January 26th, 2017

[The following is an extended version of a feature article I wrote for the online magazine Kidscreen, January 26, 2017. In this version you will find additional interview quotes and financial details of business deals not fully detailed in the original Kidscreen article.]

What a year 2016 was for kids digital businesses. From Age of Learning’s US$150-million funding injection, to LeapFrog jumping ship to VTech, there were plenty of opportunities—and dollars—to be had. But rising to the top were seven major moves spanning the app, toy, education and investment worlds, and their impact will only begin to materialize in the year ahead. This rings especially true when it comes to building platforms and brands, the growth of subscription pricing and the state of venture capital investments. Let’s take a closer look:

1. Age of Learning receives US$150-million venture investment

This was a major business announcement, not just for the kids space but also within the entire venture capital community. Age of Learning’s flagship digital product is ABCmouse, and over the last few years the company has consolidated its offering by allowing a single user account to be accessed across online, tablet or smartphone devices. (Consumers purchasing a single subscription can add up to three users, and schools have access to the product for free.)

As with many traditional subscription products sold to kids, keeping your user-acquisition costs low is important, but you also don’t want to curtail long-term sales growth. Ongoing subscription renewals are vital for growing business revenues, and the cost of renewals is a fraction of what it takes to acquire a customer for the first time. Revenues from subscriptions are the lifeblood of ABCmouse, so Common Sense Media‘s report that trying to cancel one is challenging at best, is not surprising.

Since the investment by Iconiq Capital, Age of Learning has been on a hiring spree in order to develop a deeper content base, push new older-skewing products and continue product expansion into emerging markets like China. While Age of Learning has not said so specifically, one also has to wonder about sales expansion opportunities in India, too.

One brand related lesson can be learned here from a past business mistake from LeapFrog, another company mentioned in this article. Historically, a company that starts off selling consumer products almost exclusively to young children will face a major challenge when trying to age up their product lines and related sales. This was a problem for LeapFrog over a decade ago when the company went after a new revenue stream by selling learning products to tweens. There were many challenges to LeapFrog in pursuing the tween marketplace but maybe the biggest was the perception of their brand by the audience they wished to sell to. Up until that point LeapFrog sold primarily preschool through first grade products. To a tween LeapFrog products were perceived as a “baby thing”, and who could blame them? Aging up a company’s product line is a major challenge without first creating a new brand that appeals to that new demographic. While this was a hard lesson for LeapFrog, could Age of Learning run into a similar problem as they try to age up their ABCmouse product? Granted, schools buying an educational product push the wares onto students, and students have almost no say about the learning materials they’re forced to use. Still the brand perception of a “baby thing” can jeopardize sales to older audiences.

2. VTech acquires LeapFrog for US$72 million

The sale of LeapFrog came as a shock to many fans of the beloved brand, though a potential acquisition had been in quiet discussions amid falling quarterly sales, profits and stock prices. According to Tom Kalinske, who was LeapFrog’s CEO between 1997 and 2006, and an active board member at the time of last year’s sale, it was difficult to see the company sold, though it provided the greatest return to investors.

In terms of financials, LeapFrog was at its revenue apex in 2005, bringing in more than US$650 million globally. Compare that to VTech’s electronic learning division, which was hauling in US$281 million at this time. However, by the 2016 acquisition, LeapFrog’s last trailing 12 months of financials show it brought in US$223 million, while VTech revenue had swelled to US$657 million globally, amounting to a swap of fortunes for the two companies.

When asked what the main challenges were for LeapFrog, Kalinske points to the changing nature of platforms that parents wish to buy for their children.

“The sale of LeapFrog to VTech reflects the dramatic change of parents originally wanting to buy hardware-related learning products, to a new desire to buy software-based ones. LeapFrog didn’t move fast enough to get their content onto other platforms, ” Kalinske says. “If you add up all the software apps and learning apps, as a market it’s not a bad picture. What was bad was all the custom tablets, like Nabi, Fuhu, and even LeapPads, specifically designed for kids. Moms decided they didn’t need them anymore because they could do the same functions with their phones or older hand-me-down tablets. In this regard, LeapFrog did not move quickly enough with this market change.”

