Размещено на http://www.allbest.ru/

TABLE OF CONTENTS

INTRODUCTION

Chapter 1. Theoretical Framework

1.1 Social network theory and network effect

1.2 Six degrees of separation

1.3 Three degrees of influence

1.4 Habit-forming mobile products

1.5 Geo-targeting trend technology

1.6 Theoretical concept of the financial bubble

1.7 Start-up building .

Chapter 2. Research Methodology and Empirical data

2.1 Quantitative research method

2.2 Qualitative research

2.3 Single case study on the company HeadyUp

CONCLUSION

BIBLIOGRAPHY

ATTACHMENTS

Attachment 1. Focus group research questions

Attachment 2. The interview with CEO of HeadyUp

INTRODUCTION

Nowadays online social network business is expanding rapidly because of global need of people to communicate with each other in big distances and get information. Users are obsessed with social networks nowadays. To check an account in Facebook or Vkontakte became an everyday habit. The boom on social network activity started with the release of My Space and then Facebook, Twitter and Instagram. Before it was search engines that were used the most by people to get information. Social networks like all big companies also follow the idea of making profit in exchange of providing people with goods and services. [7, p.141]

Many entrepreneurs transfer company's business processes online or they establish new companies that operate only in the internet and that don't need physical resources to make products or services. The research paper is very up-to-date because it describes how to establish the company that operates online. Mobile applications became totally the new way of earning money and they changed daily routines of people. According to recent statistics people now use phone more than other devices to get the information. That is the reason why mobile applications became popular worldwide. [1, p. 6]The main term of profit-making in the Internet is advertising. After starting generating revenue, mobile application companies start to go to the IPO and some successful one are sold to big IT giants. All these activities made this kind of business one of the most profitable and popular last years. [1, p.10]

The object of the research is the mobile application HeadyUp that is location-based social network enables users to see and share pictures or videos with other people around on the map. Additionally, the user can add to his or her content the one out of 52 million songs.

The problem of the research can be formulated as a question how to create a startup IT Company and maintain it in after-launch phase to achieve success? To find solution to this problem several issues are analyzed such as the start-up market situation, startup financial bubble, new trends in mobile applications market, development of the application from the idea to the product or service, monetization model of the product or service, approaches how to attract investors and manage the company to receive revenue, how to gain users, how to market the product in order to attract and retain attention of users etc.

The thesis focuses on the process of the development of the idea with the end product- internet application. The subject area is mobile applications. The main objective of the thesis is to implement the plan for HeadyUp on how to develop the product for the future success and create the paper itself in a form of guide that will be a visual tool for young entrepreneurs that shows how to build mobile applications with the help of step- by -step instruction.

The research is started with the theoretical part where the main postulates and available information about start up market are included. The author discusses social network phenomena, online social networks history, the concept of the financial bubble and prospective startup bubbles, habit-forming mobile products, startup building process, geo-targeting technology, descriptions of different marketing and strategic tools to analyze company performance.

After all, the empirical part is written which consists of quantitative, qualitative and single case study research methods. Quantitative and qualitative researches are conducted to prove some parts from the single case study and to develop solutions for the company how to improve the performance in the after-launch phase. The single case study shows on the real example of the company how all processes were established and company was released.

While doing the research there is not much literature related to the topic or previous research was found by the author. There appeared the lack of scientific information because social network business is a quite new area. In the internet there is no serious scientific research which is related to the research topic. There are only available some particular researches concerning usage, monetization etc. by global marketing agencies. This research is written about the innovative type of business-mobile applications, especially mobile social networks.

The literature which was used to make the research were books, marketing agencies researches, articles from scientific magazines and journals and online websites related to the topic. The chapter about habit-forming products is based on the book of the American author Nir Eyal. The author analyses the phenomena why people are addicted to some products and services and to some not. Nir Eyal introduces the reader the Hook model or in other words 4 steps process companies use to build customer habits. This book became really popular among the programmers from the Silicon Valley because it reveals the secret of how such big IT companies like Instagram, Twitter, Pinterest gained so many users. [4]

Another bestseller book called “The Power of habit: Why we do what we do in Life and Business” was used to implement also the chapter of the habit-forming online products. The author made the study analysing daily habits of people. He proves in the book the fact that habits predict not only life-changing events but also the behaviour of consumers. [40]

The last book that needs to be described is written by Larry Downes and Paul Nunes is called “Big Bang Disruption: Strategy in the Age of Devastating Innovation”, that technological boom brings not only positive output. Nowadays entrepreneurs should work harder than before, because the tech World moves so fast that if companies don not innovate, they are going to fail in today's reality. [34]

Articles from Forbes, Business Insider, the Startup Journal, the Entrepreneur and other magazines are used for creation of other chapters in theoretical part. For the chapter concerning law issues the official law resources are used. The significance of the results and solutions is proved by the real example of the company performance and real conducted quantitative and qualitative researches by the author of the thesis.

