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What revenue model should you choose for your Mobile App?

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What revenue model should you choose for your Mobile App?

So you are planning to launch a mobile app on the app store. How do you plan to monetize it, to ensure the Return on Investment made on your mobile application development? Here are some options to consider:

Option 1: Free – Ad Revenue

Price: Free
Audience: Mass Market
Model: Advertisement Supported
Example: Facebook, Yelp, etc.

The main goal is to deliver content in multiple formats and extend reach.

Pros

  • It is advantageous to have an established brand name and established sales team, as that can help package sponsors within the free application to generate incremental revenue.
  • It is easy to build traffic initially for a free app, although may not be long lasting
  • Ratio of downloads for free to paid apps is 400:1, or 95% of apps downloaded are free

Cons

  • New companies looking to follow the straight advertising model may have a challenge as ad budgets are have been sliced across the board. eCPMs are very low, so to get profitability the traffic has to be extremely high.
  • Companies in this category should have scaled back expectations as a profit center.

Advertisement Type:

  1. Independent Ad PlatformAds and Revenue managed independantly
  2. 3rd Party Ad Platform, e.g. iADs / Ad mob services
    • Ads are rendered through the 3rd Party.
    • Revenue based on impressions, clicks etc.
    • Better option if one doesn’t have big advertisers or own ads inventory
  3. Ad Exchange
    • Hybrid option to use both of the above
    • Increase in development costs

Option 2: Free – Alternate Revenue

Price: Free
Audience: Mass Market
Model: Alternate revenue
Example: Urbanspoon, etc.

The main goal is to create a huge buzz around their product by offering it for free and getting it into as many hands as possible, in order to promote an alternate business or an alternate revenue model

Examples of alternate revenues:

  • Data collection/business intelligence/analytics
  • Re-direction to sales on another site (e-commerce)
  • Ads/deals/ coupons can pushed using tools like www.appoxee.com

Option 3: Paid – Low Price

Price: Paid applications, at a low price point
Audience: Mass Market
Model: Direct Revenue
Examples: Sim City, etc.

  • Range from 99 cents up to 4.99
  • In the short term, getting hundreds of people to try it out for uniqueness factor, can lead to quick revenue.
  • However, long term revenue is achieved by apps that provide clear value, amazing utility or function that the target market cannot live without.
  • Important to have a very good growing traffic source.
  • Potential to lose out on a lot of potential customers.

Option 4: Paid – Freemium

Price: Paid applications, at a low price point, with free trial version/in app purchases
Audience: Mass Market
Model: Ads on Free Trial Version, Direct revenue on paid version
Examples: StickTennis, Angry Birds etc.

Two options:

  1. Separate App Freemium
    • Free trial provision for limited time or limited use
    • Can be upgraded by purchasing a separate paid app with all features
    • E.g. Only 3 sports are available in the free version, and users can pay for the full version
    • Need to develop and manage 2 separate apps
    • Free version can have ads, while premium version can be ad-free
  2. In-App Freemium
    • Additional Features or Content can be purchased within the app
    • E.g. Only 3 sports are available in the free version, and users can pay per additional Sport
    • If a betting feature is created, it can work on a virtual currency model, which can be another source of revenue
    • In-App upsells usually convert better overall
    • In-App purchases are successful when the flow for purchasing feels natural to the App.

Option 5: Brand Takeover

Price: Free
Audience: Mass Market
Model: Free to Users, Brand buys or sponsors the app

  • The entire App is essentially one big brand campaign.
  • For this strategy to be successful, the audience for the application has to be segmented and have a well-defined niche in order to attract brands and marketers, who can then offer targeted, branded ad campaigns.
  • The app can either be sold to a brand, or sponsored by the brand

Statistically, Option 4 has proved to be the most lucrative model.[/vc_column_text][/vc_column][/vc_row]