How to Make Money off Apps: Monetising Models for Mobile Applications

Frankly, most app and game developers don’t make any money with their apps. This is not very surprising, considering that:

- 250.000 mobile apps are already available on Apple Appstore and Android Market respectively

- Marketing an app can be expensive if you don’t know the tricks

- Size matters – it is easier to promote an app if you have 10 apps that you can cross-promote than if you only have one

AdMob App Usage Study Feb. 2010

There are 5 basic ways of monetizing apps:

1. Paid apps

The most direct way to monetize an app is to charge for it. Paid-for apps though, compete with a broad variety of free apps and free alternatives. Still, AdMob found that 50% of iPhone owners buy at least one paid app a month and the average paid iPhone app has sold 101,024 copies over a lifetime of 261 days. So despite a low average price of $ 2,33 per app developers can still hope for a decent revenue, if the content  is relevant and offers great value to users.

2. Subscriptions

Instead of charging for one-time download, subscription models charge for content within an app. Particularly reasonable for apps that offer a lot and fast changing content like magazines or newspapers, virus protection, music streaming and more.

3. In-app payments/ sales

14% of the daily revenue on the Android Market is generated with in-app purchases, including the purchase of virtual goods, unlocking features, promoting oneself in communities, access to content and more. In-app purchases are available for iOS and Android and can be implemented in both free and paid apps.

4. In app advertising

If providing interesting content or offers, in-app advertising is great for apps with high and frequent usage such as news, sport, weather, social networking, etc.. Ad space can be sold via ad networks like AdMob, inMobi, iAd (Apple) etc. Customers are paying based on impressions or per click on the ad, so for this model to work, high usage rate is essential in order generate substantial revenues.

GomoNews have published a list of ad networks here http://www.gomonews.com/mads/

5. Sponsored apps

e.g. Timeout UK, Cocktail guides, Cookbooks, Racing games, etc. One of the most common ways of monetizing an app. If a company sponsors or fully pays for an app as a way to promote their brand, there is little risk for the developer, but also little space for unexpected wealth.

The most successful app developers such as Rovio (Angry Birds) use a combination of paid apps and free apps with advertising. The free app targets a wide audience and makes money through adverts and then promotes the full pro version. This is usually referred to as the freemium model.

Some key stats:

• Apple has paid out more than $2bn to iOS app developers (Press Conference Apple, Dec 2010)[ii]
• 7% of iPhone and iPod touch owners have spent more than $50 on games in the last three months (DFC, March 2010)[iii]
• iOS users have an average of 37 apps on their devices, compared to 22 for Android users and 10 for BlackBerry users (Nielsen, USA, Sep 2010)[iv]
• The average smartphone owner downloads 15 apps to their handset, keeps 12 of them, and uses 5 every day (GfK, UK, Sep 2010)[v]
• US iPhone users download 60 apps a year (YG, USA, Sep 2010)[vi]
• iPod touch users that purchase paid apps spend $11.39 vs. $9.55 webOS vs. $8.36 Android, vs. $8.18 iPhone (AdMob, Feb 2010)

Some other key insights are:

• To make money, the app needs to offer something beyond what other free apps in the same category offer
• When offering a lite and a pro version of an app, it is essential that the pro version really offers more value than the lite version
• Great ratings and updates are critical in keeping people buying apps
• The majority of premium app revenue comes from games
• Many apps generate a lot of revenue the first month when it’s new. Unless constantly updated and promoted it then dies a slow death

So how do you make money from mobile apps then?

The answer is simply that you can make money from apps through a combination of creativity, hard work and a bit of luck. The key ingredients to success however are:

a)  Make sure you have a great idea/concept for your app to begin with

b)  Know who your target audience is and come up with a marketing and PR plan focused on them

c)  Try different types of monetising methods depending on the app and target audience

d)  Experiment, experiment and experiment more with updates, pricing, marketing, etc

Good luck and tell us if you find a secret way of making money!