Kalinske also adds a second mistake LeapFrog made was not making basic lower-priced learning toys as VTech was doing. As a result of not addressing this consumer interest, LeapFrog lost valuable market share to VTech as a result.

When asked about venture investments in the kids space, John Barbour, LeapFrog’s most recent CEO, asks, “How come over the last eight to 10 years there’s been an immense amount of investment in educational content for kids, but yet only a handful of companies have truly been successful in having a significant return on investment?” He says there maybe 100 companies have put money into this space, with a bulk of them ultimately failing.

Reflecting on more recent changes, Kalinske shares that raising capital is hard for any company, and while landing seed funding to jumpstart a business is not impossible, the process of moving past seed funding to a future investment is currently challenging. He adds, “Investors are looking for more traction and more revenue these days. The venture capital world and its judgment of startups in this space is even harder than it used to be. It’s a pretty tough place to be in right now. While it’s hard in the kids space, the story is not all doom and gloom, there are some successes out there still.”

Ironically, just after the acquisition, LeapFrog announced its new online learning service called LeapFrog Academy. While in development for some time before the acquisition, could this new subscription-based product be part of LeapFrog’s master plan to compete with ABCmouse? Barbour mentions that simply taking advantage of subscription pricing to sell more apps and generate more income will not work for everyone.

“Subscription pricing is the panacea everyone hopes will save business lives, but it doesn’t work that way. To be successful in the kids subscription space, you need to have a brand that people really trust, with an abundance of content. It should be more than what anyone would ever need as part of the value proposition, and you also need a strong customer-acquisition and management infrastructure, ” Barbour says. “ABCmouse has much of that, especially the strong customer-acquisition and management model. ABCmouse has succeeded here where the bulk of everyone else has failed because they are usually missing one or all of those three key elements.”

3. Spin Master acquires Toca Boca

Another striking announcement was the sale of children’s app world darling Toca Boca to Canadian toy company Spin Master. Rumors of the sale had been floating around for more than a year before the formal announcement, with a purchase price predicted to fetch as much as US$100 million. Speaking with Björn Jeffery, CEO and co-founder of Toca Boca, he confirms his company was in discussions with a number of buyers, though he points out the sale was handled by parentco Bonnier, and not Toca Boca.

A recent business filing by Spin Master states the acquisition price as being just under US$31 million, which is far from what speculators had been anticipating for a company with more than 150 million app downloads. Jeffery mentions Toca Boca had seen healthy revenue growth year over year since its launch in 2011, and had been a profitable company up until 2015. That was when Toca Boca started investing in its SVOD service, Toca TV, which launched last summer.

Now that Toca Boca is part of Spin Master, the level of business experience and support in this domain has been, according to Jeffery, “a very positive thing.” Where such an acquisition opportunity allows one to “draw strength and experience from another company.” Jeffery shares “it’s nice to have found a new home, Spin Master has a vision and an idea of where they hope to go with us, and that’s not the environment we came from working under our prior owner. That intent makes a huge difference from a strategic perspective.”

Jeffery sees how many kids app companies seem to be giving up on consumer sales and notes how some of these companies are shifting to education. This shift allows businesses to pursue larger B2B school sales rather than smaller, individual B2C sales. Jeffery believes this is most likely being driven by the difficulties to monetize in B2C. “It was not easy being a kids app developer in 2016, and it will not get any easier in 2017 either.”

When asked about what the 2017 kids app space will look like, Jeffery says companies are either “working small, ” or “going big, ” and there is no in between. Developers either choose to work with a handful or fewer number of people, making a small existence for the team. Or they go big, trying to raise venture investment dollars and create something really large. There are not many kids app companies that choose to be mid-sized. Jeffery describes this as, “the polarization of the industry, ” where one is not better than the other, it’s just there’s not a middle ground.

