP Business Development at Fortimo. This entire show is meant to demonstrate two things: 1) That the opportunities outside of North America are real, attainable and lucrative and 2) That is takes a Herculean effort to pull this off properly but the effort is worth it in the end.

If you aren’t looking at emerging markets as a pillar of your business my hope is that this episode changes your mind. It is hard work but no harder than coming up with an idea, coding it and finding a bunch of customers – things you’ve already done.


Key takeaways from this episode. Click on the link and the video will take you to that clip

1. The biggest limiting problem for developers 1:20
2. What does Fortumo do? 2:15
3. Why carrier billing is key to entering emerging markets 3:10
4. What country is dominant in mobile payments? 5:00
5. Localization: What to think about in emerging markets 7:15
6. Platforms: How they impact emerging market opportunities 13:00
7. What is the most effective strategy for entering emerging markets? 16:00
8. Do you lead by platform instead of market? 17:45
9. The bottom line to success in emerging markets & what is different from other markets 21:45
10. Where is the next market to focus on for developers 24:00
11. What is the number one country developers are interested in 25:15
12. What country has the highest per customer revenue 28:20
13. How should developers deal with fragmentation 31:15
14. What dynamics lend to a better return and bigger opportunity in emerging economies 33:10
15. Where should developers avoid? 34:45
16. Advice for success in emerging markets 38:20
17. Most successful payment types for emerging markets 41:30
18. What revenue increase do Fortumo customers see? 43:45

Raw Transcript Click here to download the transcript as a pdf

Rob: Hello everybody and welcome to UNTETHER.tv. I’m your host and founder Rob Woodbridge. I love these kinds of episodes where I bring you somebody who is going to be able to enlighten you about how you can extend your business into the emerging economies, into countries where there are more people, more cell phones, and more data flowing through these devices than in North America.
This is one of these things that we have to understand in order to be successful in this industry. It is my pleasure to bring on Jake Hauskens, VP of Sales and Business Development for Fortumo, a mobile payments provider. Jake, thank you for coming on. I really appreciate your time.

Jake: Great, thanks so much, Rob. I’m looking forward to talking a little bit more about emerging markets and the all the opportunities there are for developers to go out and make a little extra money.

Rob: What I think about it, it’s crazy the opportunities that mobile has afforded us. It’s crazy the reach that mobile has had. It’s a pull. Seven billion devices around the world. This is a huge opportunity. But oftentimes, would you say the biggest problem that we’re looking at is the fact that people just look locally?

Jake: Yes, it’s locally, and it’s just thinking that also everybody else is just like themselves. So, it’s two problems. Everybody’s just like me, and they face the same sorts of problems as I have. If you’re a developer and you see past that, there’s a huge opportunity to make money outside of your home market.

Rob: It’s crazy. That’s right. Everybody’s just like me. First world problems everywhere — I can’t get a cab. There’s nobody close by to pick me up on lift. These are global problems, aren’t they?

Jake: Yeah, all five billion people with cell phones have exactly the same problem I have.

Rob: Exactly, and then of course, it’s the universal language is English. It’s just so simple, right? Just build your app and deploy across all stores globally, and you will succeed.
That’s what we’re here to explain is that perhaps that isn’t the best way to do it. Perhaps there are other ways to do it, and Fortumo is the company that can help us because what do you guys do? This is the space that you play in.

Jake: Yeah, we make it really for developers to go into emerging markets and make money. That’s the core we do, and we help them do that so we bridge the problems of we say, “Hey, you can make the great app. We can give you some hints on localizing it. But getting paid, we’re the ones that really connect you to emerging markets consumers’ wallets,” which is a lot trickier than just in the US where you say everybody has a Visa.

Rob: Right, yes.

Jake: I have three Visas. I don’t even want to know how many my wife has. You just say in the US, “You’re an app. Great, get paid with a Visa.” But overseas, that’s not true.
Only 1.5 billion people worldwide have credit cards. You’re leaving about 3 billion people on the table if you just say, “Hey, I only want to get paid with a credit card.”

Rob: Yeah, and PayPal’s no better.

Jake: PayPal’s an extra 100 million which is a great business, but you’re still talking about 3 billion people that don’t also have PayPal.

Rob: Yeah, and one of the greatest things about what you guys are doing is, correct me if I’m wrong here, it’s the carrier billing, right? We always used to think about this in the old days, in the J2ME days where you’d have to have the relationship with a carrier to be on their deck and then be on billing so that it was easy to actually consume and pay for these things. That really is a key when it comes to getting into these emerging markets, isn’t it? The way you guys have those relationships?

Jake: Yeah, it definitely is. We all think about carriers as being telecommunications firms, and they have all those cool wireless equipment. They’re also tremendous billing firms. They’re financial services firms for most of people that don’t have bank accounts.
What we do is make it really easy for developers to connect their software using our SDK to all of the different carriers. Rather than having to have to be a developer and saying, “Now, who’s the biggest carrier in Nigeria? How do I find them? How do I write to their API?” We make it really simple so it’s [inaudible 04:05] to one ours. We figure out all the hard stuff with the carriers and make it really easy on the developers.