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[i] http://www.insidemobileapps.com/2011/05/11/apps-with-in-app-billing-represent-14-daily-revenue-earned-through-android-market/

[ii] http://www.guardian.co.uk/technology/2011/mar/02/ipad-2-launch-apple-announcement-live

[iii] http://www.mobile-ent.biz/news/read/dfc-reveals-iphone-gamers-spending-habits

[iv] http://www.mobile-ent.biz/news/read/nielsen-releases-new-mobile-app-stats

[v] http://www.mobile-ent.biz/news/read/brits-love-their-smartphone-apps-says-gfk-nop

[vi] http://www.mobile-ent.biz/news/read/yankee-group-doubles-us-mobile-apps-revenue-forecasts

Why Android Tablet Apps?

The iPad currently accounts for 90% of the tablet market, so why bother with Android? More than 20 device manufacturers have now announced Android tablets with prices ranging from 150- 700 USD. Key devices such as the Motorola Xoom are showing top quality design, and impressive hardware specs that are opening up interesting opportunities for our customers. At Golden Gekko, we're confident of strong growth in the Android tablet market over the coming months. Being first to market with quality offerings is a key recommendation for our customers. Supporting tablets, with the correct user experience will pay dividends:

• Impressing early adopters

• Being well situated for the users who are sure to enter the market in 2011

• Increasing your chances of being featured on the Android Market – our experience shows

this can have a huge effect on download figures

Key attributes of the Android Tablet

Golden Gekko has been exploring the tablet focused version of Android (Honeycomb) since it was first released to developers. We have also been observing the adoption of the technology, reviewing apps and experimenting with different user journeys.

The key enhancements, that we see adding true value to the Android experience are:

• We can now take advantage of the extra screen real estate, showing more complex pages. A common example is combining a list view on the left, with a map or details view on the right, allowing the user to browse the items they have, without needing to switch screens.

This level of interaction is simply not possible on smaller, phone sized devices.

• A new action bar has been introduced. This is a big change in the standard Android design pattern. We're also increasingly seeing this being applied to the phone variants of the apps.

Not quite everything is transferable, but it's a slick new option.

• Drag & Drop has been added, allowing for interesting new interaction between components

• Slicker animations are possible thanks to enhanced support from Android, and typically from the enhanced power of the tablet devices. Apps are evolving to feel more interactive with ever more impressive levels of polishing touches.

• We're seeing tablets being used in different ways to our phone apps. Typically, your phone is for when you're on the go, tablets for when can take your time over a coffee or a glass of wine. This allows for more in depth user journeys and more thorough integration with Social networks.

Image: An example screen-shot, showing the split screen approach. Notice the action bar introduced at the top of the screen. The soft keys in the bottom left have replaced the hardware buttons, and rotate with the device.

Key challenges

Adapting to the tablet world requires a fundamental shift in application planning. Many people will use your app on a tablet and on their phone. Ensuring a consistent user experience, while still taking advantage of the device capabilities will be a key factor in the success of your application.

For anyone used to developing iPad apps, the extra device burden that Android brings to the table will also come as a shock. Android tablets are becoming available in all shapes and sizes, with varying screen resolution, OS level and processing power. Thoroughly testing and optimising your apps for the full range of devices is a critical pre-launch step. A few bad reviews from users experiencing bugs or crashes can have a serious impact on the long term success of your app.

Update: What is the cost of developing a mobile app?

Of all the blogs we’ve published over the last couple of years the most popular blog by far is What is the cost of developing a mobile app. This shows a clear interest in what budgets are and should be for mobile service development. The BBC has a great article on why brands must invest in mobile apps. The budgets indicated range from 20.000£ (ca. 23.000€) for simple apps to over 100.000£ (ca. 115.000€) for more complex apps per platform.

But the world of mobile application development is changing fast; here are our thoughts on what's changed since.