As for app subscriptions in the kids market Jeffery says “It’s still early to say how subscriptions will play out. It’s hard to tell if there’s a greater purchase demand for kids apps in the app stores with subscriptions than without it. It’s clear by the number of companies offering subscriptions, it’s busy, there are many more subscription offers now than before, though these are still very early days for subscription pricing.”

4.) Khan Academy acquires Duck Duck Moose

Most players in the children’s app world will point to Duck Duck Moose (DDM) as one of the industry’s earliest successes. Launched in 2008, three friends formed the company with a mission to engage young children using high-quality educational apps. By 2012, DDM was one of the first kids app companies to receive venture investment to the tune of US$7 million, with just 2.5 million app downloads at the time. Last year, DDM announced it had been acquired by video learning powerhouse Khan Academy. Just before the acquisition, DDM had reached 10 million paid app downloads.

The deal was unusual by nature. DDM was a for-profit company and its buyer a non-profit one, resulting in a combination that would not provide a significant return on investment. This combination was enabled by Omidyar Network, the philanthropic investment firm and first underwriter of a new early learning initiative at Khan Academy, that will be led by DDM. Omidyar provided an initial $3 million US grant to support two years of future DDM operations, and Khan Academy will continue raising funds to support this early learning initiative. Khan Academy works in a similar way where it seeks out grant investment to develop and support its vision of free learning materials for all. As part of the acquisition plan DDM, which previously sold its apps for a price, would now give them away for free.

Caroline Hu Flexer, CEO and founder of Duck Duck Moose, mentions her company had many acquisition conversations, and had for-profit offers that could have resulted in a more lucrative deal. However, the opportunity to make a difference, to make a lasting impact and to reach as many kids as possible might not have been the outcome with the other suitors.

In the few months following the acquisition, DDM has seen an additional 15 million app downloads without releasing a single new product. This brings its lifetime global app download count from 10 million to more than 25 million.

“Khan Academy has such reach and great distribution, which is why wanted to collaborate with them” says Flexer. “The impact we’re making at a global level is amazing. We’re now hearing from teachers all over the world about how this move has provided them with access to high-quality materials that they couldn’t get before. This is what we have wanted to do all along, which is to figure out how to make the biggest impact with kids, and especially those who wouldn’t have the means or resources to benefit from our apps.”

Flexer shares their expertise all along has been in app development, which her small team will continue to focus on. Being part of the non-profit Khan Academy now means DDM will be funded by philanthropic support and community donations, like all other Khan Academy initiatives. No longer will DDM need to rely on app store sales to sustain their company.

This acquisition also offers a great brand lesson. Khan Academy’s products are thought of collectively as for older users, whereas DDM’s products are a perfect fit for younger audiences. This acquisition helped broaden Khan’s reach into the preschool set, and did so with the combined expertise coming from two distinct brands, with one targeting older and one targeting younger.

5.) StoryToys, Amplify and Touch Press merge

Both StoryToys and Touch Press are known in the app world for creating great apps, with the former focusing on younger kids and the latter on older ones. Amplify Education was a digital K-12 division of Rupert Murdoch’s News Corp. News Corp sold the Amplify business to it’s management team in 2015, who were backed by Emerson Collective, an education foundation started by Laurene Powell Jobs, the wife of late Apple founder Steve Jobs.

In 2016 it was announced that the games business of Amplify would merge with StoryToys, along with the app portfolio and brand of Touch Press, under a new company Touch Press Inc. If you’ve followed along this far, here’s a somewhat confusing element to this whole deal – it has also been backed by an Emerson Collective Investment vehicle, Amplify Education Partners.

Barry O’Neill, CEO of StoryToys, is now CEO of Touch Press, which will be the parent company for the collective. (StoryToys and Amplify serve as imprints.)