Chapter 1. Theoretical Framework

Currently, people live in a time that is branded as a “Connected Generation” where companies use technology to tie them to “connected objects” or other “untethered consumers”. However, herein lies the problem, although people are considered to be connected, they have never been more disconnected from their core fundamental needs and rewards as humans, not consumers. As a human being, one of the strongest instinctual connections they have is the connection to their environment, the world. So why it is that innovation is only focused on how users interact with technology; instead of including how technology provides people infinite variability of experiences within their environment? These experiential misconceptions and lack of knowledge around human behaviour have proven not to only hinder innovation but also prevent customer engagement. [12, p.143]

Companies and marketers alike are becoming out of touch with the real-life needs and challenges of people. If companies and marketers are not generating emotions and feelings, they are not taking advantage of the very things that drive behaviour. The goal of every brand should be to infuse experiences with emotions so strong that people become loyal not just to the brands but to the brand missions, instilling devotion and uniting people and brands with common causes and shared values. Leveraging real-life experiences can empower a brand's development and help it to achieve remarkable sales efficiency by combining traditional marketing with experiential tactics. [12, p. 161]

People wake up every day and convince themselves it's a new day. They go through the same routine every day; waking up, making a cup of coffee, then trip to-and-from work, even the people they interact with. Everything is monotony. Everything is a pattern. These actions become monotonous because there is nothing to disrupt the pattern of human perception. Perception is an on-going back and forth comparison between expectations and incoming sensory data.

Human brains create models of the world and compare incoming information to those models. When the observations meet expectations there isn't any intellectual stimulation. However, when disruptions exist within a perceptual pattern this promotes intellectual stimulation and aids in the creation of memorable experiences. The unique experience that will result from establishing a solid social platform that gives people the power of sharing with the locals, and the limitless opportunities within the data collected geographically will give birth to new users being able to learn and stay in touch with the happenings around.

1.1 Social network theory and network effect

According to social theory, network is a set of relationships or in mathematical terms is a set of objects and description of relationships between these objects. Recently scientists determined 3 basic types of networks: ego-centric, socio-centric, open-system. As for ego-centric networks, these are ones that connected with the one individual, for example with good friends, with companies that do business with particular company. [11, p.124]

Another type is socio-centric networks which are like in the box. For example, socio-centric network are between children in the classroom, colleagues at work. Open networks are ones that don't have boundaries; they are not like in the box. For instance, open networks are connections between big corporations. [11, p. 169]

Referring to the Oxford dictionary , social network in IT terms is “a dedicated website or other application which enables users to communicate with each other by posting information, comments, messages, images, etc.”. In other words social networks are created to improve relationship building. But the difference from real life building is that relationships are established online with the help of internet devices. [33]

From internet prospective there are existing three types of social networks in the internet such as personal networks, contents sharing networks and shared interest communities. The aim of the personal social network is to stay connected with family or friends by sharing important moments. Users give information about their personal lives. To such social networks can be matched Facebook, Snapchat and Instagram.

Content sharing networks boost large scale conversations and new and existing connections by posting and commenting different kinds of media such as photos or videos. Pinterest is a perfect example of such kind of network. [31, p.45] Shared interest communities are driven by the professional and personal interests. These kinds of networks are used to learn new skills, share with members of the community knowledge or keep in touch with colleagues. Often these types are mixed for inventing new types of networks. [31, p. 142]

Currently social scientists are very precisely studying relationships in social networks. They study how people interacting, why and with whom they make contacts and what the level of closeness is between members of the network. Basically in social science terms connections are called ties. They define connections as strong ties and close ties. Strong tie friends are the ones that interact every day and most probably have each other phone numbers. While weak tie connections are the ones that the user follows but doesn't have every day interaction. [12, p.244]