Rob: It’s such a difference. I’m up here in Canada, and Roger’s is by far the largest carrier in here. It’s like the ATT partner up here. They’ve applied and been successfully granted the status of a bank. You start to think about what they’re doing, and I know it’s like North America is a Luddite economy when it comes to the advances in the banking industry.
We’re not talking just an app. What we’re talking about here is that I don’t have a bank account, and everything I do is over the phone through digital credits or digital goods or digital cash. We think that we’re advanced because we have apps, and I can actually send you money from my PayPal account or from my checking account through the app.
I think of emerging economies and the people that you work with and the countries that you work, and the companies that you work, in emerging economies is so far in advance of what we’re doing here in North America. That’s how I feel, is that accurate?

Jake: I mean I think certain countries so Kenya always comes up as the golden child case study of awesome future but we’ve been talking about that as being as awesome future for five, ten years. It’s always been “Hey, we’re going to be right behind them,” but they’re still out ahead and I think for us is we’re not trying to. It’s a great problem you described around the PTP payment and just extending financial capabilities to everybody in the world. That is an awesome goal but that is a huge challenge. Like that’s a government and huge challenge.

Rob: Infrastructure. Oh, yeah. Yeah.

Jake: Infrastructure level challenge. And what we’re trying to do is help the app makers not wait for this sort of future perfect where everything is solved. You can actually today go out and make money using the carrier billing. So it’s very much of a ‘This is something simple you can do today to go make money and you don’t need to wait for the perfect everywhere-is-Kenya future.

Rob: I was born in Nairobi and I haven’t been there in many, many, many years but I often think about that as that we are looking to them as an emerging economy but at the same time as a leading economy in certain areas and I love that. What you guys are doing at Fortumo is to me one of the greatest things ever from an entrepreneurial standpoint is that you’re not waiting government legislation or government intervention to be able to offer these services or wait until the government has actually implemented this and built strong infrastructure in the banking system.
You found a hole and you’re filling that that’s what’s so great about what you guys are doing. And at the same you’re helping entrepreneurs make money which is what we really want to talk about here is we really want to understand the differences in these emerging economies. We want to understand what localization, and language, and multiple platforms, and design how all these play into this role which is the transaction? So where should we start with this? Maybe localization? Is that a good place?

Jake: Yeah. Sure. Localization as far as we’re thinking about it is not like in the US or Canada. It’s okay, great. Throw your app on Google Play, throw it on iTunes and Windows Store. So you’re there and you don’t have to think very hard and you’re just thinking about your app but in emerging markets you have to think much more about distribution.
iTunes doesn’t work if you don’t have a credit card. Google Play, there’s a lot of countries that that is not compatible in as well as there’s a lot of devices that it doesn’t get shipped out on. Windows phone is growing rapidly but it’s still not pervasive as well as most of the time you need a credit card if you want to use Windows core capabilities and so what we do is we help people get distribution first.
As part of working with us we help our app customers say “Hey, these are the apps where you should go into. There’s not just three, there’s actually 30 that you need to pay attention too.”

Rob: How do you decide that? So if somebody comes to you is it product based? Or is it opportunity based? Is it target customer based? How do you decide where they should be?

Jake: So what we do is we basically say go where the types of customers are you have, so if you don’t localize into Russian it makes very little sense to go to a Russian store. A lot Russians don’t speak English so that’s not probably good use of anybody’s time versus if you’re localized it’s a great place to go.
And same thing when you integrate our technology you get paid by the carriers and so you can get access to the carrier store. Versus on Google Play there’s a zillion apps on Google Play, more than that or same number on Apple, good luck getting featured. When you’re on to the merchant markets you can much higher chance of getting featured and so you’re going to get the downloads and also you don’t have the crazy CPIs that you face in the US. Unless you’re a leading in-app publishing guy and you can fight with the big guys, it’s really expensive to acquire traffic here. Traffic is much less expensive in emerging markets and the monetization rates are surprisingly high. While it’s not as cool as being a top-ranked App in the US, the ROIs are typically better overseas.

Rob: Are you seeing companies now leave the US, and Canada, or North America to later and specifically target certain emerging economies first?

Jake: Most companies still will do a beta in let’s say New Zealand and Australia. They actually have very high ad rates just because people like to beta down there and then they’ll bring it to the US. So that’s still the typical flow but what we’re trying to say is the faster you get into the emerging markets, the faster you’re going to get to the top of the [OP] charts there. And then that will allow you to, you know, self perpetuate. If you’re good, it rewards you further down the line. So we say get out there as quickly as possible. Don’t wait until you’re a top 100 app in the US. It’s too late because someone else is already on the top of the charts in Mexico.

Rob: Now, that’s an interesting thing. Does it… Does the… If you become a top 100 app which is a, literally, a rarity considering that there’s a million apps in each one of these stores. But say you have the good fortune to become a top 100 app. You’ve put all the effort into it, you paid all the money that you need to pay in order to be able to get to that point. And it’s very expensive. Very few of those top 100 apps are by chance, right? So does that influence… Does that have an influence when you launch in other stores? Or in other places in emerging economies? Or do you start at ground zero again?

Jake: I mean I think, you know, for example one of our customers is Rovio. They have a tremendous…

Rob: Never heard of them. Never heard of them.

