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In Conversation: How Spice Labs Is Approaching The Kids Apps Segment – Part 2

In Part one of this two part series, we spoke with Dr. Abhinav Mathur (CEO), Siddtharth Jain (VP, Consumer Apps) and Prashant Singh (Sr.Manager, Alliances) at Spice Labs* about IP creation, data collection, the kind of applications they’re creating, monetization, advertising support for their kids specific applications. In Part 2, they speak about payment systems and app stores, conversion rates of in-app purchases, kid-specific devices, where their IP lies and why they’re creating standard games like Hangman instead of new IP:

MediaNama: How do you view free versus paid apps? Is there a propensity to pay?

Prashant Singh: It’s more of a generic problem. It’s not there isn’t an intent to pay. It’s just that the payment friction is so much.
Siddharth Jain: On the bigger app stores, it (the payment process) is being figured out more easily. Within India, it is not that well structured right now. In terms of distribution, we’ve done well, but in terms of payments, we’re trying to leverage the groups strengths.

MediaNama: Which is why I go back to the partnerships with toy manufactuers, because the payment is collected through them.
Dr Abhinav Mathur: We want to create long term sustainable value. We do not have any immediate revenue targets, but we’re looking at this space as creating an entry in an area which we identify as a gap, and a create our own brand. And I don’t think the time is very far where the payment mechanisms will fall into place. That’s a problem that is larger, it’s not just our problem. The ecosystem will have to come up with a solution, not just us. That’s one of the biggest objectives for all app stores.

MediaNama: I think it depends largely on when operator payments becomes more reasonably priced.
Prashant Singh: If you look at it, whoever has cracked the model, it’s the guy who has a repository of credit card numbers outside of telecom. Tomorrow lets say Big Bazaar or a Shoppers Stop wants to partner with me. Say, someone creates a tablet with a Big Bazaar purchase application on it. Why cant that also be used for processing app store payments?

MediaNama: Revenue share is an impediment for microtransactions and in-app purchases as well.
Dr Abhinav Mathur: (It is) for any industry. It’s not just for kids app, it’s any app. Whatever conversations we’re having with other app stores, they’re also looking at addressing this issue.
Prashant Singh: The funny thing is, with in-app purchases, it might actually break that threshold to enter a credit card number. Because if the first time you ask someone to buy something which he has not used, he will not take the pain of entering the details. But if you give him the facility to enter a credit card number, and now that the credit card number has been entered, the impulse purchase for something which has been tried, the friction is removed.

MediaNama: How does Spice’s retail business fit into this? If you look at Onward Mobility, they’re building out a retail apps business, where immediately after purchasing the phone, they offer you an app.
Prashant Singh: the moment you sell something at the retail point, the expectation of the customer is that the retailer is the guy responsible for it. So I have to employ someone who can explain the value proposition, and then deal with any issue that the customer might have.
Dr Abhinav Mathur: We have had multiple experiments with retail, and we did place a couple of people in the stores, and we reached a figure of Rs 400-500 per day, but it was a very hard sell, and not as lucrative. While we could do it in 4-5 stores, to scale it, we didn’t feel it was the right time. We developed a kiosk as well, but I believe that buying content at a store is something that is not native to the Indian consumer. A consumer goes to a store with the purpose of buying a phone. He’ll take 100 songs if you offer it to him, but to go to an app store or kiosk and pay to download something is a little too much.

MediaNama: As a part of the spice group, you also have a devices business. Have you thought about specifically creating for-kids devices?
Prashant Singh: Some work is in progress, but we cant talk about it.
Dr Abhinav Mathur: there have been purpose specific devices created like Nokia engage. But you’re not going to buy a mobile phone and give it to your three year old. You would rather have your own device, and when you’re buying it, you don’t think that my three year old will use it. It’s when you get home that the kid doesn’t let go of it, that you think you should have some apps on it for the kid, and later you look for something fresh. You can get something that is connected, but for a kid there is fascination, and it is connected, and you can keep pushing new apps on it.

MediaNama: What about a kid specific phone, for example? Where there is only few numbers that the kid can call – of the parents, and at the same time, you are in a position to push games and applications on it. Kids always want their own phone.
Dr Abhinav Mathur: See the cost. There are multiple things that you can look at – the ecosystem, the pricing.

MediaNama: What do you think of the $35 tablet?
Dr Abhinav Mathur: Those guys who are computer literate, but cannot afford a computer or a tablet…that is the segment for that device. Someone with a salary of Rs 15,000.