1.2 Six degrees of separation

The concept was established in 1960s after the scientist Stanley Milgram made a social experiment which was called “The Small World problem”. In the experiment 100 letters were sent to randomly chosen individuals with an instruction to deliver the letter to one specific person who lived in the same region. There were evaluated predictions on how these letters could have reached the person. The person that should deliver the letter knows another that is acquainted with the target receiver is the one option. Another possibility was that the deliverer knew the target person so he or she could have sent the letter direct. As the result, it was found out that there are 6 steps between the initial person who deliver the letter and the target receiver. [21,p.77]

Due to a lot of criticism of the Milgram's theory the new research was conducted in 2003. Group of scientists from Columbia University in New York decided to make an experiment again but instead of letters they asked participants to send e-mails to the target receiver. Lack of motivation made participants not to send these e-mails like with letters in previous study. As a result, e-mails that reached the target person showed the same amount of steps as in Milgram's research from 5 to 7 steps. [21, p.121]

1.3 Three degrees of influence

social network mobile financial

Three degrees of influence is the theory which is proposed by Nicholas A. Christakis and James H. Fowler. In 2007 year scientists found that social networks have a big influence on individual's behaviour. It was researched that people influence their friends who in return influence other friends, in other words they can influence people that they never met. In practice people can influence 3 degrees friends. [1, p.78]

This proves that our ideas and opinions can have an impact on people around. This theory is proved by experiments, where around 61 000 000 people were involved. With the development of the internet the information is shared faster and more efficient. This theory is very applicable for solving many World problems such as crime, weak economics, and public health. For example for individuals who are located in centres of the networks and who are the biggest influencers can be given the task to spread out the information and motivate clusters of people to avoid criminal behaviour or keep healthy lifestyle. [1, p.33]

1.4 Habit-forming mobile products

According to Nir Eyal, the author of the book “Hooked”, habits are tools that motivate people to use products more and more often. Nowadays habits intrigue marketers. The new way to keep customers loyal and to survive in worldwide competition is to build habit-forming products. The author in his book introduces the Hook Model which includes 4 steps: trigger, action, the variable reward and investment. (see Figure 1.1)

Trigger is the mechanism that pushes the customer to use the product on daily habit, the use of the product becomes the part of consumer's routines. Then the action appears that enables users to act in exchange of receiving reward. Afterwards the variable reward makes people to be addicted to the product because of unpredictable feedback. The last step is the investment that consumers make which is measured in time, data, effort, social capital and money. It helps to improve product or service that they use. Also author compares two different definitions that people mix up while talking about routine products such as habit and ritual. By the opinion of Nir Eyal, ritual is “the series of actions most commonly set of religious actions performed based on prescribed order” while habit is “regular practice which is hard to give up”. The Hook Model works very effective because of macro-trends: companies are willing to collect more data about customer's behaviour, interactive technology is more reachable, and the transfer of the collected data is faster due to the internet. These three trends make users more addictive to new habit-forming products. Many tech companies such as Facebook, Twitter, Pinterest use Hook model to retain users. Habit is a very powerful way of attracting customers but it lasts not forever. That's why many companies check competitors for faster hook strategies. [4, p. 77]

Figure 1.1- The Hook. [4]

1.5 Geo-targeting trend technology

Geo-targeting is another trend that helps businesses to find key customers for their products online by the location. This tool was recently implemented in social networks such as Facebook or Twitter, where you can select people by location, age, gender, languages, interests and connections. Many companies can target their ads to specific group of users in social networks, so that the advertisement campaigns would be more efficient. Additionally, geo-targeting technology can change shopping experiences in the game like way. As an example, there is the application that big IT company is currently developing that influence customers to buy specific product or service in the moment of purchasing. The company offers to install special devices in the point of sale so that the customer can see through the application on which products there are offers in the enterprise or if there are new products in the shop etc. Geo-targeting technology is the new way of marketing, it helps to deliver marketing messages more suitably timed aligning with customer's daily routine. In comparison to traditional ways of advertisement it's possible for the enterprise to manage the show time, the quality of the ad, “in the moment” advertisement and in addition it helps to analyse the target customer. The only one thing that makes this technology doubtful is that people are afraid to be controlled by location. But if the company makes the application in the playful format this technology can become the new way of marketing. [27, p. 124]

1.6 Theoretical concept of the financial bubble

It is vital for entrepreneurs to get to know the current situation in the market if they want to start business. It is important to define whether the sector rises or stagnates in the current moment to understand which steps to follow.

