Native apps account for slightly more than half the mobile conversion

Retailers focusing solely on mobile web may be missing half their customers.

I’ve been looking at conversion across Kony customers and I’m seeing a pattern that is counter to the assumptions of conventional wisdom: about half the visits are from native applications and the other half come from mobile web.

More importantly for retailers: half the conversion is coming from native apps in addition to half the visits.

This means transactional native applications cannot be overlooked as a part of your mobile strategy.

I haven’t seen any other studies to compare this observation. I was speaking with Forrester analyst Sucharita Mulpuru Wednesday and asked her if she had seen any other data along these lines and she said she also hadn’t seen any studies looking at conversion between mobile web and native channels. I suspect that Kony has a unique perspective since Kony customers tend to cover three, four, five or more channels.

Transactional native applications cannot be overlooked as a part of your mobile strategy.

iPhone conversion is 30% higher than mobile web

I think retailers have created a self-fulfilling prophesy: mobile web dominates retailing because retailers generally haven’t done the heavy lifting of offering fully-transactional native applications. Let’s face it, retailers are comfortable with web development, but native development is less familiar. There are multiple SDKs, languages, and development environments to learn. Traditional web analytics, reporting, and checkout APIs are more difficult to implement from native applications. Frequent updates are also difficult from native apps – especially with the multiple environments to support.

However, we’re seeing what bankers have seen to be true for a while now – you can’t pick and choose channels to support. Some customers want to use native apps and some customers want to use mobile web. It depends upon the person, the phone, their relationship to you, what they’re trying to do, and when they’re trying to do it.

You need to be there when the customer is ready.

Furthermore, we’re seeing over 30% higher conversion for iPhone native app customers vs. mobile web customers. Therefore it’s imperative to have a well-designed, transactional app for those customers that want to use it. It also makes sense to drive users to that app to try to increase conversion overall.

The ROI is pretty easy to calculate. Offering both mobile web and native applications significantly increases the number of visits and the number of purchases and significantly increases the conversion rate for a significant subset of native customers.

Why would you want to miss half your customers – especially the ones that are more likely to purchase?

Hotwire mobile HTML5 site

Many technologists hope HTML5 will be the silver bullet to tame the mobile chaos. Ironically, HTML5 simply adds another mobile channel organizations must support.

The HTML5 standard isn’t scheduled for completion until 2022. But even if it were standardized today, intense competitive forces would start splintering the technology as they have with many technologies before. Most importantly, future hardware and software innovations will only be accessible through native applications until the standards are updated and browsers implement the support. This process could take years.

This means marketers wanting to compete effectively in the mobile marketplace can’t rely on browser technology alone. For better or for worse, organizations must continue using native applications and other technologies in addition to browsers.

Marketers wanting to compete effectively in the mobile marketplace can’t rely on browser technology alone

Why HTML5 is no silver bullet:

• Standard not scheduled for completion until 2022
• Native necessary to access innovative hardware until support is added into HTML5 and browsers begin implementing that support
• Non-standard browser implementations caused by competitive forces

About HTML5

HTML5 is a significant new revision to the HTML standard that lets browsers do things previously only native applications could do. For example, HTML5 provides access to the camera, accelerometer, and local storage. Browsers on Android 2.3, iPhone 4, and the BlackBerry Torch already use HTML5.

Companies are already taking advantage of many of the new features these browsers provide. For example, Hotwire (http://m.hotwire.com) uses the current location to assist with travel searches from HTML5-enabled browsers.

Not all browsers support HTML5. Many new phones and even yet-to-be-released phones don’t support HTML5. Of course, older phones don’t support HTML5 either. Therefore, organizations must support other browsers for the foreseeable future and HTML5 must be supported separately in the meantime.

Native innovation
Companies are developing mobile solutions to innovate and compete better. Native applications came about when developers wanted to access to phone hardware and chafed under Apple’s browser-only restrictions. Jailbreaking became an arms race between Apple and the so-called iPhone Dev Team group of hackers. Ultimately Apple provided native application support, which has of course become a tremendous success.