“Subscription models, both platform and publisher-led, will become the predominant content business model by the end of 2018, ” O’Neill says. He also keeping content platforms agnostic as they continue to change over time.

As for venture investment O’Neill notes “There’s a well-documented Series A cliff that has compounded the perception that venture capital has dried up for kid tech companies. Easy access to consumer market via the app stores and rapid product development tools such as Unity have led to an explosion of mom and pop shops, as well as micro-startups, ” he says. “Many of these have been able to secure initial seed capital through funds and accelerators, which have also proliferated over the last few years. However, the availability of Series A has not kept up with the pace of seed fund investment, hence the perception that venture capital is harder to come by.”

6.) Zynga’s learning games accelerator Co.Lab closes

Co.Lab was a nonprofit initiative founded in 2013 by commercial gaming company Zynga and education investment company NewSchools Venture Fund. Co.Lab was an accelerator that invested mostly in learning game startups. During the time it was in operation, it had seen 28 different companies go through its program. (StoryToys was one of them.) Each company received some amount of investment dollars in exchange for a small amount of equity back to Co.Lab to help mentor those companies growth.

Last spring, Co.Lab executive director Esteban Sosnik announced in a blog post that Co.Lab would be closing its doors. This came as startling news to many in the kidtech and edtech worlds. In particular, it gave the impression of a contracting and unhealthy kids business.

However, as Sosnik describes it from the investor’s side of a deal, the perceived venture investment problem has less to do with venture companies pulling back and more to do with how seed funded companies are not scaling revenues large enough to appeal to venture capital funds. Sosnik states both the consumer and school markets are very complex, which can add a level of complexity for scaling a business. The problem also intensifies with companies that rely on producing a lot of content, as content is so expensive to develop.

While Sosnik is no longer part of Co.Lab or Zynga, he is now a partner at Reach Capital, a company still making investments in the edtech startup space. Sosnik says he’s seeing a lot of activity in the K-12 and college-level education space, and Reach is making investments with a US$53-million fund it started in 2015. What he and other partners at Reach are looking to do is back entrepreneurs that value impact and can make a difference, especially among lower-income and underserved communities. (Note the similar goal to investment foundation Emerson Collective mentioned above.)

Sosnik also sees potential in startups that target two consumer business areas in particular. The first being consumer purchased early childhood products, as parents spend a significant amount of money preparing young children for school readiness. The second is college readiness, with products that cater to SAT prep and college admissions needs. Esteban points out that these are the two largest consumer learning business sectors.

Sosnik is also focused on finding companies that have a consistent revenue stream throughout the year, possibly through consumer holiday sales combined with school sales over the summer, or through ongoing monetization from subscriptions sales. Strong revenue potential coming from one of these two revenue models is part of what Sosnik looks for when considering future investment deals for Reach.

When reflecting on platforms, Sosnik is quick to say “Everybody in technology wants to develop the next ‘go to’ platform.” Historically this hasn’t happened, though Sosnik points to early platform successes that have helped increase communication between schools and parents with companies like ClassDojo or FreshGrade. (Note, Reach Capital is an investor in both of these companies. Emerson Collective is also an investor in FreshGrade.)

7.) Apple announces subscription pricing for developers

Apple made the announcement in mid-2016 it would begin to expand subscription pricing options to all app developers, including companies that create apps for kids. Shortly after Apple’s announcement, Google made a similar subscription announcement for Android developers. Since these announcements, how has subscription pricing benefited app industry generally, and kids app sales specifically?

While Apple was responsive to requests for comment, no new information was offered in terms of subscription sales or market growth since its announcement. However, app market data and analytics provider App Annie offered a lot to think about. Here are some surprising nuggets of information regarding the size of the kids app market as well as the changes subscription pricing has brought:

According to the data tracker, the global iOS kids apps market was estimated to be worth more than US$200 million last year. Apps within the Family category on the Google Play store garnered upwards of US$130 million globally in the last trailing nine months or so. (Google Play didn’t roll out its Family category until June 2015, so the dollar amount is not apples to apples.)