The aim is to learn the situation in the start up market, gather and structure existing theoretical data for the future analysis of this topic. First of all, many people who are interested in this area are concerned that startup bubble exists and it is in the hottest point now. For example, in 2014 there was $86, 7 billion invested in 6,507 deals. In comparison in 2013 there was $53, 5 billion invested in 6551 deals. This statistics shows that the number of deals decreased from 2013 to 2014 year but the amount of capital invested in startups raised in 2014 year. Many pioneers in the market feel the positive climate and create new startups that have no solid fundamentals. The ones who are increasing the price are the early-stage hedge funds, institutional investors and late-stage investors from US. [8] Other predicts that the market is not cooling down; companies with solid fundamentals will still bring the profit and will raise high amounts of capital. [24]

To analyse the current situation in the market it is necessary to gather theoretical information about previous financial bubbles and crises. First of all it is important to outline the definition of the financial bubble. “Financial bubble is a situation in which prices for securities, especially stocks, rise far above their actual value. This trend continues until investors realize just how far prices have risen, usually, but not always, resulting in a sharp decline. Bubbles usually occur when investors, for any number of reasons, believe that demand for the stocks will continue to rise or that the stocks will become profitable in short order. Both of these scenarios result in increased prices.” [32]

Coming back to history there can be described one of the most famous examples - the dot-com bubble of 1990s. That time there was huge amount of investments coming to dot-com companies that had IPO's of hundreds of dollars per share. Some of these companies never made a profit or produced revenue. Investors influenced by the theory that internet companies should expand to gain new customers and at the same time increase its market share, invested billions in them. Shares of dot-com companies were traded in NASDAQ, which also rose to the record point. But suddenly in 2000 the bubble burst and NASDAQ companies lost more than half of its value. The main reason of dot-com bubble collapse was that there were too many companies that came to the market, too much investments and too fast realisation. [8, p.178]

If we look to current situation many start-ups are not generating profit or revenue like it was in dot-com bubble. The main reason is that applications do not have well-made financial models. The idea that companies should gain users and expand customer bases and data is still in place. Large companies such as Facebook, Twitter or Instagram buy small start-ups to dominate in the market and control the traffic and consequently profits. Giants are fighting for the traffic because every second the user spends in the application or on the website brings company the profit which is received from advertisements. [ 10, p.188]

As it is written in the financial dictionary, “Bubbles usually occur when investors, for any number of reasons, believe that demand for the stocks will continue to rise or that the stocks will become profitable in short order. Both of these scenarios result in increased prices.” [32] The start-up bubble has already occurred and currently it is on the peak point when prices are so overvalued that many interested groups or individuals stop to believe in rationality of the prices of products. It can be predicted that there would be so many applications that generate a huge traffic that will be already owned by big internet companies such as Facebook or Google. Taking into account that users can't be present at the same time in all applications even though the diversity of interests, geographical diversification, preferences to different styles etc., and all the traffic will be shared between giant companies and it would be difficult to gain auditory. Only unique and revolutionary products will be able to compete and get the market share. [8, p.65]

It is clearly seen that the interest of venture companies in the new startups is high and companies are willing to invest in mobile products as it was in dot-com bubble in 90s. Many characteristics are matching with the past burst of the bubble but the difference is only in the nature of products. Because this sector is new and developing the overvaluation is likely to happen. Some startups are based on great ideas with good financial models are likely to be on top and with an opportunity to speculate with the price of the company. [8, p.67]

Sooner or later every bubble collapses as any other previous one. It is impossible to change such scenario and it is proved by the past experience. Nowadays the industry is on the top of the wave and it's likely that big companies are going to make more acquisitions so there is favourable moment to join the game.

1.7 Start-up building

Creation of the plan of actions is the essential part of company before it starts operations. It's important because it helps to identify risks and opportunities and decide whether it's profitable to make the idea working or not. Usually the plan of startup supported with different researches, calculations and examples of other similar companies. [6, p. 220]

The first step that every entrepreneur does to generate ideas is becoming aware of new businesses and new trends. As this research about IT business, the best way to get this valuable information that can be a basis for the future idea is to read popular IT blogs, IT magazines or IT articles in famous business magazines and new books about this topic. Currently Business Insider, TechCrunch, Mashable, Springwise, Enterpreneur etc. are most visited websites of getting aware of the market. Another way is to visit different relevant to future business events, where you can get motivation from successful entrepreneurs, get to know current trends and make valuable contacts. While accumulating information relevant to the chosen field, it's advised to put down notes of every idea that comes to mind. [9, p.331]