As devices offer new hardware and software innovations in the future, innovators will want use them in unique ways and won’t wait for standards organizations and browser manufacturers to expose the functionality. Innovative companies will write native applications to use the features and if successful, competitive pressures will force the rest of the industry to provide the features and they’ll have to do it through native functionality too.

Organizations must continue using native applications and other technologies in addition to browsers

History of fragmentation and no silver bullet

Mobile phone technology has been fragmenting throughout its history. Just when it seems we have a handle on the boundaries of the fragmentation, something like tablets comes along and opens up new dimensions to the chaos.

Fragmentation arises wherever there is fierce competition and mobile is one of the fiercest battlegrounds today. Mobile carriers, device manufacturers, and software providers compete based on the differentiation of their products. They have strong incentives to make their products different and prevent users from switching to competitive products. Carriers and device manufacturers have little to gain from keeping HTML5 standardized with competing products.

Technologists keep looking for the silver bullet to no avail. Fred Brooks wrote a famous software development treatise called “No Silver Bullet” in 1986. He’s also the author of the canonized “Mythical Man-Month” book on software development. Brooks’ premise was that no technology standard would provide an order-of-magnitude improvement in software development. He identified software compiler software, structured programming techniques, and in a later revision, object-oriented development as very useful inventions that moved the industry forward, yet none of these technologies provided the silver bullet order-of-magnitude productivity increases.

Summary

HTML5 is a fantastic technology that provides significant browsing improvements. However, it will not reduce the need for companies to provide native applications as a part of their mobile channel mix. On the contrary, HTML5 is another technology organizations must support in able to compete effectively and reach customers in the medium of their choice.

I recently attended my first Finovate conference, which also happened to be their first in Europe.  The venue was the Business Design Centre in the Islington section of London.  It’s a great format – 35 different vendors, each with a 7 minute demonstration, and some networking slots mixed in.  It covered a lot of ground in a short period of time, while still affording one the luxury of walking away with some salient points still in mind.  That’s about the right amount of time, at least for those of us in the US, as we’re conditioned to a commercial break every 6-8 minutes.

It appears as though 2011 is the year of the online PFM in Europe as there were 6 PFM providers.  The next major topic was social network oriented services such as LiqPay’s Facebook payment solution, Fidor Bank’s “Bank 2.0,” and a number of investment related applications from eToro, Hopee (BNP Paribas), StockTwits and Uniience, some of which are mobile enabled.  It’s certainly worth taking a look at some of these or onles like them if you’re contemplating a refresh of your online presence.

This being the Mobile Manifesto, however, my primary interest was looking at the mobile solutions, which there were a few.  Even some of the aforementioned products included mobile access/support as that increasingly becomes a baseline channel for any customer facing product, and more than ever, employee facing as well.

The product that caught my attention the most, even before I got there from the obligatory, pre-conference vendor solicitations, was an iPad based Financial Advisor tool from Finantix.  Granted, products tend to show well on the iPad, but this one particularly resonated with me because of recent client inquiries.  It was also one of four participants to be voted Best in Show.  The Finantix product really allows an Advisor to interact not only with the application, but their client as well.  Imagine sitting down with your Financial Advisor, having an interactive discussion, passing the tablet back and forth as you walk through an assessment.  The FA can prepackage content to include video presentations to share with their client in a face-to-face meeting, and even let them manipulate criteria to see what the long term effects would be of certain decisions.  It has the potential to make the whole process much more personal and engaging.

Other mobile oriented companies who showed included:

• Tagit, a “Configure Once, Run Many” mobile platform provider demonstrated their mobile banking solution
• IND Group with their online and mobile banking solutions
• eWise (Secure Vault Payments) demonstrated their mobile and online payments capability
• mPower with their mobile POS solution
• VoiceCommerce with their KYC Secure and VoicePay offerings, using voice biometrics
• SolidPass showed their token based authentication solution using a mobile device in lieu of a key fob.

In any event, I look forward to seeing more creativity and ingenuity at FinovateSpring 2011!

Starting November 22, I will be working with Kony Solutions full-time leading their product marketing efforts.