Jake: Never heard of them, so if you’ve never heard of the bird when he gets a new market or a new game, he has a lot of carryover from one market to the other just because the level of PR and excitement around their products is so great. So I think they definitely have a lot of cross-market [pollinization]. But for a lot of other app developers, what you need to do is, in emerging markets is, get in there early. Provide good language support, good customer service. And win those positives reviews in each of those markets because people in Brazil who only speak Portuguese don’t really care about your English product.

Rob: No, no they don’t. Nor should they. Nor should they. But, so, when you… There’s obviously opportunity for companies in these markets. How difficult is it for them to actually be a part of these markets when they’re, say they’re in North America or say they’re in Europe and they’re going into different countries. How hard is that for them? To be able to manage this?

Jake: Well if they do it themselves they need to figure out which app stores are important, how do you submit, what are the guidelines, how do you maintain your position there, or how do you answer questions? How do you get everything done? How do you arrange for a promotion? How do you find the person at that app store company who controls that promotion? You know, and go find them on LinkedIn.
So that’s one of the services we provide is that we have a whole team that does that. Who their entire job is helping our customers with app distribution. And so they… We take that work on and we distribute there and say hey because you’re able to get paid in emerging markets, it makes sense to spend time distributing in there. Versus if you can’t get paid in, let’s say India. It makes very little sense for you to spend your time doing great CS getting localization there. You’re not going to get paid. But because it works the pay and the distribution work together, it makes sense for you to spend your time.

Rob: I agree. 100%. I’m going to ask you a little bit later on, so remind me this I’m going to ask you what the impact of working with you guys is versus not working with you guys. So maybe if you have a case study on that. I’ll give you a little bit of time to think about it. But in the meantime, one of the other things that you guys have talked about is this difference in platforms. The fact that not everybody’s carrying an iPhone. Or not everybody’s carrying the latest Android device or a tablet of some sort. Often times, in emerging economies, they’re carrying an Android device. Or a BlackBerry, for example. Or a Windows phone. Or a Nokia device. And each country has its own dominant platform, pretty much, don’t they?

Jake: Yeah, so they have very different… So when I talk to developers one of the first things I always try to tell them is, listen, I say everybody let’s pull out your phone and so everybody has the latest Samsung or HTC or Apple. You don’t see phone that are two generations old. They’re definitely never three. But we say hey, in emerging markets, these phones costs $150 off contract. And so these phones are not as capable. So if you’re designing for, you know, you need a quad core processor to make it work, your market is much smaller.
And so we try to say is make something to a more reasonable common denominator. So feature phones, there’s still a ton of them. Like on our work, about a third of our payments going through were Gingerbread, for example. So a lot of people have older phones. And what we do is make it really easy and we say hey, if you want to go make money on the older phones, you need to make sure that it works okay on slower things, as well as with less connectivity.
So you can’t say I need to have the highest speed 4G where I’m standing next to a cell tower for it to be awesome. You need to say what happens if… What if it’s intermediate connectivity, so it comes on and off? What if it’s a 2 and a half G phone? Does your thing work okay? And as the more of these things you can say yes to, the more opportunities you have to go into markets because it’s not as crowded. It’s not… Because so many fewer people are thinking about these sorts of problems, you’re going to rise to the top a lot faster. It’s a lot less competitive than the US where everybody’s designing to a very similar standard.

Rob: So part of the strategy could be to lower the design and development expectation of the application. And I’m not saying make it a bad experience. But for some reason in North America, what we try to do is… and I can understand this. Innovative nations are we, Canada and the United States. But we always try to think a little bit further. So we’re going to do… like Ingress, a location-based game. Augmented reality game. And that’s not going to fly in emerging economies.
But maybe a redo of Miner 2049er would. Simple, pixel-based, that kind of stuff, when it comes to games.

Jake: Yeah.

Rob: Is that what we’re talking about here?

Jake: Yeah. So focus on the use case. Focus on making it fun. Focus on making it useful. As far as graphics fidelity, that’s one of the fastest ways for game developers to burn up budget, is with graphics.

Rob: Yeah.

Jake: So you’re saving yourself development time and money, and you’re not hurting your monetization. You’re actually making it easier, because your apps are smaller. They work on slower connections. So it’s a win/win all around if you’re able to develop a really compelling content without spending all of the time and money on the really expensive graphics.

Rob: Now, is it about looking at the market that you want to enter? So say you want to go into Africa, or say you want to go into Turkey, or wherever. Russia. And then looking at the ecosystem of what’s going on in the app ecosystem for that country, and then finding the holes, and then filling that hole with an application. That’s one strategy.
And the other strategy would be to take your existing application and port it over, and to do all the localization and language modifications. Is there one that works better than the other when it comes to this? Getting into those markets?

Jake: Yeah. I think when you’re localizing, the key things to think about are what languages does it work well. So is it a very graphics-focused game. So going back to the “Angry Birds” example, or a “Cut the Rope” example. You don’t need to know very much language to play those games. They’re fun. Versus if it was a text-based game, you have a heck of a lot of translation ahead of you.

Rob: Yeah.

Jake: So the more universal your game is, the more graphic-centric it is, the better and easier it is to move around, first thing.
And second thing is on the platform. So in Russia, for example, Windows does really well. Their market share is higher than iOS. Most people don’t know that. So if you’re, say, developing on Windows in Russian makes sense. Versus if you’re in an area where they have lower market share, then it’s not as good of a fit. So you need to make sure that the platform that the country is using is what you’re localizing to. We can help developers with those hints, and where everybody’s winning.