Another way to find an idea is to make a market research on the topic of interests that can give an understanding and idea of the product that is missing in particular market sector. Travelling is also one of the chances to come up with an idea or see the idea that can be reworked and brought to another market. [26]

Secondly, after having the idea in mind an entrepreneur should make marketing research, which can be implemented with the help of the industry associations, periodicals, up-to-date web articles, governmental organisations. Then through the marketing research there can be identified target customers that the company plans to serve with its business idea and make appropriate questionnaires or surveys for the targeted sample .[5, p.341]

Research can be aimed to determine the potential market, to measure the competition, to test a product or service or to test positioning in the existing market. If the product is tangible, the sampling procedures can be implemented to identify positive sides and drawbacks of a product or service. If a product is intangible such as mobile application or website it is advised to make a beta version of the mobile application and ask targeted audience about the product. The clear communication from the key customers can be extremely valuable during the development of the product. Through marketing research the understanding of the level of competition and competitors will be available. [5, p.224]

The next step after marketing research is the development of business plan. Standard business plan consists of eight parts such as company analysis, industry analysis, competitive analysis, customer analysis, marketing plan, management team, operations plan, and financial plan. In company analysis the basic information such as products or services description and future development are described. Industry analysis includes the information about the market size and which trends affect the market. Creation of marketing plan helps to analyse target customers and make adapted to them marketing channels and tactics. Marketing plan can include SWOT analysis or PEST analysis. Then after marketing plan the implementation of team management plan follows. In other words team management plan is the company structure with key workers and roles they will make. Also while building the team it's important to decide whether to establish the Board of Directors, to allocate the cofounders or not. In addition, the hiring plan is ought to be made. Meaning that the CEO of the company should decide what kind of workers with what kind of roles he should hire to execute the smooth performance of the company. One of the last parts is the operations plan where the step-by-step actions are described which come along with the company strategy. Finally, in every business plan financial part is vital because every start up follows the aim of the profit making. In financial plan income and cash-flow statement, balance sheet, break-even analysis etc. are presented. [27]

Business plan is not only the way how the CEO of the company sees his company but it's also the information for the potential investors, employees, suppliers and developers' etc. This tool can help to identify problems to solve in the company and help to make the vision and the strategy of the company. [5, p.73]

As it can be found in the official website of WTO concerning legal protection of the application, “Intellectual property rights are given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time”. [29]

After defining intellectual property rights, WTO broadens the definition:

“The rights of authors of literary and artistic works (such as books and other writings, musical compositions, paintings, sculpture, computer programs and films) are protected by copyright, for a minimum period of 50 years after the death of the author.” Mobile application can be allocated to computer programs, so that the application is protected from copyright. [29]

Having studied different success stories of IT companies such as Google, Facebook, Twitter, Instagram the author of the research created an unofficially excepted set of rules on how to plan the emerging project that the reader can follow in every success story. Mobile application launching plan consists of 3 periods: pre-launch period, launch and after-launch. [13]

Pre-launch period is the time of the development of the IT product, establishment of funding and early marketing research. During this phase founders of the company follow such steps:

- Marketing research

- Keyword research

- Creation of the monetization strategy

- Social media networks presence

- Creation of press-release

- Description of the application

- Translation of the application to needed languages

- Implementation of Analytics

- Negotiations with influencers (magazines, journals, blogs etc.)[13]

Next period is launch, which is the short time when the product is in the application market and people can already download it. The most important activity during this phase is marketing, because it can influence the further success of the application. During this period there should be made following steps:

- Announcement to influencers about the new product in the market

- Social media monitoring: up-to-date information, regular updates

- Social media campaigns

- Application store optimization

- Sending of launch press-release

- Launch Mobile Ad campaign

- Outreach to PR database of 1,4 billion[13]

After launch period is the time when marketing campaigns of launch worked out and first users started to use the application. Actions on this stage are unpredictable and this stage should be analysed as a unique case for every company. Usually steps lie in the fact of maintenance. Entrepreneurs follow such steps:

- PR and marketing campaign optimization

- Description change and optimization

- Building positive and strong reputation

- PR outreach

- Social Media fun database

- Marketing analysis-new features development

- Outreach to 300+ reviewers

- PR-material release [13]

Every successful IT startup company goes through the process of funding. The standard funding process consists of several stages such as idea stage, co-founder stage, family and friends' stage, angel investors' stage, venture capitalists stage, IPO stage. In the first stage, the person comes up with the idea that he or she believes is going to work in the current reality. The potential founder of the company starts to work on it or in other words starts to create the value of the company. Later when the company is registered the value would be transferred into the equity of 100%. [29]

