Do mobile applications have an ROI?

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I am often asked this question – Do mobile apps have an ROI? (return on investment). Coming from a background of large scale consultancy and project management – ROI is a familiar concept to me – but I have rarely seen it been used in the mobile data industry

here is my view on why that’s the case ..

Firstly, ROI is a concept much more applicable to the corporate sector than to the consumer sector. In other words, you can quantify ROI by measuring against an existing cost or some other metric(ideally a ‘hard’ metric based on a numerical value).Even measures like ‘customer satisfaction’ can be quantified

However, the mobile data industry is predominantly(at least currently) based around consumer entertainment. And consumer entertainment has no ROI

In other words, in most cases, the model is ‘product based’ as opposed to ‘project based’. A project based model lends itself much more easily to ROI.

Of course, the notable exception is corporate rollout of a technology(for example RIM Blackberry devices). In that case, we can speak of ROI in terms of increased productivity for the user.

Thus, in general, the mobile data industry has no ROI. IMHO.

Image source: http://www.foundation.uconn.edu

Comments

  1. Tom Hume says:

    What definition of ROI are you working to? I always thought it was just Return On Investment: the amount of money you get back by investing a certain sum in performing an activity.
    With that definition, you can attempt to measure ROI from any activity (perhaps less accurately with some – e.g. advertising campaigns – than others).
    An example: I know of a company that did the shoddy buy-a-list-of-mobile-numbers thing and spammed them all with photos (shortly before this became illegal). They paid £X for the list and made £Y per month thereafter from customers who opted in to receive further photos. That’s mobile, that’s consumer facing, but you can see the ROI on it over time.
    Am I missing something? I’ve never worked in large scale consultancy :)

  2. Ajit says:

    Hi Tom
    Good comments and thanks for your feedback.
    Here are some more thoughts based on my personal experience
    ROI by definition needs to be quantifiable i.e. for a business case to be approved, there must relate back to some cost
    I use the ‘Good Bad and the Ugly’ model to classify customers
    i.e.
    A customer will spend on a system to get a competitive advantage (Good). Companies like Dell, Cisco and Amazon are the best examples of this approach
    The second (and most common) is the company who wants to reduce a specific element of cost i.e. the return must tie back against cost (cost = bad. so I am calling this class bad) and finally
    the ‘Ugly’ – One off massive issues or threats – Y2K, security etc
    And of course there is the ‘asset’ i.e. any operational software from the ‘Microsoft windows’ to the ‘shopping cart’ are simply operational software assets. These being different from ‘good’ in the sense that they are a commodity
    In the ‘good/bad and ugly’ model – ‘bad’ is ‘good’ i.e. that’s where the biggest class of your customers are likely to be – although both ‘good’ and ‘ugly’ classes are likely to spend more!
    Whenever I put forward a proposal I try (even if its not immediately obvious) to put in some form of ‘cost reduction’
    Qs is .. where does a mobile app fit in here?
    If we look at the Mobile data industry(cellular) today .. its still mostly entertainment. Thus, probably difficult to compute ROI.
    Ironically .. the example you gave(mobile marketing) is probably the best example of a quantifiable ROI on the mobile data industry . Thus, the definition is the same but ROI is not quantifiable in most cases in the mobile data industry IMHO.
    Kind regards
    Ajit