Mobile Software Monetization Models
May 09
Rolling a mobile app out on the market isn't an easy thing to do. One of the absolutely inevitable and important decisions is the monetization model (or several models combined). Here you define how your mobile software will bring profits. That must be done long before development, and the decision depends on many factors, including the essence of the app itself, its individual features. And of course, take into account the fact that the majority of mobile app users aren't quite willing to pay - everyone would surely choose a free product. Here we would like to overview a number of common monetization models.
Paid applications. You create an app that will charge a certain amount from the beginning. Here you must learn more about the pricing policy of the peculiar application store. The price should be carefully thought-over, it affects the application's success and popularity with users. Many software owners conduct temporary price reductions for already popular products, or allow to download them for free, for a certain amount of time.
Free applications. How can you receive profits from a free app? In a number of ways. Basically, a free app will be an advertisement of of something that will be sold. Keep in mind that your free app must always be shiny, attractive and up-to-date - because it will provide users with the first impression - and it must be absolutely positive. Let's look how you may generate revenues by using a free app.
1) Freemium. A software product can be downloaded free (so-called 'lite' version), while its extended, 'premium' features and services are offered for a payment. That's a good way to allow users to get acquainted with your mobile software; and if the app proves convenient and useful for customers, they could acquire the fully-packed version and enjoy the full experience of their favorite app. You have two options here: whether there will be two separate apps ('lite' and 'pro') or just one, where the features will just be 'unlocked' after the payment. It depends on the software details.
Freemium can make the free version popular, bring you more reviews with users' suggestions and wishes, so you may see what users exactly want, and give it to them. The free version actually promotes the paid one. Invest in both to keep up with the users' needs.
We can also mention another popular way - trial. Users may download the free full version from the beginning, but for a limited period of time (30 days is a widely spread example). There is hardly any difference, whether you should limit time or functionality - that is up to you. Anyway the users will have the ability to get acquainted with your offers for free.
2) Subscription (paid access). This monetization model originates from real magazines and newspapers, and is also very widespread. Now it goes beyond subscriptions to digital media; for example, it's connected with software-as-a-service model. You may sell content, extra support or extra storage space. If you have an already established app and a considerable user base, you may sell third-party content and services (see 'User base' below).
3) In-app purchases. Not quite of a model, rather a tool, a solution that can be found in various categories of mobile applications. Premium features and game modes, in-game features and items, subscriptions - there is a number of ways to implement in-app purchasing in your software, combine it with other monetization models.
4) Free-to-play. As the top app category, games cannot be left without attention. Any user may enter the game and play it for free. However, the revenues from such games may be driven through in-app purchasing. A catchy, addictive game may have additional paid levels, paid features, which allow further game experience, and more.
5) Ads. Ad banners, texts, videos - this monetization model is constantly growing, encompassing the market of free applications. For example, the majority of free applications on Google Play contain ad banners; these apps offer users to buy an ad-free version. Though some users are ready to put up with annoying ads, some are ready to buy an ad-free version of a truly great application, which, in fact, now seems not that expensive. That's a very simple and extremely popular monetization model.
6) User base. When the free software you own finally becomes popular, wins an audience, it can also be used for further monetization. You may basically sell the access to the user base of your app. And this can be done in various ways:
Paid applications. You create an app that will charge a certain amount from the beginning. Here you must learn more about the pricing policy of the peculiar application store. The price should be carefully thought-over, it affects the application's success and popularity with users. Many software owners conduct temporary price reductions for already popular products, or allow to download them for free, for a certain amount of time.
Free applications. How can you receive profits from a free app? In a number of ways. Basically, a free app will be an advertisement of of something that will be sold. Keep in mind that your free app must always be shiny, attractive and up-to-date - because it will provide users with the first impression - and it must be absolutely positive. Let's look how you may generate revenues by using a free app.
1) Freemium. A software product can be downloaded free (so-called 'lite' version), while its extended, 'premium' features and services are offered for a payment. That's a good way to allow users to get acquainted with your mobile software; and if the app proves convenient and useful for customers, they could acquire the fully-packed version and enjoy the full experience of their favorite app. You have two options here: whether there will be two separate apps ('lite' and 'pro') or just one, where the features will just be 'unlocked' after the payment. It depends on the software details.
Freemium can make the free version popular, bring you more reviews with users' suggestions and wishes, so you may see what users exactly want, and give it to them. The free version actually promotes the paid one. Invest in both to keep up with the users' needs.
We can also mention another popular way - trial. Users may download the free full version from the beginning, but for a limited period of time (30 days is a widely spread example). There is hardly any difference, whether you should limit time or functionality - that is up to you. Anyway the users will have the ability to get acquainted with your offers for free.
2) Subscription (paid access). This monetization model originates from real magazines and newspapers, and is also very widespread. Now it goes beyond subscriptions to digital media; for example, it's connected with software-as-a-service model. You may sell content, extra support or extra storage space. If you have an already established app and a considerable user base, you may sell third-party content and services (see 'User base' below).
3) In-app purchases. Not quite of a model, rather a tool, a solution that can be found in various categories of mobile applications. Premium features and game modes, in-game features and items, subscriptions - there is a number of ways to implement in-app purchasing in your software, combine it with other monetization models.
4) Free-to-play. As the top app category, games cannot be left without attention. Any user may enter the game and play it for free. However, the revenues from such games may be driven through in-app purchasing. A catchy, addictive game may have additional paid levels, paid features, which allow further game experience, and more.
5) Ads. Ad banners, texts, videos - this monetization model is constantly growing, encompassing the market of free applications. For example, the majority of free applications on Google Play contain ad banners; these apps offer users to buy an ad-free version. Though some users are ready to put up with annoying ads, some are ready to buy an ad-free version of a truly great application, which, in fact, now seems not that expensive. That's a very simple and extremely popular monetization model.
6) User base. When the free software you own finally becomes popular, wins an audience, it can also be used for further monetization. You may basically sell the access to the user base of your app. And this can be done in various ways:
- rent some space in your app for third-party ads; make sure these ads are relevant and unintrusive, so they wouldn't drive people away from your own app; these may be ads promoting other apps, yours or not;
- integrate third-party functionality and services in your app;
- sell third-party content to your users; that may be books, music, images, recipes, whatever. The richer the content is, the more users can be involved. There can be even specialized software for that purpose, when the content owners cannot afford their own application. The collaboration with other content owners/service providers may become so close that the boundaries are quite invisible.
All these monetization models drive revenues to software owners, and some of these may be used simultaneously. None of them guarantees revenues, none is 'better' or 'worse' than others. You may combine them to build a strategy of monetization, that will make your mobile software profitable in every way it can. Study all available information on your future competitors. You have the final say about what and how exactly to implement; this depends on your approach, on your software and its tasks. Think of all that before starting the development project; knowing how your software will make money is one of the first and most important decisions concerning your project.
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