After the creator of the idea realises that it takes twice times more to transform the idea into physical product or service if he or she works alone, the creator finds the cofounder who is smart and motivated enough to execute the project. They work together; add the same value to the project. (see Figure 1.2) But the cofounder in comparison to the employee receives not the salary but the percentage of the company. He makes 50% of work and he receives 50% of the company, because he or she equally takes the same risks as a founder by spending own time and skills for building the product. [29]



Figure 1.2- The process of startup funding [29]

The next stage is considered to be the start of funding. First investors of the company most likely are the family or friends of the owners of the idea. (see Figure 1.2) Firstly, until the company is not registered the owner has no legal right to offer the public to buy percentage of the non-existing company in exchange of money. Secondly most of accredited investors, people who have 1 million dollars in the bank account or who earn 200 000 dollars annually, won't be ready to take a risk of investment in not established company. Most of the times in the family and friends' stage, investors buy big percentage of the company with small amount of money. [29]

After receiving first money for the development of the product cofounders register the company. The registration can be made through the online service or through the lawyer that is considered to be more expensive. After registration the company has an equity that is split among 2 cofounders and a friend or family member. Then the common stock is issued. [29]

To increase the value and the price of the company and not to admit the start up to go broke, the owners start to search for the angel investors. So-called incubators, accelerators often provide the coming startups with money and resources in exchange of the percentage of the company. In the early stage of developing startup investors are not likely to invest a lot of money but they ask for the big percentage. If the idea of the startup is valuable and they see the potential owners can estimate their project as 1 000 000 dollars. The accredited investors are likely to invest 200 000 dollars. [29]

Table 1.1- Calculation of the percentage of the company that the private investor receives (Management team of HeadyUp)

*Pre-money valuation = $1 000 000 *Angel investment= $200 000
Post-money valuation= $1 000 000+$200 000= $1 200 000 The angel investor %= $200 000/$1 200 000=0,167=16,7%

The company grows rapidly and now it's valuated as $1 200 000. To grow business and to increase the price for the enterprise, owners attract venture capitalists. In this stage the calculations of the percentage that investors receive is the same as with angel investors. For example the venture capital company values the company as $4 000 000. Then the owners start to offer other venture companies to buy a part of the company. And this round can repeat until the big company wants to esquire the startup or there will be no investments and the company dies or the company decides that it should go public. [29]

The last stage that the startup company can do is to go public or in other words to offer its shares in Initial Public Offering. When the company offers to buy its shares in IPO regular people can buy them. Accredited investors can buy only restricted shares that they can't sell in exchange of cash. Only after the IPO these shares became unrestricted and they can be converted to money. During the process of the IPO the company appoints the bank to be the underwriter, the bank that maintains all paperwork and sell the stock to wealthy clients. The underwriter receives 7-8% of flow raised in IPO. [29]

Another way to make a profit out of mobile applications can be described with the help of the model of monetization, invented at Harvard in 2013. According to gathered statistics, each user who downloads the application can be expressed in monetary units. The more users are using the application, the higher the price of the startup, which in the long run could be sold with the high price to huge IT - Corporations [18]

Alternative way how to earn money is to have ads in the application. There is a new monetization model which is used by Google and other search engines in order to have revenue from advertising. According to Interactive Advertising Bureau, an impression (view) - is "a single display of online content to a user's web-enabled device." In other words with impression we can calculate how many times the user sees the advertising whether it's clicked on it or not. Cost per Impression method is widely used for advertisement in applications. CPM is an internet advertising metric which means the price company pays in terms of the number of impressions made. Normally companies pay the price for 1000 impressions so that it's easier to calculate the price. [18]

The process of buying online advertising consists of several steps: setting the budget based on affordability, choosing between automatic or manual number of views for achieving advertising goal and the schedule for ad campaign. Then the application automatically calculates the Average CPM based on target audience size and schedule. [19]

CPM depends on country where the advertisement is viewed. Definite CPM for the particular application is difficult to estimate before the company started to make revenue but it is possible to predict the CPM, based on official average number. According to the research made by marketing agency it was found out that average CPM for 2013 year in Europe and US was $1,46 and the average number of impression of one user in a year is 14400 in the popular application, in average application in one month is 300. [19]