Rob: We often thing — I’m Canadian — so we always have that conversation around BlackBerry. And everybody asks me about BlackBerry, and says, “Is there still opportunity to develop for BlackBerry?” And we think that maybe there’s 62, I think, 62 million devices worldwide that are BlackBerry, and a declining population of applications, right?
So you look at all of these other different platforms that are out there in emerging economies, including BlackBerry. Very strong in Africa and emerging economies.
But do you talk to the developers that you’re working with and say, “Listen, if you really want to be a big fish in a small pond in the app space, what you should do is go and write for Windows Phone, or go and write for BlackBerry over here, because there’s a market that we know is big enough to sustain the business that you’re looking for.” Do you have those kind of conversations? Do you make recommendations like that?

Jake: We do. We definitely recommend the… I’m sorry to say, not necessarily always the BlackBerry platform. That doesn’t come up as much in our conversations.

Rob: No, it’s okay. You don’t have to apologize. We’re okay with it.

Jake: But the Windows Phone is clearly the strong third platform. It’s growing. Microsoft’s behind it.

Rob: Yes.

Jake: And you see their market share gains, especially in places like Russia. They’re making strong headway. And as you see with the good tailwinds from the Nokia acquisition, it’s just going to get better. So as far as putting your resources and trying to get to the top of the charts early, Windows is a great place to go, just because it’s a little less crowded. A lot less crowded than Android or iOS. And then as the momentum of that platform comes on, you’re already parked at the top, and you’re getting a lot of free downloads from being at the top, and you’re not having to pay the really high CPIs to win up on the other platforms.

Rob: It’s kind of a once-in-a-lifetime opportunity, wouldn’t you say? And tongue-in-cheek. Everything’s a once-in-a-lifetime opportunity. But the applications that were there at the beginning of… the very first time the App Store opened in iPhone.
Have still become… are the top 10 apps of all time, right? They just ride up because of the momentum of being there first. They become the default. And the same thing with Android. And now there’s Windows Phone, and in emerging markets, the same kind of thing could happen, where you just ride the wave, right?

Jake: Yes. And that’s true of the different app stores that we see. And so some of the app stores have really strong popularity, and others have mix and match. So it’s good to be a winner. If could win early, it’s self-perpetuating and as you say. And you are getting a lot of the free marketing and the free downloads, and then subsequently the free money via our conversion technology. And so it just. It’s a much easier business model than saying, “I have to go find a huge marketing budget and buy my way off the charts.” There’s relatively a few companies that can afford to buy their way to the top 20’s.

Rob: I have heard some great statistics about user base. I’ve heard mobile entrepreneurs talk about this to the extent that they have to get somewhere in the realm of. Like if they want 5000 users on Android. Core users will coast them between 5 or 10,000,000.00 million dollars. And spend to get those and then you start to see things rolling. Not a lot of companies. This is in North America. Not a lot of companies have a lot of money to throw in am app to get that number of users. So obviously when you start look at your strategy. Emerging economies very strong opportunities there.

Jake: Yeah.

Rob: So when it comes to the differences in the market. So we are talking about localization is understandable. Language is obviously clearly understandable. Platform is different. Many more tablets in North America. Far fewer in emerging economies. Many feature phones. If you look at a company like Facebook that decided to create a feature phone app for Facebook.
You start to understand their motivation. Facebook also just bought a company that accelerate the Web simply because they want more people. The mobile web just actually compresses the mobile web. So they want more people to use more data, but will cost less. There really focused on the emerging economy. Is there anything else that plays a critical role in how companies can get into these countries?

Jake: I think that key thing is just keeping in mind of you need to have the right app for solving a customer’s problems. Like the African apps tend to be. The ones that win there are games. Everybody loves games but also more useful apps that provide real time information. They will pay for that. But it cannot be really time information of what’s the traffic on near Candlestick Park.

Rob: Or stock prices.

Jake: Or stock prices. It needs to be local information that’s implacable to their lives and they do that. If you are an app developer . . . That’s why I think that are really local in the African example. African app developers are closer in that information and they can really sell that. Some developers are going to have a hard time competing with you if you have this great local information that you are selling.

Rob: Are you competing at this point. Do you think there’s a lot of competition from the emerging economy themselves? So app makers in Africa. App makers in Brazil or Turkey?

Jake: You look at a North American’s perspective. Look at the success at the Northern Europeans have had. We as North Americans do not have a dominance on it. I think that’s going to be true especially if you look towards the Asian model at gaming. They are some of the most successful in-app purchasing models came from Korea.
Where North Americans borrowing a lot of those technologies and I assume that the next wave you’re going to see developers workers India, Africa and South America, Their going to borrow our technologies. You never know who’s going to be the next guy that’s going to take the next Rovio. It’s fun for us is that we want to make it easy for the next Rovio to say hey, “Let’s get paid really easily so I can focus on creating the great app.” That’s going to win and take the payment problem out of it for them.