1. Overall trend

Generally the average cost per application is climbing due to a number of factors:

a.       Complexity of the average project is increasing - more backend communication/integration and more complex features.

b.      Scarcity in experienced iPhone and Android developers - there are lots of app developers available but few with skills and experience we need.

c.       Higher quality expectations - in many cases, applications are becoming critical for success and sales of a business. Requirements on reliability and device testing therefore increased noticeably.

d.      User experience is key to success – brands and agencies are paying a lot more attention to the importance of user experience including user interface design and performance.

2. Middleware to support backend integration

In the past most apps were stand alone pieces of software, such as iPint, Zippo, Barclays Waterslide, Malibu Bowling, etc. However, the majority of new apps require an element of social media, communication with content management systems, integration with m-commerce solutions and other interactions with existing legacy backend services.

Supporting these features often requires a middleware solution which can add considerable cost to development in the short term. Though, In the long run, it will save time, money and headaches as it is easier to maintain and to update. The middleware integrates into one or more backend services and provides a standardized format for the applications to communicate in. The result of which is that changes to existing backend services can easily be accommodated by the middleware without having to update previously released applications.

This is especially helpful in cross-platform projects which could have clients running on iOS, Android, Java and a mobile website. Middleware development can cost anywhere between 10.000€R for a fairly simple service, to hundreds of thousands for complex solutions with multiple backend services to incorporate.

3. Complexity of Android development has gone up slightly

To date over 100 Android devices have been launched. Fragmentation between devices has increased noticeably with developers needing to spend more time fixing and testing small discrepancies. The average cost of an Android project is currently 20-30% higher than that of iOS projects.

4. Automated tools can provide a cheaper alternative

Application development tools such as Tino and Mobile Roadie can provide a fast, low cost solution, but functionality is limited. These tools can be great to get an app up and running quickly but once you reach a certain level of complexity and customisation, these services are usually not sufficient.

5. Time to market continues to be very short

The pressure to deliver new apps and updates quickly means that off-shoring is not really an alternative. Experience shows that off-shoring takes 2-3 times longer due to requirements for more detailed specifications, longer feedback cycles, lack of proactive enhancements and challenges during acceptance.

Read more about the cost of developing mobile apps and mobile websites in our previous blogs:

What is the cost of developing a mobile website?

What is the cost of developing an iPad app or other tablet app?

The mobile OS battle is not over yet

We frequently get told that developing for other platforms than iOS and Android is meaningless. Many declare all other platforms dead. For the last 3 years, we’ve been told that J2ME is dead. But still in 2011, on a worldwide base, there will be more J2ME enabled devices sold than smartphones. People have also been telling us that Blackberry is a dead platform, that Microsoft has zero chance to succeed in mobile, that no one will develop apps for Palm/HP WebOS and that WAC is a failure before it has even had a chance to launch.

We believe it is very dangerous to make statements like this. The industry moves extremely quickly and there are a lot of factors involved. This is why we believe that the mobile OS battle will continue for some time:

1. The operators/carriers don’t want Apple and Google to gain complete dominance

The operator device teams at operators made it clear during conversations at Mobile World Congress that they don’t want Google or Apple to dominate completely. They will continue to back Nokia with the Windows Phone, RIM with Blackberry OS, Limo as the operator partnership and WAC as a cross-platform development platform.

2. Failing is not an option

For RIM, HP and Microsoft failing is not an option. The Blackberry OS made RIM successful and this is what lead HP to acquire Palm WebOS. Microsoft is probably the company that has the most to lose. Their strategic deal with Nokia they has proven how far they are willing to go to achieve their objectives. If RIM fail with Blackberry OS they will go down for the count as a smart phone manufacturer.

3. Device manufacturers and OS developers have deep pockets

Nokia, Samsung, RIM, HP and Microsoft all have big cash piles to execute thei mobile OS strategy. They may not get the same number of app developers to adopt their platform as Apple or Google and they may fail in the long term. However, it does mean that they can invest huge amounts of money in marketing, pay developers for app development and get big brands and services such as Facebook, Twitter, Foursquare, Google, etc. to build for their platform. They will not give up in the next 2-3 years.