These metrics are used to calculate the efficiency of different advertising campaigns. To calculate the efficiency the researcher should measure the number of users before the start of the campaign and number of users after the end of the campaign. The difference, which is the number of users should be multiplied with average impression in one month and should be multiplied with price for 1 impression.[19]

Table 1.2- The formula for calculation of the revenue received from mobile ads in the application [19]

Revenue=Number of users*number of Application Impressions/1000*eCPM

While the product is already made and launched in the market or is going to be launched in the market entrepreneurs start to brainstorm ideas how to advertise and make familiar this product for prospective users. During this stage most common practice is to implement marketing plan that directs the company to successful performance. [16]

The first stage of the plan is to research the company with the help of SWOT- analysis if the company plans to expand to new markets. While doing SWOT -analysis researches analyse company's external and internal environment. Internal environment often classified as strengths (S) and weaknesses (W). External environmental factors are opportunities (O) and threats (T). Strengths from the SWOT can be defined as patents, brand names, good reputation, and cost advantages from using know-how, exclusive access to natural resources, and access to distribution networks. [16]

Weaknesses can be often described as lack of strengths, such as lack of patent protection, weak brand name, bad reputation among customers, high cost structure, lack of access to best resources and key distribution channels. External environment analysis can bring some new opportunities for the company as well as threats. Taking into consideration opportunities, there can be identified unfulfilled customer need, creation of new technologies, removal of international trade barriers and also loosening of governmental regulations in the new market. [16]

Threats can be defined as negative factors that influence on company performance and lead it to bad results. There are some examples of such threats such as change in consumer tastes and shift to competitor's products, emergence of substitute products, new regulations of government, increased trade restrictions with other countries. [16]

After conducting marketing research marketers having identified key customers start to build marketing plan for the product. One of the best tools researchers use to bring the new service to the market in 7P Marketing Mix that enables company to position the product or service and optimize the impact with the target market. Marketing Mix consists of 7Ps: Product, Place, Price, Promotion, Physical Evidence, Process and People. After analysing the product on these 7 criteria there can be implemented the strategy for positioning of the product in the market. [37] Concerning processes in mobile marketing is the analysis about the delivery to the customer; People component exists in mobile application area in a way that workers are an asset of the company who are also involved in smooth performance of business processes. Evidence component is about the additional significance or warranty that the service was delivered and visual characteristics. [38]

The next step is to draw the picture of the key-customer of the company. First, to identify the key-customer it's important that manager imagines himself or herself in the place of user. Then the marketing manager makes the marketing research analysis. [36, p.199]

Web presence of the company is built on the functional and informative website with good description of the application and friendly design. The feature to download the application should be build in the website and should redirect the person to the Appstore page of the application. The design should be simple with one aim- to make person to download the application. Contact details and auto-download press-kit should be placed on the website. [14]

For successful web presence company should make a social media plan. Standard social media plan includes presence and engagement of the activity in popular social networks such as Facebook, Twitter, Vkontakte (in Russia). Social network pages should have a logo of the company, the link how to download the application and new posts every 2 days. Researchers found out that the best time for posting is 5 pm. Then the marketing manager should start answering people's questions; express the opinion of the company. [14]

Nowadays the company image is highly dependent on the image that the CEO of the company shows in the social network. It's very important that CEO has well-organised profiles in Facebook, Twitter, Linkedin and Vkontakte. After that marketing department should analyse the market and define target customers their wants and wishes to adapt the product. [16]

One of the best ways to introduce the business for investors and public is to visit special events. The lack of time and money together with benefit business receive from attending events make the entrepreneur to put priority and skip some events. That is why it's essential to have well-organised networking strategy. The networking plan is based on answering 3 questions: who, where, whom exactly. Networking strategy is built only after the company started to perform. To get to know who the prospects of the networking strategy are, the company should take a look at the list of clients that it had before. First of all, the entrepreneur should define from which industries investors or partners came into business, how long have they been investing in IT start-ups etc. But if the company works mostly with consumers the profile of the ordinary customer should be created. To answer to the question where to meet prospects, the creator of the start-up should analyse who exactly he or she wants to meet. The small business owners most of the time are in contact with Chamber of Commerce or Local Business Association or if the company itself is small business, it can contact these organisations for developing more referrals to the business. To find representative from corporations the best way is to visit volunteer, non-profit group events such as Aiesec events. [2, p. 256]