Rob: The payment is always important right because you can go in independently and you can go build your app. Then you have to figure out how to get paid and conversion and collection and all that kind of stuff. So you eliminate that challenge for the entrepreneur. Which I think is one of the biggest impediments, I think, mentally for the entrepreneur to decide to go into emerging markets.
When you look out there, what countries should people be looking at right now when it comes to getting into early enough so that there isn’t a lot of competition but there is also a lot of opportunity to be had.

Jake: I think that we look at it as kind of on region blocks. So language blocks verse specific countries. I guess Brazil is a language block of Portuguese. It’s a great market and it’s a BRIC. So people do pay more attention to that. But their next door neighbors, they’re Spanish speaking countries, there’s a lot less competition. But they’re still able to pay using their mobile billing accounts.
They could pay for your app. Less competition, you win up the charts. Same thing in Russia. Russia has a very advanced mobile economy where people are used to paying for things with their cell phones. You could pay for your utility bill in Russia. So paying for an app is very easy. And it makes sense to them. You can design there.
Same thing with India. That’s a little bit more on the frontier. But as they develop, they’re adding tremendous numbers to cell phones. While we’re flat, they’re adding a huge number every single year. So you’re getting ahead and you’re winning early, so as you mentioned before, you’re at the top when it becomes huge.

Rob: Well, what’s the number one country that people always ask you about that seems to be the top of mind for this?

Jake: That would be China, so the developers, that’s the first question is always, “How do I get into China?” And then one of the reasons why everyone’s asking is because it’s difficult, it’s hard. It’s not [turnkey] into China yet.

Rob: No. And because Google pulled out of China, so Google does not have- Android play is not available in China. So I think the dominant Android store there is Amazon, right? The Amazon Google, but it’s one of many in China.

Jake: Yeah, the dominant stores are Chinese so they have a wide variety of carrier stores. You have the Chinese huge Internet companies that are as big as our North American companies in China. And they’re selling a lot of apps. People are used to doing online commerce with them, and so for Western developers it’s a challenge to get in there and they actually need to have local partners due to legal restrictions. It’s one of the key things that kind of levels that with Westerners is when you move to China, it’s not the 30-70 situation that you face in the States.

Rob: What is it?

Jake: You’re going to be looking at probably closer to you getting a third.

Rob: Oh, really?

Jake: Because you need to be bringing in enough middlemen in China to help you with that as well as there’s going to be the carrier billing, so the carriers take their share in China, and there’s just more friction for you. Which, a third sounds kind of rough but the market is huge. The Chinese market is actually much bigger than our market in North America, so it’s 16 billion in Asia-Pacific versus North America is 13. A lot of dollars to go out and chase and that market’s just getting bigger.

Rob: Yeah, it’s unrelenting. And I think of that as India is the same way, is it’s unrelenting but in terms of ease of getting into the market, I think that China’s obviously very difficult but the spoils are there. I sat with Darya Trushkina, who works for a company called Game Insight and they’re based out of Moscow, and she kept on pushing people to Korea. Are you hearing a lot about Korea as well for emerging economies?

Jake: The Korean game companies are tremendously successful. When we go to shows, they’re up giving talks on how to do it.

Rob: Yeah.

Jake: And the rooms are packed. They’re extremely good at monetization. Because of that the rates there are- and the penetration’s high. So the penetration in Korea is 100 percent so you’re not going to probably have somebody with two cell phones, and with both of their hands, both of them buying apps on you different apps. So the market is pretty mature I think, but there is a lot we can learn from that market and take those learnings to other places.

Rob: Yeah, that’s funny. We’re so young in this industry and it’s already mature. But there must be some differences, some very specific differences across all these other countries. For example, here’s a question. Who, what country has the highest average revenue per user?

Jake: Yep. It is surprisingly, it is Turkey actually.

Rob: Turkey?

Jake: Yeah. It’s almost three times higher than the U.S.

Rob: Turkey?

Jake: [inaudible 28:37]. Turkey.

Rob: This across all apps? Not just one category? This is just the average revenue?

Jake: It’s across our entire portfolio of customers. So for us, roughly the U.S. is about seven bucks per paying customer.

Rob: Yep.

Jake: And in Turkey it’s 20.

Rob: 20 dollars.

Jake: Yes.

Rob: Why is that? Is it difficult to get it on your phone? Is there a scarcity issue? Is it just that people are willing to spend more money?

Jake: They love it. It’s a big part of their culture. It’s very pervasive as far as playing games and downloading apps and in- app purchases.

Rob: Yep.

Jake: It’s a major form of entertainment. So they’re spending less in other areas and spending more on apps. So I think it’s mostly a share of wallet scenario, so they’re not taking expensive trips to Hawaii. They’re buying a lot of apps.

Rob: It’s a fair trade off. Hawaii or apps.

Jake: [inaudible 29:26] share, and it’s a big enough market where if you take the time to localize, you can make a very good return there just because it’s not one of the first places a lot of developers think about. But it has a great ROI because the cost of installation is so low.

Rob: Do you know if there’s a specific type of application that’s working better there? Is it a communications app? Is it games? Is it something like productivity apps, those kind of things? Or is it just a-

Jake: Right now, I think the games tend to be the best monetizing app just because they’re furthest along on the in-app purchases. So I think as the other categories catch up and kind of innovate a little bit more about in app purchasing, their payments are going to maybe catch into the games as well.

