Feb 10, 2011 - mobile    1 Comment

maximising revenue streams on the App Stores – Part 2/3

As promised, here is Part 2 of  last week’s blog post on maximising revenue streams on the App Stores.

Referring to last week’s table…

Free apps only

Now who doesn’t like freebies! These types of apps are very popular in any App Store. Free apps is a very good way to entice new smartphone users to the wonderful world of apps. I remember when I first got my iPhone, I promised myself that I would not spend a single penny on apps until I eventually got sucked in the ecosystem. I haven’t been able to escape since then. Free apps provide a guaranteed high number of downloads provided that your app is good of course.  It can also play in your favour if you’re a new developer and want to get your name out there.

Pros:
- Very good way for developers to gauge the market
- Allows new app users to feel the app experience
- Good to make developers known especially if they’re a new company/developer where promotion is key
- Builds loyal followers creating a community
- Customers can experience app without being charged
- Potential to reach mass market

Cons:
- no revenue for developer

Lite apps

Lite apps, basically a downgraded free version of a paid app, is a great way to entice users to download apps. This allows the user to experience the quality of the apps before commiting to purchase. Works great for games and utility apps. The good thing about the lite model is that it enables a developer to calculate the conversaion rate of the lite apps users to full priced app, providing a good estimate of how successfuly it might have been free v/s paid. This kind of app is typically viewed as a free app with an upgrade option to a full working version.

Pros:
- Allows users to experience apps before committing to buying full version of app
- Allows developer to estimate success of apps in a free v/s paid model
- Allows developer to get some revenue when full version is bought

Cons:
- Customers and revenue may be lost if customer decides not to buy app

Paid apps

Now this is where we start getting serious about dipping hands into the customer wallet. The amount of people who are open to buying apps nowadays is increasing by the day. The most common successful categories are games and entertainment. This is where the big hits come from. Usually the apps have a long tail effect: the lower the price, the more likely it is going to be downloaded. Don’t believe me? Does Angry birds ring the bell priced at only $0.99(£0.59). Obviously if your app is for a niche market, then by all means put the price up, for example, the iamrich app ($999.99) which was for people who wanted to show that they are rich.

apps long tail effect
the lower the price, the more downloads

Pros:
- Developers get some money and hence some ROI

Cons:
- App consumers have to buy app before experiencing it

Free app + in app purchases

In app purchases has certainly been a blessing for developers as it has enabled a lot of developers to earn extra money on top of the selling price. Apple made a brilliant move by creating this source of revenue. Before customers would buy games, finish it, and delete it but now with in app purchases, new levels and bonus items can be bought continuously throwing in new challenges and items for people to buy. Just brilliant! The added bonus of making your apps free is that a lot of people get to choose if your app is the kind of stuff for them or not. Example of this kind of apps is Tap Zoo where they earn money by using in app purchases for items.  Tap is currently 2nd in Top Grossing and is definitely enjoying some success using this method.

Pros:
- Builds loyal followers creating a community
- Potential ro reach mass market
- Customers can experience apps without paying upfront
- Good way for developers to earn money
- Flexible revenue model as more in app purchases can provide more revenue

Free app + ads

This method of revenue was brought to my attention by one good folk from Handygames at the Mobile Entertainment awards where I was judging for a mobile apps competition. Handygames are the makers of Guns’n'Glory, Shark or Die. Their model is a very interesting one as they offer free games with ads and a paid version of the game without the ads. Ads can be annoying sometimes. If you fancy the game and want to enjoy it in peace without ads flashing past your eyes, then go for the paid version. I like this model as I believe it is very powerful to build a tribe of loyal followers by giving them the option to buy the app or use them for free. So far Handygames is the only developer I am aware of who uses this model.

This type of model is also good for one time hits. A very good example is the Vuvuzela 2010 app during World Cup 2010 which was free and used ads as a primary source of revenue. The developer claimed to have had revenues in excess of $500,000 during the world cup by using ads.

Pros:
- Builds loyal followers creating a community
- Customers can experience app without being charged
- Potential ro reach mass market
- Developer still earning money, especially if they are offering a paid ad-free version

Cons:
- Ads can sometimes be annoying so placement is key here so as not to p**s off customers

Lite apps + in app purchases

This combination seems pointless to me, why would you want to offer in app purchases for apps which are downgraded! Haven’t seen many apps using this method of generating revenue. Not a very good combination in short as customer would not like the idea of buying subscriptions, items, etc. in a downgraded version unless the in app purchases would be valid in the full version.

Cons:
- Customers against buying downgraded version of app and using in app purchases
- Unlikely to generate revenue

Lite apps + ads

Although I am not a big fan of this combination, it seems to be working  great as shown by apps like Flashlight free, etc. It’s a good way to make some money while customers are evaluating your apps. Eventually they might go for the full version.

Pros:
- Allows users to experience apps before committing to buying full version of app
- Allows developer to still get some revenue without relying on the sale of the full version

Paid app + in app purchases

Terrific way to monetise your apps. The advantage of this combination is that the more in app-purchases you have the better your revenue. Good example is the TomTom app which offers a high number of fun in app purchases like Darth Vader, etc. Same rule applies for paid apps, the lower the price, the more downloads you’ll get and in app purchases provides you with the flexibility of continually monetising your app.

The one thing that I like about paid app + in app purchases is that although a small number of people might download your apps for free in Jailbroken iphones, they’ll still have to pay you for your in app purchases. Jailbreak that Hackers!!!

Pros:
- Developers earn money through sale
- Flexible way for developer to monetise app
- Apps can be continually revived via in app purchases by offering new levels and items

Paid app + ads

Seriously if you do this, you might as well jump from the top of a skyscraper! People are paying for apps and they expect it to be free from clutter as in free from ads. Do this and you risk getting nasty reviews on your app. You’ve been warned!

Free app + in app purchases + ads / lite app + in app purchases + ads / paid app + in app purchases + ads

Now seriously you are starting to play with fire here. Any form of payment combined with ads is synonymous to shooting yourself in the foot. Trust me you do not want to p**s off customers and have them flood your app with bad reviews. Avoid these combinations at all cost, do yourself a favour.

That’s it for Part 2. Hope you enjoyed my post.

Next week for Part 3, we’ll take a look examples of successfull combinations and upgrade models for your apps.

[you can read Part 3 here]