     

4. Consumers still want choice

There is still demand for different solutions by consumers. Not only is the mobile phone a fashion statement - people want different looking phones - but there is also a demand for different screen sizes, input mechanisms and shapes. A great example is Blackberry which has continued to be very successful among business users as well as teenagers thanks to the keyboard and great messaging services.

5. Money is not everything

Having said that several of the mobile OS players have very deep pockets money is definitely not everything. Nokia allegedly spent as much money on R&D for Symbian and Qt as Apple has on R&D. Despite this they failed. At the same time Palm WebOS, which is considered one of the most advanced smartphone platforms, was developed by a small team within Palm and with the distribution of HP it might succeed.

What do we bet on for the future?

Having said that the battle will continue there is no question about who is dominating at the moment. iOS and Android are currently the platforms of choice. Other platforms are prioritized, based on promotion agreements with the device manufacturers and carriers. We believe that there are great opportunities for differentiation and distribution by embracing the full mobile ecosystem.

Mobile App versus Mobile Website: Busting Myths

Many brands find themselves debating whether to develop a mobile website, a mobile application or both. There are many things to consider when choosing a strategy.

A website optimised for mobile is an important part of any long term mobile strategy. For specific campaigns, and complex user interaction, an app often is a better solution. Apps deliver a richer user experience and can therefore create a more intense interaction with customers. A mobile website however, will give broader reach and as they are more accessible to search engines can be a great tool to point users to your service.

 When should you develop a mobile website?

• As the core element of your mobile presence in any long term mobile strategy
• If you expect to get a lot of traffic through search

When should you develop a mobile app?

• If the concept/service you want to deliver is too rich for a mobile website
• If the app is used as a tool that complements an existing web online presence
• To make the service more convenient for your users, often re-locating and re-loading a web site takes a lot longer than starting an app.

  

Common Myths of why mobile websites are better than apps

1. Mobile websites are much cheaper

A mobile website with the same functionality and similar user experience to an app will cost pretty much the same. Especially if you want to deliver it across multiple platforms. However, expectations for a mobile website are generally lower than for an equivalent app. So bringing down the functionality will also bring down the cost. Yet still, the service needs to be tested on the target devices if you want to be certain that it works, which can be fairly expensive.

2. Mobile websites always give access to a wider variety of devices

In theory WAP/XHTML should work on most devices. Differences in browsers, display resolutions, input methods (touch screen or keyboard), API differences, etc. still cause a lot of customization work per device group. For a richer user experience you need to invest in a platform that renders the mobile website correctly for each device.

3. HTML5 will solve all these problems

Unfortunately this is not the case since:

a) The browsers still vary significantly between different platforms, OS versions and in the case of Android between different devices. This is unlikely to change and creates a lot of work for effective QA.

b) The functionality supported by each device is different. HTML5 on mobile devices can integrate with parts of the native functionality such as Location, Messaging, Contacts, Accelerometer, etc.

c) The codecs for video in particular are different depending on the OS

4. It's easier to find a mobile website

If the mobile website is available among the top 5 search results on Google this may be the case. But even this can be challenging since websites and mobile websites are mixed. Also note that you need to implement redirects from your website to your mobile website so that the user gets the best customer experience.

5. A website bookmark is just as good as having the app icon on the phone

One of the greatest advantages of an app is that the icon is or can be visible on the home screen of the device and therefore always a few clicks away. Bookmarks are usually hidden considerably deeper down in the menu structure and therefore used less frequently.

6. People will just use the mobile app once anyway

Some mobile websites and mobile apps will only be used once. This has been the case for websites since the beginning and it will always be this way. But good quality apps and websites are already showing that when the service warrants it, users will come back again and again.

NFC for my mobile apps – how much does implementation cost and is it difficult?

