Posted in Business
Just how lucrative is the world of mobile apps? Well, guess what? It’s incredibly lucrative! In fact, in July 2015, transactions in Apple’s App Store hit the lofty heights of $1.7 billion. So, with all these dollar signs flashing in front of your eyes, wouldn’t you just love to take home even a tiny fraction of this revenue? Sure, you may well have designed an amazing app for the iPad or iPhone, but in this day and age that simply isn’t enough. You need to back up your creative genius with a little bit of business savvy as the app market is a notoriously tough nut to crack.
It’s certainly a struggle and many developers have dropped out of the app game due to a lack of success. However, the ones who have persevered and navigated the choppy waters of the App Store have brought in some huge profits. And it’s time for you to join them.
Developing Your Business Model
When you’re working on a business model for your app you need to start by knowing one simple fact: there is no ‘one size fits all’ strategy which will guarantee success. You can certainly go online and Google the story behind other successful apps, but you have to bear in mind that 99.9% of those apps will be completely different to yours. And, as a result, their customers will have unique needs and habits which you can’t apply to your own business model.
That’s why you need to start from scratch. Work from the bottom upwards and you’ll find this provides you with a business model which prepares your app for any potential problems it may face. You see, it’s a crowded market out in the App Store and the fierce competition means you have absolutely no room for slipups.
And the best way to get the ball rolling with your business model is to ask yourself 2 crucial questions: 1. What problem does my app solve and how is this achieved? 2. Would my app users be willing to pay for anything else?
The answers to these questions will form the foundations of your entire business model, so it’s not an area you want to gloss over. Develop definitive, honest answers to help steer your commercial efforts in the right direction. By understanding the problem your app is trying to solve you’re identifying your target market. This empowers you with the knowledge to start formulating your business plan so that it has the best chance of engaging this target market e.g. marketing campaigns, distribution channels etc.
And the question of what your app users are also likely to shell out on is equally important. Certain apps may serve one sole purpose that don’t require an upgrade to keep users engaged e.g. a scientific calculator app. However, other apps, such as gaming apps, require something to keep that user engaged and come back time and time again, so costed upgrades become paramount. With this knowledge safely in place, you’re then ready to move onto the next step: deciding which type of business model to run with.
Deciding on a Business Model Right For You
Not surprisingly, there have been endless, upon endless different business models integrated into the App Store. Some of these have been fantastic, some have been complete disasters from day 1. Now, a successful app should always launch with a fantastic business model. Sure, there’s always going to be a little bit of tinkering needed along with the way, but the basic format should remain the same. And that’s why we’re going to take a look at the most successful business models seen in the App Store.
Freemium Apps Apps which are sold at absolutely no cost, but later claw in the dollars through gated features are one of the most successful business models to have set foot in the App Store. Consumers are given the chance to experience the app for absolutely no outlay and this initial engagement aims to get them addicted. They can see that this app is amazing, but there’s the potential for it to be even more amazing if they part with their hard earned dollars to unlock the gated features (the most famous example of which is Angry Birds). The gated features which, by now, should have your users salivating and scrambling for their credit cards can take a variety of forms such as exclusive levels in gaming apps or additional functionality in production apps for example. However, you need to be aware that the freemium model is not without its pitfalls. Striking the right balance between free features and gated features is a tricky task and one that many developers fail spectacularly on. After all, provide too many free features and users aren’t going to be too bothered about digging into their pockets for a couple of minor upgrades. Conversely, don’t offer enough free features and users will feel like they’re having to pay to discover what the app’s all about.
Free, But With In-App Advertising How about a business model where your users never have to pay a single cent, but you still manage to bring in revenue? Sounds like the ideal strategy, right? Well, it’s a very real business model and is perhaps more of a money spinner than you’re aware.
What your users are presented with, in this business model, is a fully functioning version of your app with no gated content or features. However, nothing in life is truly free, so the payoff comes in the form of in-app advertising which takes up a portion of the screen. Each advert which is clicked by your users helps to generate profits for you and also allows for the creation of highly tailored ad campaigns. And this pulls in even more revenue. Bear in mind, though, that ads can be annoying. In fact, it’s fair to say that they can be very annoying, particularly when they take up too much of the screen. This compromises the user’s experience and is likely to have them searching for the ‘uninstall’ option before long.
- Paid Apps This business model does exactly what it says on the tin. You pay your dollars, you get your all singing, all dancing app (see Facetune). And if an upgrade becomes available you don’t need to reach for your wallet, it’ll be installed completely free of charge. For the publisher, however, the odd free upgrade isn't too much of a hindrance as these have been planned for in the initial pricing.
Now, it’s possible to sell an app for just $0.99 or, if you’re able to prove it’s value, as much a $999.99! However, even with a $0.99 app you need to really prove it’s value due to the number of free apps floating round in the App Store. Naturally, this is really going to test your app's appeal, but the best way to promote this is by concentrating your marketing efforts on designing an irresistible App Store listing. By incorporating compelling copy you can convince consumers that your app trumps all others and insightful screenshots act as the icing on the cake. However, relying on a listing to build engagement is a risky business, so it's no surprise to learn that paid apps are receiving less and less purchases in the app store. Add to this the huge competition from free apps and you can begin to see why it's popularity is sliding.
- Subscription Apps An increasingly popular business model to maximize an app’s revenue is through the subscription app model. It’s not a million miles away from the freemium model, but concentrates on exclusive content rather than features. Subscription apps provide a certain amount of content gratis, but once this content has been digested - and the user craves more - a paid subscription is required to unlock the full content. It’s proving particularly lucrative for magazine publishers (see The Economist) and developers who are running service apps which provide monthly services. The beauty of this model is that it provides a regular, recurring income and allows your bank balance to rise steadily as new users become loyal and top up your revenue. One drawback with the subscription app model, however, is that it’s only suited to a handful of niches, so using it in the wrong environment can be a financial nightmare. And, as with freemium apps, it’s difficult to get the right balance between free and paid content.
Take the Initiative (and The Revenue)
Competing in the App Store is tough for even the most experienced developers and publishers, but this doesn’t mean profits are tough to come by. All it takes is a dedication to the planning process to truly understand your app and pairing it with a killer business model which will complement everything your users love about your app. And once these two are combined you suddenly move an inch closer to driving that Lamborghini.
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