This will come as a surprise to many, that global sales from kids apps is not such a big market to play in after all. This might best explain how everyone interviewed for this article said selling in the kids app space is hard. Especially when you compare the size of the kids iOS and Android app market (roughly more than $330 million globally) to the sales numbers in the toy space for just VTech and LeapFrog together (collectively $880 million just between the two companies). In terms of changes related to app subscription pricing App Annie stated they don’t have specific numbers for kids subscriptions, but they could share other broad trends they see with subscriptions across other categories.

“Subscriptions have become an increasingly important type of app purchase, currently accounting for roughly 15% of all app store revenue. They have impacted a broad range of categories, including music streaming (Spotify and Pandora Radio), video streaming (Netflix and HBO NOW) and dating (Tinder). Both Apple and Google made changes in June 2016 that we believe will propel subscriptions even further. Apple’s App Store and Google Play have increased the share of revenue that publishers receive for subscriptions and iOS has opened them up to all app categories, including games.”

The year ahead, and beyond

There you have it, seven big stories to learn from, with a number of key takeaways for the year ahead. However, there’s one more observation to share, one not often mentioned in the halls of industry conferences and in business case studies. In researching this article, many executives interviewed all expressed in one way or another the desire to make a difference. One comment shared in particular best captures that pursuit. It comes from Mike Wood, the founder of LeapFrog, where he served as its first CEO from 1994 to 2004.

After Wood left LeapFrog he founded another early learning company called Smarty Ants, which he sold in 2015. Today, in an elementary school just north of San Francisco, Wood spends a few hours a day, almost every day of the week, helping young kids in grades K-2 learn how to read. Wood reflected on starting his businesses and the volunteering he is doing now. He shared the following:

“When you run a company with many passionate and smart people reaching to do the best they can for kids, it’s hard not to be attached to a company and the benefit you can bring to kids. For years at LeapFrog, as well as in my next company Smarty Ants, I would tell people ‘we’re in the goosebumps business, ’ we have the opportunity to change the trajectory in many kids lives. I get to be in a very special place, I’ve been able to work alongside some smart, optimistic, cheerful kids, and I get to be there when they just start learning to read. There’s lots of goosebumps in being there when that happens. Now it’s much different in terms of gratification from running a company like LeapFrog versus working directly with a small group of kids, but you still get goosebumps either way. You get the same joy when you see kids moving forward either way. It’s emotionally powerful to be part of these things.”

Here’s wishing everyone a wonderful and successful year ahead, filled with many new ideas to grow your businesses. May your future hold plenty of goosebumps!

Scott Traylor is the founder of 360KID and a consultant to many children’s interactive businesses and products (none of which are referenced in this article, except for LeapFrog, with which Traylor worked from 2004 to 2009, Smarty Ants, and a few Co.Lab startups Scott advised but are not mentioned in this article). He’s also a former computer science teacher and currently lives in Silicon Valley, searching for the next big opportunity in the children’s industry. Scott can be reached at Scott@360KID.com.

Average Rating: 4.8 out of 5 based on 179 user reviews.

October 28th, 2016

[The following is a feature article I wrote for the online magazine Kidscreen, October 21, 2016.]

The American Academy of Pediatrics (AAP) has a long history of providing recommendations to parents on how best to raise healthy children. Nearly two decades ago, the AAP began outlining stipulations regarding appropriate media usage for kids. In earlier days, that meant mostly television. Today, as we are well aware, kids’ media consumption extends to mobile devices—and oftentimes begins at the tender age of six months.

So, it’s safe to say change is in the air. Last fall, the AAP revised its media guidelines to be more in sync with family life, effectively letting go of the once-held belief that kids under the age of two should completely abstain from screens. Which brings us to today.

Of the three policy statements released at the AAP National Conference in San Francisco this morning, the association’s latest recommendations for parents with young children include:

  • No media use at all for children under 18 months. The only exception to this recommendation is if families use Skype or FaceTime to stay connected with one another, as long as parental support is included as part of this screen time activity.