NFC has been around since 2003 but it´s not until now that technology and adoption are ready for commercial deployment. Google plans to embed NFC in the Nexus S, RIM in all their new devices and Apple want to equip the iPhone 5 with an NFC chip, despite rumours they would not. Nokia launches a series of devices including NFC, starting with the C7 and most other handset manufacturers will include NFC in their devices within the next 2 years.

According to Wikipedia: “Near field communication, or NFC, is a set of short-range wireless technologies, typically requiring a distance of 4 cm or less. (...) This enables NFC targets to take very simple form factors such as tags, stickers, key fobs, or cards that do not require batteries. NFC peer-to-peer communication is also possible, where both devices are powered.”

The technology will enable lots of new exciting mobile interactions. The main focus is on mobile payments. A complex eco-systems and infrastructures of mobile payments makes it more likely that the utilization will be in other areas first such as loyalty cards, identification, as travel tickets, enterprises and potentially micro-payments for vending machines.

What is the cost of implementing NFC in your mobile applications?

Android and Symbian already support NFC. iOS and other mobile OS are expected to add support this year. This means the implementation of the service on the application side is fairly straight forward. Make a call to the API to read a Tag (the target device) and then there is an open communication channel between the two NFC chips for whatever the desired interaction is.

Examples could include

a)      Identifying a certain customer as having been in the store

b)      Registering a discount coupon from a mobile app in a store

c)       Checking in at the airport

d)      Paying for a buss, taxi, tube, etc if the application is connected to a backend-server which supports this

e)      And a myriad of other things

This means that the cost of implementing NFC in an application is very small compared to the cost of setting up a backend which could be hundreds of millions for a full scale payment platform that replaces credit cards. A simple NFC solution which reads an

NFC chip once to authenticate that the user has been in a certain store or redeemed a voucher could cost as little as 10-20.000 Euros to implement.

So what’s next?

During the coming years we will see thousands of different applications including NFC. Some of those will be groundbreaking and others will quickly be forgotten. Banks, retailers, transportation businesses, fast food restaurants and event companies will all launch pilots and some full scale implementations but it’s likely to be an evolution that replaces plastic cards over time rather than a revolution.

Golden Gekko is currently working on NFC trials with a couple of clients so please contact us for more information: info (at) goldengekko.com

Why did Facebook buy Snaptu for 70m USD?

In the current smartphone hype everybody focuses on iOS, Android and HTML5 when speaking about mobile applications. Many might therefore wonder why Facebook would spend 70m USD on acquiring a company that delivers mobile apps based on Java ME (J2ME). Facebook has a simple reason: 95% of all phones worldwide are still non-smartphones. According to Sun there are currently over 2.1Bn Java ME enabled devices worldwide. Of all phones sold worldwide in 2010, 81% were non-smartphones. Smartphones still make up a very small percentage of all mobile devices in emerging markets, where Facebook now has their greatest growth potential with well over a billion connected feature phones. Other big online companies such as eBay, Amazon and Yahoo have also acknowledged this and currently invest in similar technologies in order to position themselves among consumers before they have a chance to upgrade their phones.

At Golden Gekko we believe that Java ME still has another 3-5 years potential for brands that want to reach mass market penetration and low end devices across the globe. Last year, for example, the Java ME version of the Malibu Bowling Game had over 5 million downloads in total; 1,3 million from the independent app store Getjar.

This doesn’t mean that Java ME is for everyone but it’s definitely not dead. One of the challenges for app developer has been fragmentation across devices. This meant that you had to develop 100s of different versions. Today companies such as Snaptu, Mobile Distillery and Golden Gekko have solutions that make this much easier.

For more information about the potential of Java ME please contact Golden Gekko.

How much does it cost to develop a mobile website in XHTML and/ or HTML5?

One of the most frequent questions we get asked is:  what is the cost of developing a mobile website? The answer is simple: It varies almost as much as the cost of developing a website. The price ranges from a few hundred to millions of Euros, but we will try to give a more constructive answer:

The key factors are:

1. Content/Service
What is the purpose of the mobile website? Is it an e-commerce site, a landing page, a news site, a social network, etc?