As about whom exactly the entrepreneur should contact there is the 6 degrees of separation theory in place. The more contacts the person makes the more close he or she will be to the desired and needed contact, according to Milgram research. The one feature is that the startup representative should ask specific questions and talk about specific area that will lead him or her to the person they are searching. For example, people having known that someone made an online application and wants to find investors will advise this person to talk to Mr. or Mrs who know other interested in this area people. To make a good networking strategy it's important to be surrounded by different business contacts. It's very possible that through one contact the businessman can find another highly valuable contact. [2, p. 76]

Chapter 2. Research Methodology and Empirical data

2.1 Quantitative research method

The collected quantitative data is useful for the marketers and creators of IT startups, it will give the clear understanding of the mobile applications market, marketing tools used to promote the product, the Appstore users statistics. All the written information would be corresponding and approving with performance of the real company.

Through the quantitative research the author tries to find out what kind of applications people use the most, how much times on average people spend while they are using not only Facebook but also other social networks, how to keep users involved in using the application etc. The findings sum up information not only about one social platform but about many others at the same time. These data helps to adapt the application in the best way to potential users.

Population is defined as a complete set of elements: persons or objects that possess some common characteristic defined by the sampling criteria established by the researcher. In a research, the most essential as well as the first step is to identify the population. The sub questions relevant to the total population are, how big the total population is and what are the common characteristics and the differences between them. The right choice of the population will make the helpful and directive foundation of the next step- sampling. [25]

Sampling is a selection of the representative elements of the total population. Five different stages are involved in the sampling process in order to obtain the right samples. Firstly, deciding the total population about the research, then identify the measurement of the samples or the common details which can be used for the description of the samples. Next step is selecting the suitable sampling method. After that, the sample size can be ascertained. Finally, there should be implemented the sample plan. [25]

The sampling method is also an integral part of the whole process, which can be divided into two big categories: probability sampling and non-probability sampling. The former one means that all the elements of the total population can be chosen to be sampled, in contrast to the later one, indicating that only some of them have the chance of being samples. A probability sampling includes Simple Random Sampling, Systematic Sampling, Stratified Sampling and Cluster Sampling. Non-probability sampling contains Quota Sampling. [25]

In the research Simple Random Sampling method was chosen because each subgroup of the population of every size has an equal probability of being chosen as the sample. The sample of the research is different age, origin and occupation people who have and use smartphones of different brands. There were 104 respondents that participated in the survey. [39]

Questionnaire that meets the objective of HeadyUp was developed with regards to the single case study analysis. The questionnaire was published in social networks: Facebook, Twitter and Vkontakte. Also data was gathered through survey in Swiss and Finnish Universities in the way that students should have filled in printed copies of questionnaire. The data obtained through quantitative research was analysed and there were received certain results.

The first question respondents were asked was “Do you have and use smartphone?” The purpose of these questions is to eliminate respondents that are not in the sample. Through this question it was identified that all users that took the survey had a smartphone that they actively use.

The next three questions were to find out whether users download new applications or not, what the most influence their choice- to understand which marketing channel to choose to gain users, to identify whether they download application randomly or study it before the process of purchase. They are sounded like: “How often do you go to the Appstore, Googleplay or Androidmarket to download the new application?” The next question was: “What does grab your attention and make you download the application in the preview of the application? What media do you use to get to know the information about new applications in the market?

Figure 1.3-The frequency of downloads of applications

It was found out that 55% of respondents download applications once a month, 20% every week, 15% every day, while 10% once in half a year. (see Figure 1.3) As for features that the most influence the users to download the application in the Appstore are two factors: the application is for free and idea is fresh and interesting. Then the right description, good quality pictures and reviews influence and trigger whether to download the application or not. (see Figure 1.4)

From the next questions it was identified that Word-of-mouth and Appstore trends such as rating and reviews are the most influential factors that make the user to find and download the application. Then next 2 most influential factors are articles in online versions of popular magazines and journals and ads or posts about the application in other social networks. Less influential are video ads, e-mails, QR-codes and printed media. (see Figure 1.5)



Figure 1.4-The most effective Appstore optimization tools

Figure 1.5- The most effective advertising channels.

The next question was made to identify how many Apple store and other markets users take part in the survey. Appstore users are more relevant to the research sample because the application works only on Apple devices. In the future company wants to adapt application also for Android market. The question was: Which mobile platform do you use to download the application? In the survey 65% of respondents who download from Appstore , 35% of respondents are ones who download from other application markets. (see Figure 1.6)