Rob: I figured as much. All right, so what else? When we talked you said that, for example, Russia is… What did you say? Overtaking? Or about to overtake iOS in terms of, uh, or Windows is about to take-

Jake: Windows. Yeah, the Windows is there, yeah.

Rob: And so obviously that’s a unique thing about the country. So focus in on Windows as opposed to iOS. Go with the device, or the operating system, rather than your desired operating system. What else? China is very difficult to get into.

Jake: China is Android. You’ve got to go Android. You have to localize. And you need to work with local partners. So we help our customers kind of navigate that. Just because it’s very difficult. We actually have a team in China that does that. So we have boots on the ground in China. They’re talking to the carriers, talking to other publishers and really getting our customers in. Just because it’s tough. If you don’t have Chinese people working in China doing this, it’s very difficult to make money.

Rob: What about this whole idea that in North America, especially, and I hate using the frame of North America but it has a lot to do with it, is that the average time it takes for somebody to install the latest version of the operating system, which is key, it’s such a simple thing. So you’ve got fragmentation when it comes to the device type. So in emerging economies and especially in Asia and China, there are phones that you and I have never seen before. They run Android, right? And input mechanisms are different, everything’s different about it. And then obviously the operating system is different. Because the roll out at least of this is controlled, right?
So at some point I think that iOS, the latest version of iOS, it’s like 65% have already upgraded to it. And it was the fastest upgrade, you know, process, in all the operating systems. But Android, there’s probably like 15 or… Not that many but five, six, seven different versions of the operating system distributed across all of these economies makes it very difficult to build for it, doesn’t it?

Jake: It does that’s why I think, going back to the earlier idea of building towards a little bit lower common denominator. So don’t make your app utterly dependent on having the latest and greatest from Android. Make sure it works with older apps. Or, I’m sorry, older operating systems. And you’re going to make a ton more money. Just because the developers that say it requires the latest and greatest because of the cool factor, they’re missing a huge opportunity with that. With the device makers who are putting out a ton of apps like, as you mentioned, the [OEM’s] that me and you haven’t heard of. They are selling apps in the South America. Selling a lot of handsets into India, Africa. And these are handsets that cost less than $150. So they’re not going to have all of the different sensor suites that we’re used to. Not going to have the processing and the OS is going to be potentially older.

Rob: When you kind of look out and you do this survey of all of these different countries. And you know, we’ve already said listen, if you’re interested in ARPU it’s Turkey. But these emerging economies don’t have the infrastructure so they never got used to having, for example, land lines in their house. So they moved to cell phones very quickly.
What other factors here are allowing these countries, and the populations there who are carrying these devices to… Do they use their phones more because they don’t have land lines? Because they don’t have televisions in every room? How is that dynamic playing out in these countries?

Jake: It’s their primary communication. So it’s not like they say I’m going to sit on my couch with my PC, with my tablet on my lap, and talk on my cell phone. They have their cell phone.

Rob: That’s it.

Jake: And so, yes. And so you need to design and say this is somebody, and it’s a very personal gadget just like it is for us. So you need to design and make sure that this is something that somebody’s going to want to have with them. That potentially if someone else takes a look at their phone that, you know, that’s okay. That they would see the app on there.
And just make it very useful and personal for the people. This is their device. I mean even in places like Vietnam where we think of, oh my gosh, do they pay, has anybody in Vietnam ever paid for an app? Like those are the sort of looks I get when I talk to developers. But they’re at $5. Compared to the U.S. $7. So they’re not quite as high as we are, but it’s pretty good. It’s a heck of a lot higher than most people would suspect. And so people are willing to pay if it’s genuinely useful. They look at the tradeoffs, they have a budget, and they’ll pay for your apps if it causes them enjoyment or it helps them with their daily tasks.

Rob: Where do you tell people not to go? Like where would you say, don’t go here. Just stay out of this country, stay away from here. Where’s a bad place to do business in [inaudible 34:58]?

Jake: I think, well, I mean for Western developers, I’d probably say the number one place to avoid would be Japan. It’s a great, huge market, but it is exceptionally difficult for Western developers to market and sell a game that plays really well there, just because the tastes are very different.

Rob: Yeah.

Jake: So there’s a couple exceptions. But as a general rule…

Rob: Japan.

Jake: …that’s a big, juicy target that you might want to look elsewhere for.

Rob: It’s funny…

Jake: And spend your time localizing into Chinese, or Hindi, or Arabic.

Rob: It’s funny. I don’t ever hear about Japan when it comes to companies moving their products into Japan. And I’ve talked to over 500 mobile entrepreneurs, and Japan never comes up on the radar. This might be the first time I’ve ever had a conversation about Japan. So Japan.
Where’s a country that is popular, but the average, the ARPU is so low that you think, great country, great infrastructure, waiting audience, but ARPU is $2, and it’s just not worth it. Is there a place like that? Except for Canada, maybe?

Jake: I think one of the places where it’s tougher to make money is in the areas where people are beta testing.

Rob: Yes.

Jake: So the smaller English-speaking markets. So Canada, New Zealand. And those people aren’t there to make some huge ROI and buy a new house because of their sales in New Zealand. They’re doing it there to get testing in an English language. And so as long as you’re using it for testing, I think that’s okay. But I wouldn’t design a lot of apps specifically for the Kiwi’s needs, just because it’s a small, expensive market.

