December 03, 2012
Tradable vs Non-tradable Apps

We’ve previously discussed the major opportunities that are emerging for developers globally, fueled by rising demand from BRIC countries and other emerging app economies, representing at least half of the world’s mobile subscribers. In order to capture these opportunities, developers can focus on two broad strategies: to “reach-out” or to “search within”. Developers that “reach-out” will address international app-demand by supplying apps that appeal to users across borders and continents (tradable apps). These apps can reach far and wide but in order to do so requires a moderate level of localisation. Those developers that “search within” will look at gaps and opportunities in local markets. These apps have local reach and require a high level of localisation.

To illustrate these opportunities further we have segmented apps into two main categories: tradable apps vs non-tradable apps. This naming is designed to mirror the distinction with tradable vs non-tradable goods and services. Tradable goods and services are those that can be supplied from a distance; for example frozen food, electronics and clothing. Attempts to supply non-tradable goods or services from a distance is either impossible or results in a significant loss of utility; for example property, local transport or prepared meals. With apps the separation of code and data can make the distinctions between tradable and non-tradable less clear. Local weather forecasts are fairly useless outside of the area they are provided for but since global weather forecast data is available for free or at low cost online, it’s possible to create a single global app that provides local weather forecasts everywhere. On the other hand, whilst there are taxi’s in almost every city in the world, they are not all hooked into a global booking service, so companies like Uber and Hailo have to roll out the entire service one city at a time, even if their app can be reused across all locations.

Non-tradable apps
Tradable apps
Description Equivalent of non-tradable goods or services: providing from a distance is either impossible or results in a significant loss of utility. E.g. property, local transport or prepared meals. Equivalent of tradable goods and services: can be supplied from a distance. E.g. frozen food, electronics and clothing.
Examples Local news (e.g. Canal Touch); transport (e.g. Tube Map, Uber); transactions (e.g. local banks) Communications & social networking (e.g. Skype, Facebook); utilities (e.g. Dropbox); weather (e.g. Accuweather); maps (e.g. Google Maps)
Localisation Local service partnerships, local content Translation, cultural adjustments
Trade route Local to local Local to global
Opportunities Addressing market gaps in non-tradable app categories in your own country Identify tradable apps that are top sellers in limited regions; take them global via localisation.
Regions Countries where local app demand exceeds developer supply, like Asia, Latin America, Eastern Europe, Russia and Africa. Regions with medium levels of smartphone penetration where user app engagement is growing rapidly.

The non-tradable app opportunity

For developers focusing on in-region, for-region development, the opportunity lies in addressing market gaps in non-tradable app categories in their own country. These opportunities are particularly strong in countries where local app demand exceeds developer supply, like Asia, Latin America, Eastern Europe, Russia and Africa. There is a simple source of inspiration for such apps – simply search the app stores of other countries for apps which provide very successful local services; if those services can also be delivered to a large enough mobile audience locally and there’s no existing competition then there’s a clear opportunity. It may also be the case that different communities have local needs unlike those in other countries. Markets of that nature will be limited in scale but also well insulated from international competition.

The app export opportunity, or tradable apps

Developers with tradable apps that have been successful in a limited number of regions have a significant opportunity to take them global via localisation. This opportunity is particularly ripe in regions with medium levels of smartphone penetration, and where user app engagement is growing rapidly. Games with very simple concepts and controls sell well globally even when they are not localized. However, localization improves sales internationally even for the simplest games. The more complex the game, the more benefit from localization. Similarly, people need utility apps everywhere and adapting them for local languages and cultural variations can massively increase the addressable market. Client apps for social networks have a significant export opportunity to all regions where the social networks they interact with are popular.

Mobile app franchises?

One final app trade opportunity worth considering is the use of a franchising model. With examples like Uber and Hailo above the companies have raised venture capital and are expanding internationally by setting up local offices around the world. However, where a profitable business model can be established that has re-usable client app and backend service assets but a lack of local data and/or service partnerships to expand to other markets a franchise could be offered. For many budding mobile entrepreneurs around the globe, the cost of building and running such a service may be too much risk, or even prohibitive for the size of their local market. By re-using a proven app and business model, both the local businesses and the original developer can benefit.

As with any investment to expand a business, for all of these opportunities both the risks and rewards need to be considered carefully. At the same time it’s worth remembering that with the global growth of mobile app usage, an opportunity that looks only marginally profitable today may be significantly better a year or two from now.

How are you planning to take advantage of local market gaps or growing global demand? Please share your success stories and experiences in the comments below.

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