MediaNama: What’s your marketing plan for it? How do you make the app discoverable?
Dr Abhinav Mathur: The community that we have, of a million people, we need to ensure that they talk about our application, talk to people. In their social group, might have children of that age. The second is that we work with the App store owners themselves, so that these are given prominence.

MediaNama: The IP that you’re creating is fairly standard. You’re not doing your own studio, creating device specific, or new ideas? If you look at Angry Birds, which extends to a different mediums…
Dr Abhinav Mathur: The IP is in the experience, the brand, the content that we will start to push and the way we will structure it. In 1990, Windows 3.0 was launched, and it had two games – one was snake and the other was Gorilla. The Angry Birds game is the same IP, but it’s been packaged differently. You’re engaged, ready to play next time, and that frustration that you’re not able to complete it. We’ve played hangman, Hollywood, Bollywood on paper. We’re trying to create content around it, and engage. That engagement and the thrill of being able to successfully being able to form a word, with a hint.

Siddharth Jain: We’ve tried to leverage what is simple in flash card. For a short term, we’re going to keep it simple, and we’ve defined the engagement so that the usage and downloads have resulted in a lot of high value downloads. The levels will be invested in. For the 1 to 5 year olds, their content, a lot of different SKUs for the same platform get created. For the kid I’m trying to teach him hand eye co-ordination over ABC. What are the 100 ways I can make it interesting, and what are the 5-10 ways which become popular. I need to think of 20 ways that it can be done, and put it out into the market, then 2-5 pick up. That’s the way we’re approaching the very young kids segment.

MediaNama: there is also and opportunity to start providing kids which are 2-3 years in age and then growing with them as they grow up.
Siddharth Jain: Definitely. That is something that in the last year we’ve seen happen. As people have picked up, they’ve picked up word packages month on month which are more involved. That you put out one application like a packet of biscuits – every day, every week, every month. In terms of certain people do stick through a year..

MediaNama: There are people who have stuck through an entire year?
Siddharth Jain: It’s not a game. It’s a service, which is attractive – a new set of words, pictures, colors. You keep playing on and off.

MediaNama: What’s the ratio in terms of people who have bought the game, and have bought packs? What’s the conversion ratio?
Siddharth Jain: The conversion ratio for the kids segment has been anywhere from 2-10%. On apps where we have done certain things well, it has gone very high, and generally if you do put it out, the ratios are about 1% or less. On Kids, 3-5% we’ve been able to achieve, and on certain features, even higher percentage.

MediaNama: Any other learnings from the apps?
Siddharth Jain: You want to look at your application not just as a product that you put out once and forget it. You want to look at it as a service that you want to grow. You keep putting in an effort to grow it, and look at it as a service. You see if it gets the right response. Take Hangman Kids as an example. The first version had some words, and the same product has your own configurability to it. You can put in your own spelling and give it to the kid. You keep increase the content that is available. You don’t look at it as an application that you created once. You look at the feedback closely and try and grow it. That’s why for us – to answer that question on brand building – it is coming through this. We wanted to change a bunny rabbit (in the app) to something else, so we introduced a friend of the bunny rabbit, and then removed the rabbit, thinking it has to be better. The immediate feedback was that the kid is did not appreciate the change, so it had to go back. Good app stores are providing the feedback, which allows you to grow as a service.

Our core strength now comes from 25 apps, which are different versions of certain things. Things like spelling, drawing, stories, rhymes, and multiple versions around this. Basic alphabets. We’ve created many units around it. On the casual gaming side, we’ve got 5-6 apps which are doing well. In terms of ideation, we’ve focused it on the kids side, creating more characters to keep the kid engaged. We would have crossed 300-350 releases of our apps overall.

MediaNama: How do you weigh the kids segment in terms of a generic apps segment? In terms of propensity to buy, to upgrade?
Dr Abhinav Mathur: In that model, we’ve mostly worked on the free side, and we’ve worked with advertising. On the kids side, it’s mostly where we’ve tried to do the free to direct payment from the customer. We’ve been able to drive the volumes pretty high, so the advertising has worked very well for us. The payment model has to come in. Most of the purchases are in the international markets, and the Indian numbers are pretty low.

MediaNama: Is it down to payment gateways?
Dr Abhinav Mathur: In terms of free usage and downloads, it’s not what you would expect. In terms of both monetization – advertising and paid applications, India as a geography is relatively small. International conversions is much higher. The propensity to pay is much higher. The app store as a source of ads is picking up in India. Secondly, the propensity to pay is an issue. And there are not too many people who leave credit cards number on the app store.

Disclosure: Spice Digital is an advertiser with MediaNama

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