Rob: Yeah.

Jake: And it’d be difficult to go and make a great ROI there.

Rob: There’s an app called Tempo, there’s a company called Tempo.ai, based out of California. These guys are beta testing in Canada. They did it for a year in Canada. And I thought, “Hey, that’s innovative.” And then, based on this conversation, I’m like, “But please, make the apps for Canada. It’s okay.” Canada, we have money. We spend really currency, right?

Jake: Mm-hmm.

Rob: Sometimes it’s on par with the US currency.

Jake: Yeah.

Rob: But, so those emerging… you’re right. Those small, concentrated, very small populations. Great beta testing, but maybe the ARPU isn’t as high as it should be, or as it could be.

Jake: I think the problem is less on the ARPU side, and it’s more on the CPI side.

Rob: Yeah. Right. So that’s cost?

Jake: Because everyone else… you’re fighting people’s testing budgets, not their actual ROI marketing budgets.

Rob: Right, right, right. Well, if you want to dominate New Zealand, go ahead, right? You can go ahead and dominate.

Jake: It’s an expensive proposition.

Rob: Yeah. I know. And it often happens that way.
So this whole thing is not cheap, right? None of this is cheap. You can be smart about it, or you can make a whole bunch of mistakes on your own. And the idea here is to be smart, and to look at companies that can enable this infrastructure. It’s basically infrastructure as a service. And you take a little piece off the top, but you’re saving so much heartache, and so much headache, and so much pain, and potentially failure, by just bringing a company like yours into this mix, and allowing and enabling your applications.
And focusing on what you do best, right? Which is none of the other stuff, and all of the stuff around developing and localizing and making good user experience. And so that’s what you guys do.

Jake: Yeah.

Rob: So last thing here, before we go, Jake. Is there any general advice that you give to people? Aside from, hey, come and visit us and use us as a service. But is there any advice that you give to people that you think about, like some of the examples of the impact that you’ve had. But based on that, what kind of advice would you give people who are looking to move into the emerging market space, and advice to succeed?

Jake: I think the key advice to succeed in emerging markets is make sure to level set yourself, and say, transport yourself into the mind of the customer you’re looking at, and saying, “Is my product providing enough value where he is going to open up his wallet, or she’s going to open up her wallet, and pay for this?”

Rob: Yeah.

Jake: And say, is it just kind of a little tricksy thing, and they’re not going to pay for it. But because of our technology, we make it easy to actually take a payment if they want to pay.
So you have to be honest with yourself, and say, “Is this something that somebody in this market faces this problem?” And if you say, “I’ve done a great job localizing it, I think this is an important problem for them, or it’s going to provide them a lot of fun on the game side,” they’re going to pay for it.
But they’re very calculating about how they make their purchases, and they only make ones that are really worth it to them. So they might be a little bit less frivolous than maybe people who have a little bit higher income levels. So you need to be more focused on my value equation for those people.
And so we solve the payment problem, but you as the app developer still need to make a compelling product that says to the customer, I’m going to have him open up his wallet.

Jake: And is pricing different when you get into these countries? Is something that would cost $5 here, do you recommend people charging $2 there? Or is it same pricing across the nations?

Rob: Yeah. I would highly recommend for our customers and we actually have this as a platform capability, of setting individual prices per country.

Rob: Yeah.

Jake: And so you can say, “Hey, this app is selling like gangbusters in Turkey. Let’s raise the prices.” Versus, “Okay, it’s a little bit slower in Brazil. Let’s lower prices.” And you can do this on a market basis, and also show what price points make sense. You know, other countries may charge VAT.

Rob: Yeah.

Jake: So taxes on sales.

Rob: Yeah.

Jake: So a dollar in Germany is not the same as an app dollar in the US. You’re going to have to pay some tax to them. And so there’s that. As well as the carrier fees. There is going to be commissions that’s paid to the carriers for use of their network, and it’s more than the Visa fee. Carriers in emerging markets are typically going to take anywhere from 40 to 50% of the revenue.
But it’s found money for you, so you’re still getting half that you wouldn’t have had otherwise. So it’s a great opportunity to expand your business. Versus if you say, “I’m only going to take Visa because I need to get paid my 70% at an app store, and I’m not going to take anything less than 70.” You’re leaving a lot of money on the table. And given the great margins on apps, literally that’s profit you’re leaving.

Rob: Is there any country that, when you go through this… I said these were the last questions, but you know, Jake, for those who watch this or listen to this, they know it’s a total lie. “Last question” means “last hour of our conversation.”
But is there… when you look at countries, and you’re trying to decide where to go, part of the thing is around payments. So part of the challenge is do you charge for a premium application, so it’s a one-time fee and then you’re done. Or are there more countries that are apt to do software as a service, or in-app purchasing. As you said, like China, lots of in-app purchasing, and certainly Japan is in-app purchasing. But is there… that’s got to be part of your strategy, as well, is how you want to get paid.

Jake: Yeah.

Rob: Once, or many times, right?