How much content does it contain? One page or hundreds of pages? The scope of the mobile website will provide a good starting point for estimating the cost of development.

Cost Range
- For a very simple mobile website a tool such as Netbiscuits could be used. Such a solution would cost a few hundred Euros
- If your site is a blog, for example, then it's possible that a free Wordpress plugin could be used to mobilise your existing website
- If the site includes more advanced functionality, then it needs to be custom built. The cost for this usually starts around 10.000 Euros

2. Design
Another important factor is the user interface design. Creating user flows, wireframes, mockups and designs could take several weeks, and therefore costs money.

Depending on the target audience you might want to implement two versions of the site. One optimised for XHTML and one for HTML5 compatible devices. While HTML5 supports a much richer user experience including animations, audio and video; XHTML should be optimised for speed and easy navigation rather than contain lots of graphics.

Cost Range:
- A simple mobile website whose design could be just a sketch that takes an hour to create would cost less than 100 euro
- For a sophisticated m-commerce site, intended to generate millions in sales, the cost and effort could easily rise to tens of thousands of Euros. Experienced user interface designers in London or New York frequently charge day rates of 1000 Euros. You get what you pay for.

3. Usability
Ease of use is not only about user interface design. It is also a matter of building an information architecture that it easy to navigate and optimised for the key use cases. The site should be tested with users and constantly improved over time.

Cost Range:
- Delivering excellent usability is an integrated part of good mobile website development. This means the cost cannot be isolated. However, if you consider your site business critical then plan for at least 2 weeks of user testing and enhancements before launch. You won't regret it.

4. Device support
One of the greatest challenges with mobile is device fragmentation. There are 10+ operating systems, hundreds of browser versions, 20+ display resolutions and lots of exceptions to take into consideration.

In theory HTML5 should resolve some of these issues. Unfortunately the differences are so big that you need to test and optimise your HTML5 site for each of those platforms.

At Golden Gekko we believe in testing on as many target devices and OS versions as possible. This means anywhere between two for an iPhone optimised HTML5 site (OS4.x and OS3.x) and 200 devices for a site that targets a broad spectrum of mobile devices.

Cost Range:
- Platforms such as the GG Server Platform and Netbiscuits provide rendering capabilities that optimise the site for each device type. The cost ranges from about 100 euro per month up to thousands but the service is well worth the money
- The feature set may differ between devices. E.g. some devices such as iPhone 4 have excellent java script support while others do not. Therefore add at least one week extra development time beyond the first platform

- The cost of QA / Testing vastly depends on the desired device support ranging from about 500 euro for a few days of testing on one platform to 10.000 euro for 3 weeks of testing across 200+ devices.  

5. Search engine optimisation
One of the greatest advantages of a mobile website juxtaposed to a native app is that people can find the content on your site through search engines. All standard mobile websites can of course be crawled. Still, just like for the web, optimising the site for search engines can make an enormous difference.

Cost Range:
Search engine optimisations for a big mobile site costs between 3.000 and 6.000 Euros

6. Logging and Reporting
If you've invested lots of money in your mobile website you want to know how many visitors you attract. You are interested in where they come from, what they do, how long they stay, where they leave, when and how frequently they come, etc. Most mobile website tools provide some standard reporting services and stats but if you really want to understand the users and their usage patterns you might have to dig deeper and combine the data with other sources.

Cost Range:
- Standard reporting should be included in the development and hosting services for any mobile website project
- For customised logging the effort is usually one to two days to define the requirements and about one extra week to implement and test the logging

Summary:
So what is the total cost of developing a mobile website? Depending on what you what to do with it, user interface requirements, usability testing, device support, search engine optimisation and logging the cost could range from a few hundred Euros for a simple landing page to 100.000+ Euros for a complex m-commerce site.

Please don't hesitate to contact us for a quote specific to your requirements. info@goldengekko.com

www.goldengekko.com