Monetizing Mobile Apps- A Value-based approach

Apart from deciding whether to charge on a one-off or a subscription basis, mobile app developers need also to consider whether their application has mass market appeal as well as perceived value. This can help determine which strategy to follow when deciding how to price the application (free or not). It can also help to determine whether to include advertising or not.

In my book, Building Location Aware Apps (2010 Manning Publications, R Ferraro and M Aktihanoglu-AVAILABLE FOR PRE-ORDER ON AMAZON.COM) I present a model of how the perceived value of the app and target market can be combined to decide on the charging strategy for the app itself:

'Freebie' applications are shown in the lower left-hand quadrant of the matrix. When it comes to monetizing an application, there is clearly no interest in giving it away for free, especially if it is not supported by ads. However, in the case of low value/low market potential applications this is often the only choice available.

'Long Tail Kings' are those applications that address a small, but definable niche within the market with a high-value proposition. They can charge for their application a premium price, and don’t need to include advertising as a result.Long Tail Kings can try over time to extend their appeal to other market segments.

'Killer Apps' rule over the mobile landscape. By offering great value to the consumer within a mass market, they can use their dominant position to not only charge for their application but also generate regular advertising revenue. Other applications continually aspire to become killer apps, though most never make it.

'Boot Campers' are those applications that hold great promise, because they have a large market potential, but that do not hold a great deal of perceived value in the eyes of the consumer. Boot Campers have to work extremely hard (hence the name) to work their way out of their quadrant by convincing consumers of the value they can offer.    

There is a lot more on this and other approaches to determine how best to monetize your mobile app (including a full range of mobile advertising options) in my book. I also explore the freemium model in more detail, as it remains one of the key ways of successfully commercialising digital products.

Location, Mobile App Monetization and Mobile Entrepreneurship

I recently gave a video-interview to Rene' of Mobile Monday Malta ahead of my talk there in early October on the ideas from my book on Location Aware Applications.

The vidcast covers the areas of Location, monetization of the mobile channel, entrepreneurship and the specific opportunities and challenges in Malta.

You can take a look at the interview here:

Mobile Web and Mobile Apps Monetization Strategies

Faced with a prevailing culture where consumers expect web services and digital content to be free, mobile app and mobile web developers need to adopt the right strategy in order to monetize their efforts.

The Freemium model is a classic marketing tool available to mobile app developers to maintain the perception of a free service, while attempting to lock-in customers into some type of charging mechanism. (And I recommend reading Chris Anderson's 'Free: The Future of a Radical Price' book for further insights into this).

But many of the decisions around charging will stem from a look at the value that the mobile consumer perceives he/she is getting from the app in question. Apps with a low perceived value will struggle to charge anything at all, no matter the charging mechanism.

I presented a basic introduction to monetization of mobile apps to the EAE Business School this week. This intro is based on a wider discussion included in the chapter of the same name in my new book on Location Based Services (for early access to the book, click here). In the same chapter, I include a toolkit for deciding how and what to charge for mobile apps and present some success examples of companies that cracked the key to generating recurring revenues.

I took a quick survey of the class (highly educated, international, 20-25 year olds) to see how many had smartphones and what type. About 25% had a smartphone, equally split between iphone and Blackberry. 0% had an Android device (which goes to show that Android still has some way to go in Europe...)

As part of the Q&A, one of the questions that struck me the most was along these lines:

"We hear a lot about mobile apps and the gold rush taking place, but is any app developer actually turning a profit from this activity?"

The answer is, of course, yes, though only those developers with the right combination of an attractive value proposition and the right charging mechanisms are able to succeed in an increasingly crowded marketplace. The potential, with 500+ million apps downloaded to date from the iTunes Store, remains huge. But it pays to have the right monetization strategy in place.

You can see the presentation below:

Mobile Web Monetization Strategy

View more presentations from Ric Ferraro.