  • Parent co-viewing and shared media use is vitally important among 1.5- to two-year-olds. Research has still yet to demonstrate the benefits of media use for children under the age of two, but there appears to be learning benefits, as long as a parent is actively engaged in the co-viewing experience.

  • Limit media use to no more than one hour per day for children ages two to five. During this time, parents should be encouraging high-quality educational and pro-social media content, and should continue to participate in the media experience with their child as they grow to help them understand what he or she is seeing.

  • Make sure media use does not replace non-media activities like outdoor play, social time with friends and family, and reading together. Parents are urged to take time away from screened media to do other things with their child.

  • No media use one hour before bedtime. Studies show children sleep better when they are not engaged in media before bedtime.

Given the rapid advancement of digital media businesses and services, the AAP has been challenged to offer timely research-based guidance to parents and pediatricians. In looking through the list of 191 referenced articles and research reports mentioned across the three AAP policy statements, you see a lot of new research, with almost 30% of referenced research released since 2015. For a list of all referenced research, and links to download free and paid research, click here.

As a developer, I’m inclined to call out some missing and important parts of kids’ digital media usage: Are interactive screens any better or worse for young children than passive screens? Is passive television viewing worse for a child than a mobile learning game, or connecting with a family member on a tablet using Skype? The answers, as of today, continue to be elusive.

The reality is that screens are everywhere, not all screens are created equal, and most people use them heavily throughout their day.

One 2015 study (Kabali et al) referenced in the AAP documents showed most two year olds in the US use a mobile device on a daily basis, and most one year olds (92%) have used a mobile device. Collectively, 96% of all children ages zero to four have used mobile devices. This data is striking, but especially noteworthy when compared to a 2013 Common Sense Media report (Rideout et al). During the two years between when these studies were conducted, television screen time dropped and mobile screen time quadrupled for this age group. Would you call this a media tipping point? And what recommendations does the AAP have for media creators?

To that end:

  • The AAP asks developers to avoid making any apps for children under 18 months of age.

  • When creating new products, work with a developmental psychologist and an educator to help advise age-appropriate content and digital engagement.

  • Design media products for a dual audience, so parents and children can enjoy a shared media experience together.

  • Provide appropriate, responsive and authentic feedback to the child through your product.

  • Do not include any advertisements. Children of this age group can’t tell the difference between content meant for them or an ad.

  • Formally test your product for educational value before promoting educational claims.

  • Consider adding parent dashboards or preference areas where a parent can find helpful feedback on their child’s use of the product and/or customize the experience to monitor and limit overall time being used.

The amount of research and information reviewed by the AAP and synthesized across the three policy documents is impressive, and a helpful benchmark for parents, pediatricians and media creators alike. As this ever-evolving conversation continues in the months and years ahead, there will always be a great need for more research that looks at content as well as the latest distribution methods.

Scott Traylor is the founder of 360KID and a consultant to many children’s interactive businesses and products (none of which are referenced in this article). He’s also a former computer science teacher and currently lives in Silicon Valley, searching for the next big opportunity in the children’s industry. Scott can be reached at Scott@360KID.com.

Average Rating: 4.4 out of 5 based on 182 user reviews.

October 21st, 2016

On Friday October 21, 2016 the American Association of Pediatrics (AAP) released three policy statements regarding health recommendations on media use by children. A review of these policy statements shows the AAP has referenced 190 different research papers and articles to support their position. Almost 30% of the papers were made available in 2015 and 2016, and generally reference a large body of helpful information regarding screen use by American youth. Over 75% of the referenced research can be downloaded for free. In an effort to help advance the interests of researchers, educators, and industry here is a collection of all of the AAP referenced research in an Excel spreadsheet with links to easily access and download all of the material.

A collection links to the AAP referenced research on children and screens

Average Rating: 4.5 out of 5 based on 169 user reviews.

