Music creation is really personal. It's often intimidating, so we thought if you are creating software that helps someone sing, like our reverse karaoke app LaDiDa, you want to present it in a personal way. You want it to be something someone feels like they can be intimate with. To us, in the earliest days of the App Store, that's what the iPhone was, right? It's a part of your personal life. It is something that you have an intimate relationship with. It also has a microphone built in, it has speakers built in—and it's small, you can hold it in your hand, in the same way that you hold a microphone. There's just a lot of different things that made the iPhone a very natural first music partner.
In the beginning the focus was simply that: Build a really good experience, and get some kind of traction for those experiences. Then—and really, ultimately, this is the only thing for a company that makes apps—the equation that you have to solve is that the money you make per app install has to be more than what it costs you to acquire one app install. The jargon that we use is LTV, or Long Term Value, which is greater than CPI, or Cost Per Install. In the beginning I didn't think of it explicitly in that way—I wasn't aware of those terms—but that's what we're all doing, right? And as you go through different stages of growth, that goal doesn't change. But the way in which you do it changes.
One way we saved marketing dollars from the beginning was by using YouTube videos for marketing. For our product, in particular, video was the best way to describe what it does. We would obviously pitch the app all the time, and we saw how people reacted when we described it in different ways. When we'd just say, "LaDiDa, it's a reverse karaoke app"—it didn't mean a lot to people. They might get curious: What do you mean by "reverse karaoke"? But it didn't make them want to download it. But when you do a live demo and see someone sing into the phone and the app creates a song around your singing? People have a totally different reaction: They want to try it for themselves.
Creating viral videos on YouTube is a market that, in and of itself, has evolved. But basically we would work with "celebrities" on YouTube—kids that have channels with millions of subscribers and that get thousands or millions of views on their shows every week—and we formed partnerships, making videos to demo our products. Many of those videos went viral and we'd see corresponding bursts of app installs. On one channel our videos had something like 40 million views apiece. And we did not pay very much money for their production or the partnerships, so that was extremely, extremely ROI positive for us. We were able to get to profitability through that marketing channel alone.
As we got to a different stage of our company, we've used video in a different way, through a company called Flurry. They provide app analytics, and also have an advertising platform to incentivize video. So we can show videos of our app Magic Piano, for example, on Flurry's network, and users on another participating app can choose to watch these videos to earn currency inside their game in exchange for watching. They can then click through and download the app if it seems interesting to them. Through Flurry, we can track who installs after viewing our videos in other apps, so we know that channel has been really effective for us. And we know from talking to Flurry that's it's also really effective for other apps that have nothing to do with music.
Once you're in our app, you can purchase a song by paying us money. Or you can purchase a song by earning currency—watching videos for other apps is one of the ways to earn it. If someone chooses to watch a video ad within our app, we earn advertising revenue from that. And then when they buy more music from us, we also earn money. One of the things we've learned is that we actually make more in-app money from the users who come into our products via those video views than we do from any other users. Part of the reason this form of advertising is so effective, is people are choosing to engage with it. They are actually setting aside time to engage with it.
Still, the app landscape has evolved and it's getting harder and harder to build a sustainable business. Now we have close to 100 million installs across our products. And yes, we want to take it from 100 million to a billion. But even if you have a successful app, it's no longer enough to just have it go to No. 1 in the App Store. That used to be my dream. Then it happened, and that was great, but then you realize, Well, what's next? You have to actually build a sustainable business from this, and it has to grow over time.
So for us now, it's no longer about pumping out these new apps that get really big for a little while and then come back down. Now it's really about building a sustainable, long-term relationship with our users. Our way of doing that is building a community. We're building a social network for music creation, and we view our apps as a gateway into that community. So someone might enter that community by singing into LaDiDa, our karaoke app, or by creating a music video through our app CineBeat, or by playing a piano through our Magic Piano app. Ultimately our focus is not just on getting traffic into any one of those apps, but getting people into our music community and having them become active members. That's our real goal now.
[Photo by Winni Wintermeyer]
- Ryan Spoon, ESPN Digital Media
- Lisa Bettany, Camera+
- Keith Shepherd, Imangi Studios
- Smart Talk: Scott Kveton, Urban Airship; Gentry Underwood, Mailbox
A version of this article appeared in the July/August 2013 issue of Fast Company magazine.