What is a smartphone or tablet nowadays without applications (apps) running on it? The last few years the number of developed apps has grown rapidly. Regardless of building them for Android, iOS or Windows operating systems, people are rushing to develop apps for all kinds of purposes. But looking at the installed user base on each platform and information on the payouts made by the different companies, it appears that the vast majority of developers will find themselves with little revenue to show for [1].
Companies like Apple, Google and Microsoft are all trying to attract a huge crowd of developers to their platforms, but each company uses a different approach in announcing the actual facts and figures on this topic. For instance, at Apple’s Developer Conference the company proudly presents the current number of available apps in their app store emphasizing the payoff to developers. On the other hand, Google and Microsoft remain quite taciturn in revealing revenue numbers on their apps. Nevertheless, figures indicate that Apple is winning the game in terms of payoff to developers with an average of 5,000 million dollars paid to around 235,000 developers, whereas Google and Microsoft paid 900 million and 100 million dollars to 150,000 and 45,000 developers respectively. These figure show, however, no details on how much money developers can actually make on those platforms [1].
There are a few ways of earning money when building apps. The following monetization models can be distinguished [2]:
-Â Â Â Â Â Â Â Â Â One-time paid apps: users have to pay only once to download the app. Updates and feature additions are expected to be free.
-Â Â Â Â Â Â Â Â Â Freemium apps: users can download the app free-of-charge, but the app has limited features. If the users want to have additional features they need to make in-app purchases.
-Â Â Â Â Â Â Â Â Â Paid apps with added paid features: this monetization model is quite similar as the Freemium model, but instead of a free download users have to pay for the download as well.
-Â Â Â Â Â Â Â Â Â Free apps with advertising: users can download the app free-of-charge, but advertisements will be shown when the app is in use. The success of this monetization model highly depends on a large number of users who need to use the app on a very frequent basis.
When developing an app, it is recommended to consider all of the above mentioned monetization models and determine which model would be suitable for your specific app. Just like writing a business plan for a startup company, developers may investigate all revenue options and analyze the consequences of each option. After all, the application and its corresponding monetization model should fit with the user experience you want provide [3].
One approach of app development is to build both a free and paid version. For example newspaper The Guardian introduced a ‘Two App Strategy’. They created a subscription-based app for iPhones and a free-of-charge Android app based on advertising subsidy, because “We feel that having a free, ad-funded Android app is the right business model for this marketplace and platform at this point in time. We have no plans to change our iPhone pricing model as it stands, though we are always reviewing and watching the market very closely.†[4]
What do you think? Is there a future sustaining business model in building applications for smartphones and tablets? What’s in it for the developers?
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[1] http://www.forbes.com/sites/tristanlouis/2013/08/10/how-much-do-average-apps-make/ [1]
[2] http://www.entrepreneur.com/article/228089 [2]
[3] http://techcrunch.com/2012/08/26/how-free-apps-can-make-more-money-than-paid-apps/ [3]
[4] http://paidcontent.org/2011/09/07/419-guardian-tries-two-app-strategies-android-free-iphone-paid/ [4]
Links
- ^ http://www.forbes.com/sites/tristanlouis/2013/08/10/how-much-do-average-apps-make/ (www.forbes.com)
- ^ http://www.entrepreneur.com/article/228089 (www.entrepreneur.com)
- ^ http://techcrunch.com/2012/08/26/how-free-apps-can-make-more-money-than-paid-apps/ (techcrunch.com)
- ^ http://paidcontent.org/2011/09/07/419-guardian-tries-two-app-strategies-android-free-iphone-paid/ (paidcontent.org)
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