June 20th, 2016

[The following is an article I wrote for the online magazine Kidscreen, June 13, 2016.]

It’s been an interesting time in the mobile app world. While the children’s mobile space continues to face its fair share of challenges, new hope has emerged from an announcement made in advance of Apple’s Worldwide Developers Conference, which begins today in San Francisco.

Some noteworthy points to take away from last week’s announcement:

  • Apple app review times will be significantly reduced. Starting today, about half of all apps submitted will be reviewed and approved within 24 hours. A majority of those apps remaining will be reviewed and approved within 48 hours.

  • Developers interested in selling their apps on a monthly subscription basis can begin considering this option. While some parameters around subscription-based apps are sure to come, this is a welcomed move. Apps will soon be able to generate monthly subscription dollars in any app category. Apple also plans to allow multiple tiers of subscription pricing.

  • If a user subscribes to an app for more than a year, the revenue split between the developer and Apple, which has historically been a 70% to 30% split, will change to 85% to 15% in the developer’s favor. That’s 15% more revenue heading into a developer’s pocket. This policy will go into effect starting today, and any developer that sells an app as part of a subscription can start collecting this additional 15% of revenue from subscribers who have been with them for more than a year.

And more changes are coming within the App Store itself. One big change will be the ability for developers to bid on keywords in order to have their apps appear at the top of a search result (though this change will apparently not appear for anyone under the age of 13).

On the surface, this is great news. And it’s possible that more changes benefiting developers will come out of this week’s conference. In addition, this move by Apple will most certainly force Google’s hand in making more changes to its Google Play app store. In fact, shortly after Apple’s announcement, Google modified its subscription pricing to an 85%/15% split, minus the one year offset that Apple has defined.

While the changes will undoubtedly be embraced by the app-making community, they come on the heels of recent findings from research firm Nomura, which used data from app tracking research company SensorTower to discover that overall app downloads from some of the biggest publishers have dropped by 20% in the last year (unless you are Snapchat or Uber).

This is not good news for any developer, as it suggests a contracting market. So while there’s great potential for appmakers to make more revenue through app sales, it will only work if people are actually downloading these apps in the first place.

It’s also worth noting that developers have been clamoring for many more improvements that have yet to be addressed. Are these first set of changes too little too late? Is it possible we will see a resurgence in the app world again that offers developers of entertaining and educational apps for children something to be truly excited about? Time will tell, but you can count on one thing: All eyes, especially those of the struggling app developer community, will be focused on more news coming out of the Apple Worldwide Developers Conference this week.

Scott Traylor is the founder of 360KID and a consultant to many children’s interactive businesses and products (none of which are referenced in this article). He’s also a former computer science teacher and currently lives in Silicon Valley, searching for the next big opportunity in the children’s industry. Scott can be reached at Scott@360KID.com.

Average Rating: 4.6 out of 5 based on 247 user reviews.

June 8th, 2016

Photo of a photo of AppCamp attendees

[The following is an article I wrote for the online magazine Kidscreen, June 1, 2016.]

Every year at the end of May, between the Google IO and the Apple Developer Conference in San Francisco, roughly 50 talented and passionate children’s app developers meet to hear the latest industry news, view upcoming apps and discuss best practices for mobile development. And last week’s seventh-annual AppCamp conference in Monterey, California was no different. What has changed, though, is the kids mobile market.

You would think with the latest industry news of Toca Boca’s acquisition by Spin Master, and Age of Learning receiving a US$150 million investment, that the bright sunny skies of Monterey were foreshadowing the future of the industry.

But opening discussions at the conference, which were led by many successful developers, painted a very different picture, as concerns about sustainability, lack of monetization, discovery and growth were top of mind.

Having a successful app, or a portfolio of successful apps, is often not enough to provide sustainable revenue for a company. It’s become clear that in order to survive, app developers need to diversify their offerings beyond mobile. Licensing of intellectual property, app bundles, toys and television are all helpful ways to create stability and sustainability, though each requires its own set of expertise and ongoing cultivation in order to succeed.