Jake: Our most successful merchants have the strongest in-app payment systems. And where you think about where does it make sense for the user to recognize the value of my app, and then how am I going to charge them money? So we handle the “how am I going to charge money” by using carrier billing. We make it really easy, with just a one-click to buy. So we remove friction.
Very similar to Amazon. I buy a lot of stuff on Amazon because they make it too easy for me. We do the same thing. We make it really easy. But you still have to run into the pay point. And so when you’re designing the app, make sure you put the pay points in there to get in-app purchasing. Versus if you’re just looking for a one-time sale of $1, it’s really hard to drive the nice… you’re never going to get a $20 average revenue per user if you only charge $1.

Rob: No kidding. It’s good advice.

Jake: So you’ve got to have IAP.

Rob: It’s very, very good advice. All right. You guys obviously run webinars, you run… you’ve got a great blog on content. Where should we drive people to get more information about what it is that you guys provide?

Jake: Great, yeah. So we have one of the easiest to use systems. So you can go to Fortumo.com, and you can just sign up right on the Web. The SDK isn’t a secret. You just need an email address, and you get access to it. You can download a test application and make a payment. It’s really easy.
We try to provide a solution that works all the way from a guy in his den making the next great app, all the way to the biggest companies in the world, like an EA or a Robio. Our solution, because it has self-serve capabilities, you can do this. You can try it out and say, hey, I’m just going to demo this, and I’m only going to try it in Spanish-speaking countries. And that’s okay. Try it out in certain markets. And as you get comfortable with it, roll it out across the globe for your app.

Rob: I love it. I love it. And the impact of you guys on your customers has been obviously very strong. You’ve been able to, companies that have not been able to, never thought about, or have struggled with moving into emerging economies, you’ve had a huge impact. Any numbers that you provide?

Jake: Sure, yeah. So our customers typically will see a revenue increase. So we account for anywhere, for most of our customers, from 10% up to half for some of more emerging markets-focused customers. So the main app stores are important, but you can… literally, we’ve had customers double their revenues by attacking the emerging markets, for not a lot of extra work on their part.

Rob: Why? If you’re listening to this, I hope you stop listening to this and you’ve jumped over to Fortumo.com, and you’ve signed up. Why would you ever leave revenue on the table? Why? You put all the effort into the coding. Why wouldn’t you be out there trying to push this into as many markets as possible?
And I’m not saying every market. Be strategic about it. Get in touch with these guys. Start to learn and listen from their experience. It probably will save you time and money and effort, but it also actually will make you money, as you’ve heard.
These opportunities, I just don’t understand why everybody’s focused on North America and not the emerging market. So hopefully at least what we can do here is give a little glimpse into the opportunities that are there. It’s amazing. It’s amazing.

Jake: Yeah, it is. Thanks so much for having us on today. We’re excited. I mean, just last night we won a Meffy Award in San Francisco for being able to help companies distribute on Android into emerging markets. So it’s great to be recognized as helping a lot of developers really expand their business into the areas of the future.

Rob: Well, yes.

Jake: Please go to Fortumo.com, and it’s easy. It’ll take you less than four hours to get signed up and implement it into your apps.

Rob: Well, you guys should go to Fortumo.com. And I thank Jake Hauskens, who’s the VP of Sales and Business Development for Fortumo, to come on and explain and talk about this emerging market opportunity. You guys should be looking at this. Honestly, if you don’t, I don’t even know what to say. You’re wasting your time if you’re building for one market. Go and look at the other markets to see if you can increase your income.
Because I always say this, and we talk about this. You guys have to make money, right? You guys are the backbone of this economy. The app economy. If you’re not making money, you’re going to go and get a job in the government, and that is going to be no good.
So please, go and take a look at what these guys are doing and apply what you can to your business. Go into different markets, if it’s not too costly, but it actually drives new revenue and it makes sense for you guys.
So here’s a perfect example. Fortumo.com. Go and do it. Please go do it today. And then let me know. Reach out. Let me know. I want to hear if you’ve doubled your sales. I’ll have you on the show if you’ve increased your sales because of leveraging what these guys are doing. And I’m sure that Jake would appreciate hearing back from you guys, as well. I’m sure he would. Right, Jake?

Jake: Yep, definitely. Please feel free to send me an email.

Rob: All right, Jake. Thank you for doing this. I appreciate your time. And those of you who are sitting there listening, watching, wondering how you can make some money sitting on your apps. Literally sitting on your apps. Go to Fortumo.com, check them out, see if they can help you. And I’m sure that they can. But don’t just waste your time and waste your apps’ potential.
And we will see you next time on UNTETHER.tv. Thanks, Jake.

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About Jacob Hauskens
Jacob Hauskens FortumoJacob’s main responsibility at Fortumo will be furthering relationships with existing customers including Microsoft, EA, Barnes & Noble and Rovio, as well as establishing new partnership. In addition to holding leadership positions at Sony Electronics and collaborating with companies such as Google, Microsoft, Symantec, and Intel, Jacob has worked as the Director of Business Development for Rocket Lawyer and as an analyst at Bank of America Securities.

About the author

Rob Woodbridge

I'm Rob, the founder of UNTETHER.tv and I've spent 14 years immersed in the mobile and pervasive computing world. During this great time I've helped some of the most innovative companies grow their business through mobile. If you are in need of a mobile business advisor or coach, connect with me here to get things rolling.

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