I am excited to work with Kony because I believe they are solving a problem that affects almost every company, in every industry, worldwide. I think they can become a fixture of global technology infrastructure. Just like every company needs a database or app server, they also need Kony technology to decouple product roadmaps from exponential platform fragmentation.

I see the potential for Kony to become the next Oracle, BEA, or Cisco.

As I outlined in my previous post, it seems everyone in mobile commerce is wrestling with platform fragmentation. I have done extensive work for clients on this issue including deep research into a number of vendors attempting to address this problem. I was very impressed with Kony Solutions. A number of my clients also were impressed after doing their independent analysis.

I believe the Kony technology is very strong. I also believe they have put together a great team, many of whom I’ve worked with before and respect. Furthermore, their founder, and my new boss, has built a number of successful public companies in the past.

I look forward to the opportunity to work with even more companies worldwide on mobile commerce and help them spend more time focusing on their product roadmap and less time dealing with mobile device fragmentation.

Other Mobile Strategy Partners consultants, like George Kelley and Jose Colucci, will continue serving clients. Mobile Strategy Partners will continue, but of course, I won’t be available as a resource. Mobile Strategy Partners will also remain independent and objective and will not promote any particular product.

I intend to continue writing here and sharing my analysis of the industry from my perspective. My goal is to share an even broader view as I gain insight into even more companies internationally.

There are two things I believe very strongly about the future of mobile commerce:

• • Mobile commerce is here to stay
• • Mobile platform fragmentation will remain a serious challenge throughout the foreseeable future

Since mid-2009 we’ve built a very successful business helping nearly twenty name-brand clients in banking, retail, insurance, fast food and other verticals wrestle with these issues.

We’ve seen the questions change from “WAP vs. App” to bewilderment at the challenge of managing an exploding number mobile product lines while simultaneously managing a flood of customer adoption and increased competition.

The mobile challenge is to develop a roadmap of continual product improvements without knowing the exact technology mix that will be in users’ hands.

Fragmentation persists because of creative destruction. The iPhone created the industry. Then, Google eclipsed the iPhone with Android devices from a variety of OEM manufacturers. Apple did it again with the iPad. Now tablet salvos from Dell, RIM, Samsung, and others are incoming. Arguably, we’ve also already seen the rise and fall of many technologies like WAP, Palm, J2ME, Blackberry, and Symbian, just to name a few.

Organizations must support the mobile devices their customers have. As customers flock to the next great innovation, companies must reach their customers on the device they have right now — and in the way that works best for them.

The days are long gone where IT picks the technologies they’ll allow their customers to use. So, the mobile challenge is to develop a roadmap of continual product improvements without knowing the exact technology mix in users’ hands at rollout, versions 1.2, 1.3, and beyond.

Companies are burning resources porting to new platforms instead of innovating and staying ahead of the competition

Most companies are rolling out their first mobile product and in some cases extending variations to other platforms. Few companies have had to manage complex product lifecycles for the mobile channel. As new platforms are emerging, companies are burning resources porting to new platforms instead of innovating and staying ahead of the competition.

Few companies have the resources to manually manage multiyear product lines across a number of platforms including product management, revision control and infrastructure, quality assurance, and development.

Organizations won’t be successful picking and choosing platforms either. It’s not enough to only support iPhone or Android (or SMS, mobile web, RIM, Windows Phone 7, iPad, etc.). The playing field is changing too dramatically and too often. Companies picking and choosing platforms may find themselves investing in a dead-end product with few customers after a release or two (or even at the first release). Two years ago RIM seemed to rule the world. Five years ago Palm ruled the smartphone world.

Browsers aren’t a panacea either. Major mobile innovation is happening with native and hybrid application technology. HTML5 solves some problems but will not make native applications obsolete. Exposing native resources through the browser create unacceptable security risks in many situations (along the lines of Java applets and Active X). Furthermore, variations in HTML5 implementations likely will continue the testing nightmare that exists with the mobile browser, where tens of thousands of browser permutations exist.

Every company interested in mobile commerce has to face the device fragmentation issue and I don’t see it going away any time soon. In fact, it usually just gets worse. We just have to deal with it.

I’m going to be spending a lot of my time addressing these issues in the future.