Regular AppCamp speaker and Toca Boca co-founder Björn Jeffrey shared that while his company enjoys a rare and privileged place in the children’s app world, it has been actively diversifying its offerings. Toca Boca has been building a new interactive television subscription service scheduled to launch in the fall, and it has also pursued developing new toy products through its Sago Mini subsidiary based in Toronto. Toca Boca also actively seeks out other partnerships and licensing opportunities, as Björn believes the industry will continue to see consolidation in the app space. He’s also concerned about a current “app fatigue” in the marketplace.

Valérie Touze, co-founder of Edoki Academy in Paris, echoed Björn’s sentiments. Touze, who specializes in creating Montessori apps, strongly believes that developers can’t rely on the slim chance that Apple will feature their apps─a rare opportunity that provides a brief boost in sales, and something that a developer can’t control nor request. Diversification, Touze believes, will help avoid disappointment.

Industry vet Mark Schlichting, founder of NoodleWorks and a key creative on the Living Books series from yesteryear publisher Brøderbund, noted that we’re in a mature market. With any sector, there is a rise, a plateau and a fall. This happens with every media platform: CD-ROMs, console devices, electronic handheld games─and now, children’s apps? We’re either at a plateau, or just starting to see a decline, depending on how you look at this maturing industry. Unlike the early days of the App Store, nowadays there’s a predominance of big companies and big licensed brands. For companies that can afford to make such apps, these businesses may not be focused on generating revenue, but rather care more about generating brand visibility, brand engagement and cross-promotion of other non-app products.

Dan Russell-Pinson, president of Freecloud Design, and the creator of the mega app hit Stack the States, believes there’s an “excitement gap” occurring as well. When the iPad launched in 2010, there was a hunger for apps, which were an exciting thing to download, share and talk about. Now, apps are commonplace. While Dan said he continues to release new mobile games simply to maintain his existing revenue base, he believes the market is supportive of price increases, moving up from US$1.99 to US$2.99, or US$2.99 to US3.99 per download.

French developer Pierre Abel of L’Escapadou, a pioneer in the app industry who shares all of his app metrics and sales data in his L’Escapadou blog, talked about the challenges of being a small developer. Abel offered this thought with which he and many other small studios struggle: Is it more important to create new apps for new revenue streams, or should a developer focus on updating one’s existing library of apps? It’s often impossible for a small studio to do both at the same time.

While app industry roadblocks abound, Google Play insider Shazia Makhdumi noted that similar challenges occur in other markets, such as the book world, the music industry and even children’s television. These industries have seen similar problems with monetization, discovery, advertising, visibility and audience-building. Could it be that the children’s app world, along with its many challenges, is simply following a similar pattern to other, more established media industries? And as the sector matures, are new ways of monetizing—say through subscription (or dare we say even advertising)—providing new financial opportunities and stability?

There are, of course, slivers of sunshine.

AppCamp attendees were treated to sneak previews of mobile products that will hit the market in the coming months from the likes of StoryToys, Kindoma, Originator and Edoki Academy. The level of innovation in these apps was impressive and extremely high. What was being shown will certainly raise the creative bar for the rest of the industry. It also provided a glimpse into what success in the children’s app world will look like in the future, at least in terms of quality and features─if not revenue.

The next gathering of the children’s app industry will occur at the 16th-annual Dust or Magic Conference in early November. At that time, the industry will collectively compare notes again, evaluate what has worked, discuss what needs more attention, and hopefully see some positive steps forward with new subscription-based business models that will likely grow in popularity.

Scott Traylor is the founder of 360KID and a consultant to many children’s interactive businesses and products (none of which are referenced in this article). He’s also a former computer science teacher and currently lives in Silicon Valley, searching for the next big opportunity in the children’s industry. Scott can be reached at Scott@360KID.com.

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